Thursday, July 10, 2014
No One Is Really Going To Sell You A Goldmine. Certainly Not One Producing Gold For LIttle Or No Cost Nor Investment. Lots of People Will Try And Sell You Physical Gold Some Where You Keep It In Their Vault and Some Where They Buy It From A Gold Mine And Somehow Sell It To You With A Commission Added On. Why Cant You Just Buy From The Gold Mine Directly?
Something Fishy About Commercial Advertisments Telling You to Buy Gold as an Investment Getting Sick of Those Commercial Advertisments Telling You that You Should Buy Gold as an Investment? Financial News Junkies Have Heard the Spiel so Many Times They May Start Turning into Gold as If King Midas Touched Them Lex Loeb Contributor Network . Buy lowing and selling high does'nt seem to apply to mass marketing advertising campaigns to sell gold as an investment. Instead it seems that the higher the price of gold gets the more it is advertised for sale as a great investment and if not an immediate investment one with a long term perspective. For some unknown reason a high real premium on the price of gold over what it costs to mine and process it makes it more valuable as an investment in the eyes of many. The higher the price goes relative to the cost of finding and processing gold the more sellers can afford to advertise. It is not entirely clear that there is any direct correspondence to the price of gold as a reserve currency or as an alternative to paper dollars or to any economic circumstances as constantly advertised and the willingness of the market to keep the price at levels substantially higher than the base cost of the metal as a (common) commodity. Economic fears may be driving the price higher to some degree but the real price movement is based on supply and demand. High prices mean that more buyers are willing to buy stocks on the market that are put in the market as goods to sell. There are many people and institutions that will never put their gold holdings on the market for sale so these are not supply. People with gold jewelry are not likely to sell momentos just for spot gold prices just as central banks like to decorate vaults with gold bricks rather than make orinmental objects out of it. That means there is limited on the market supply and a potential supply held in collections and reserves that could always enter the market. The interesting thing about central banks is that they tended to sell off gold reserves when prices were low rather than buying up stocks at that time. Once panic or economic crisis sets in no one is selling gold but some of the central banks then start buying again just like the investor class the mass market advertisers are after. Something is really fishy about the commercial advertisements for gold as an investment. There is one commercial with a woman with a snobby english accent asking tv viewers if they would prefer to receive $50,000 in cash or $50,000 in gold if they could not cash it in for 5 years. Sounds like a great reason to hoard gold? What is fishy is that the company running the advertisement incessently is not telling people to trade in their platinum or their silver for Gold as a long term investment but they are asking for dollars! Yes dollars! That is a red flag that goes up in a smart investor's head immediately. Why are they telling people that dollars can't be trusted and should be dumped for gold at high prices when they want your dollars? If gold was such a great investment why are these big marketing companies not hoarding all their own gold? I listen to the commericals and the problem is the dollar is being devalued, is subject to inflation, the government can't be trusted, hyper inflation is coming , you have to unload paper money savings Now and buy all hard currency, hard assets you can to survive finanncially. The company that wants to sell you gold wants you to give them the paper money that has no value in exchange for what they are selling. That is as fishy as fishy gets. Could it be that buying gold even at a small commission near market spot price is no bargain at all if the experts are selling it to you? The mass marketing has become an industrial process beyond just the mining extraction and processing of gold to the extent that it does seem to be helping to move the price higher with some direct market correlation. A seasoned market trader in any commodity , bond or stock knows that buyers and sellers come together on price based possibly opposite interests in the direction of prices. Buyers prefer a lower price and sellers a higher price. The sale meets somewhere in between the two sets of interests. When stocks are selling at what might seem low prices necessarily someone is buying every share at the lower price which sellers bring to the market. When you see market experts selling because the price is higher does it make sense to be buying from them? That is why the red flag goes up. The experts should be hoarding and not selling and people perhaps who own and control the production of new mined gold should be happy to sell at the highest prices the market allows. When the price falls below the price of production it is a good time to temporarily shut down the mines and wait for higher prices later on or to build up future sales stocks but not when production costs exceed the market price. That seems to explain why the advertising campaigns become more expensive when the price of gold goes up. The companies with the greatest price advantages maybe from mining it or maybe from having bought futures and options in advance can afford more advertising as a percentage of their total costs. If the price of gold is siubstantially higher it pays to put a few extra dollars into a big advertising campaign if it unloads more gold faster. If the profit margin for gold is low because market prices are low they need to curtail their advertising just the way mine owners will temporarily shut down the mine and wait for better future selling conditions. That seems to explain some of the fishy smell in the buy gold as investment commercial but not necessarily the desire of those who have the gold to convert gold to dollars. The two assumptions then are that gold mining companies need more supplies including fuel to mine and process gold which can be paid for in gold or dollars and if dollars are received they are spent immediately. The second is that other sellers buy more futures and options contracts with the dollars and burn them away quickly or they actually prefer a lot of dollars to hoarding gold. The virtues of gold as a hard asset might be way over rated by the marketing agents who find virtue in getting paper dollars in exchange. Is it the savvy trader's fault or the retail class investor's fault that the investor may be paying too much. Unfortunately it is impossible to tell for sure in an absolute manner that prices for gold can't or won't go a lot higher. There is a small chance that professional gold sellers could be short changing themselves by selling too much gold at present prices which may still be superstructurally higher later on because of the snowballing effect of more people piling on to the gold story. That brings to mind the famous South Sea Bubble as one example when people kept buying shares at higher prices as the prices went up until there were no buyers left at a staggeringly high price and only sellers looking to get out with an underlying business with no real value at all. Gold is worth it's weight in gold which means that a grape is worth it's weight in grape or a pear is worth it's weight in fruit. If an apple is worth it's weight in apple fruit then it means an apple is worth an apple. An apple worth it's weight in gold might be worth a lot or very little if your last pear with nothing else to eat is made of gold. . Close