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Gold Below $500 An Ounce?

I wrote an article with this title about a week ago in response to a Money Magazine article saying gold was a "bubble" asset. I wanted to explain the current price action in gold.

I thought that article might help some understand what's happening with gold.



"Will gold go below $500 an ounce? While some gold bugs may be calling gold to fall to just below $700 an ounce, I don’t see gold falling much below that. But as I always say, a holder of gold cares not that it falls to $700 or lower, on its way to $2,000 and higher. The traders of gold would love to drive the price down, exposing the weak hands. Then they’ll drive the price back up. That’s what traders do. But the Dollar Index is the key. Keep an eye on it for clues."

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Another buying opportunity!!

I presume this means silver will fall as well? Or will we see a re-balance of historical ratios?

you'd better watch the Euro too...

it took a beating yesterday.

2Chronicles 7:14 If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their land.


Been keeping tabs since about mid-November...


I said back then there was no reason for the EURO to be testing its all-time highs. Their economic data was terrible as their government was borrowing/spending just like the U.S.

"the Eurozone GDP has recorded record drops with only a recent rise in GDP because of government intervention in the auto industry."

Sound familiar? hehe...

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

as a stockbroker and an insider

i find it comical everytime i read one of these. i got news for you there is no gold around now in quantity unless you take it off your wifes necks. this is a paper game run by syndicates like goldman and jp morgan. they have already reducxed there comex short position last week by 47000 contract you will see more short covering and when the specs and day traders go short they will rob them to. real gold and fake comex paper futures gold is not the same. you can trade paper back and forth but lets see if they can deliver the real thing when the chiness and indians come a calling.


you're referring to the Money Magazine article calling for gold to go to $500, and not my critique of it. I think we're in agreement here.

Regarding the manipulations of paper, I would never advise a client to buy gold based on it. There's a multitude of other reasons to do so that make perfect sense.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

I wonder how many they scare from buying metals..

Physical...well probably some..

I´m thinking on buying more now.. I hope it goes lower...

Hmm wonder if my dealer have any left.. he´s constantly out of stock..

coin shows

try to find a coin show in your area. i've had some really good luck at them. coin dealers are like all other merchants. if you bring a wad of cash, it talks.

you can try

i did i went around to dealers yesterday most want 200 over comex spot or no deal. the markets are reaching a breaking point where they will find it harder and harder to get real gold out of peoples hands. my dealer is paying seller 5 percent over and yet he has nobody coming in. 40 buyers for every seller of gold eagles.

You can tell the smart

gold buyer by their comment, "I hope it goes lower..."

My sentiments exactly.

Dollar cost averaging into a position makes sense. At some point I'll write an article suggesting that, but not just yet.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Bob Chapman would like this. You should send it to him.

Great article though! Gold is no biological resource and in a complete free market it may have no value at all, but in a fiat system gold is the worst enemy for bankers. The liquidity preference for gold right now is so high I wonder exactly how much an ounce will cost by 2012

A true flower can not blossom without sunlight and a true man can not live without love.


Enemy of the bankers indeed!

Interesting comment about a complete free market. In a sense, you're right as it would return to its rightful place as trusted medium of exchange. More to it than that, and not perfect, but the restraints of government abuse would be there.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Gold and Silver are tanking at the moment!

It's hilarious to see how the MSN media spin their web on why gold is tanking.

They say it’s because of a strong dollar against the Euro, which hurts our exports. They also say the recent bad jobs report points to a week economy which means no inflation. Such reasoning is nothing less than a joke. We are truly in a totally catch 22 position as a nation, and here’s why.

If we don't get some sort of inflation it will be disastrous for the government’s ability to repay the trillions in deficit spending they’ve been doing for the last year and a half. For the record, if the government’s deficit spending isn’t inflationary, I don’t know what is. Such irresponsible behavior alone is a GOOD reason to stick with gold, its called securing your buying power.

Furthermore, Moody is already warning Congress that the US debt is at critical mass, and will cause the downgrading of US Debt Instruments. This too is an inflationary warning against the US dollar’s value. Another GOOD reason to stick with gold.

In case anyone has not noticed, the housing market is still tanking. My guess is we’ve only seen the beginning as to how low home prices will really go. An unexpected part of the foreclosure equation (which was not originally figured into the equation at all), is just now starting to boil over. And they are all the homeowners who CAN afford to make their mortgage payments but are choosing to turn it over to the bank instead, because their mortgage amount far exceeds the value of their home. This is compounding an already bad picture for the banks. (Bank failures, and or losses means no profits, which means less taxes paid to Uncle Sam)

Then there’s the bad commercial loans, which are now just starting to kick in. Some economists are predicting the losses in commercial loans could top the housing losses. (Again bank failures and or lost profits means less tax revenues for Uncle Sam)

It’s also been reported recently that US Tax Revenues are way, way down because of the recession/depression were in. The Federal Government’s solution to all this is to raise taxes to makeup those losses. Including additional taxes to pay for their outrageous deficit spending. This BEHAVIOR will prematurely destroy the US dollar as the Worlds Reserve Currency. And when that happens you will be grateful you have ANY kind of precious metals, instead of US dollars.

These are trying times, and one must see the long-range implications of what is about to happen, and not the short-sited ones the MSN media loves to dwell on.

The Winds of Change!

The media spin...

has been hilarious indeed!

I've been collecting CNBC videos that last couple years with their comments on the gold market. Once I can put them together, it will be a nice video to expose them and their continued bashing of gold!

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Untrue that deflation is bad in the mid-term

People are and will ever more flee to short term Treasury bonds in the fact of deflation, in fact making the government extremely liquid and flush with cash for a while.

In a few years... yeah then we have a serious problem. But for the time being this is actually a BENEFIT to the government.

BTW the hate mail has slowed down guys.....


What's up?

Derek Blain.

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Progress is precisely that which the rules and regulations did not foresee. - Ludwig Von Mises.

The deflation

scenario is one I watch too as I follow Mish Shedlock closely. I always like to read what he writes and weigh it versus the Austrians, especially Gary North who seems to have an axe to grind.

Can both sides be right? It seems they might. I don't view the Austrians as short term analysts by any means. They usually post Rogers or Faber's views.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Great article,Doug

and easily understood by old guys.

This excerpt from an essay by John Embry (Sprott Assets)is to help
support our contention that the gold
"above ground" won't be replaced as fast as it is put under the mattress;

Thus I was fascinated when Aaron Regent, the new head of the world's largest gold company, Barrick Gold, was quoted at RBC's annual gold conference in London lamenting the state of the gold mining business. He went so far as to suggest that global gold production was in terminal decline despite record prices and Herculean efforts by mining companies to discover new ore bodies in remote areas. He alluded to "peak gold," implying that production has reached levels that can't be exceeded, an expression that is commonplace in the oil industry, where the subject has been under discussion for some time.

Following this pessimistic assessment, a more horrifying prediction was revealed in the South African Journal of Science. Chris Hartnady, the research and technical director of a Cape Town based consultancy, stated that South Africa's famous and extremely prolific Witwatersrand gold fields are around 95 percent exhausted and predicted that production rates should fall permanently below 100 tonnes per year within the next 10 years.

This is truly shocking in that gold production from the Witwatersrand, the largest gold field ever discovered, peaked at around 1,000 tonnes per annum in 1970 and, though falling steadily since, still contributes around 230 tonnes per year or roughly 10 percent of world production.

In view of these two evaluations by knowledgeable industry players, my negative view on production has been reinforced. Gold mine production is in the neighborhood of 2,350 tonnes per year, and I continue to believe that odds strongly favor it continuing to fall rather than show any meaningful increase for the next several years.

re: gold production decline

Hi Scott...

Thanks for the info...

I follow Dr. Thomas Chaize. He's been pretty thorough with his independent analysis.

His latest from 2009 is here: http://www.dani2989.com/pdf/prodgold2009gb.pdf

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!


In the era of the London Gold Pool, only around 3,000 tonnes were sold to maintain the $35 price. This time the exercise has been dramatically larger and has occurred over a much longer time frame against the backdrop of a considerably more fragile financial structure, particularly in the West. So all of you are free to use your imagination to estimate how high gold is going to go this time.

So what have we learned in 2,064 years ?
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." ... Cicero - 55 BC

And which way did Rome go?

Fait is inexorable? One hopes not, but history does leave a compelling lesson.


The Chinese are looking for a major throwdown at the $1040 level

India beat them to the punch last time, and gold shot up from their bullion purchase of something like $200 million U.S., or something of that magnitude.

Short term dollar rally = great gold buying opportunity, but it won't last very long.


Breakdown in the Gold Market

Breakdown in the Gold Market

By: Jim Willie CB, GoldenJackass.com

A great disconnect exists in the gold market between the exchange futures contract price (the paper price) and the gold bullion paid price for transactions (the physical price). The differential in price is growing wider, enough to place tremendous pressure on the gold market itself. Look not to the gold premium paid for purchases, but to high volume purchases in the tens of million$. In mid-December, almost every demand for gold contract delivery was matched by a cash delivery, complete with 25% bonus premium offered. The officials even produced a new ledger item called 'Cash For Delivery' that was necessary to balance their badgered books. It prompted little attention. Some call it a basic bribe. Others call it a technical default.

Fast approaching is the event of GAME OVER for London, a condition that has already reached critical level, according to a key reliable source of information with London connections and direct experience with its market events. How long can a major metals exchange sell contracts but have miniscule supply of gold in their vaulted possession? The paper gold market and the physical gold bullion market have finally separated in a practical manner, meaning actual gold has almost no role anymore in London paper contract settlement. The absence of gold in London requires extraordinary tactics to settle contracts and to obtain gold bullion. Red tape procedures delay delivery for individuals, and bribes accompany gold delivery demands as standard practice. The London Bullion Market Assn has almost zero gold, its supply having been drained in high volumes since early December, a process currently in acceleration. The opportunity to convert fiat money into precious metal at prices considered reasonable is also vanishing. The London gold banker said,

"There is going on a lot more than meets the eye. The physical system is actually consolidating bigtime and is organizing itself with lightning speed, totally hidden from pretty much anyone, even the so-called insiders. The paper precious metal market and the physical precious metal market have defacto disconnected. The paper and physical gold markets currently operate in parallel universes. The outflow of physical metal from bank vaults is happening at a mind bending pace."



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A four legged chair is very sturdy. Pd, PT, Au and Ag.

Don't put all your eggs in one basket.
Trade some gold for palladium. It's the wise thing to do.

Ron Paul warns of dangerous times..

when this occurs good luck buying ANY metals at ANY price.. you better get what you can get while you can get it. trying to time a buy is in my opinion stupid.


“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

I'm not sure

where you are reading into anything I write as "trying to time a buy."

I do say; "a holder of gold cares not that it falls to $700 or lower, on its way to $2,000 and higher."

I think we're saying the same thing and you're just bringing up additional reasoning to buy gold which makes sense.

But there are traders out there (DaddyWarBucks) who profit from the markets as well.

One can trade and profit while at the same time acquire the physical metals.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

I agree... the problem is

I agree... the problem is those paper traders are going to get caught.. the other problem you have is while you wait for your trading profits the supply of physical metals is drying up.


“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul


but the advice I give is to do both, not one or the other. Physical is a must for every portfolio. I recommend that in my book.

At the same time, trading profits can be had by playing the cyclical trends.

I've been recommending since about mid November to look at trading gold in EURO's instead of U.S. Dollars. There was no reason I could see that justified the EURO being as strong as it was, almost reaching its all-time high versus the dollar.


Peter Schiff used to say, "there's always a bull market somewhere" before Cramer stole it from him. IMO, there's always a bull market in gold and the down turns will always try and shake people out.

But your point about owning it is a good one.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Doubt it will sink to $500 ... but $650 is the insiders goal.

Silver is projected to level out at $6 - 7 per once. Then a "fixing" of the value & return to a metal backed economy is possible.

This "run up and float down" is nothing more then the plan to rake wealth off this sector of the savings game.

Discover Costa Rica

Paper Gold

Dollar strength/gold weakness is needed for the tentatively expanded treasury auctions next week and so the administration can point to it as progress for the House vote on raising the debt ceiling today. It will cushion the dollar from falling too much upon news of a rising debt ceiling.


Looks like the gubmint can use the commercials to paper gold to wherever it wants. However, India bought gold around $1040 so maybe it won't go lower than that - wouldn't be surprised though if it did.

gubmint cheats

After looking at the big

After looking at the big commercials open interest in the $900 strike, there's a good chance it will go below where India bought.


for the update Freedom....

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!