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Bloomberg Counters Gold’s Run with Absurd, Baseless Hit-Piece

Monday morning I was greeted via my inbox with a Bloomberg report on Gold. Bloomberg has a series called “The Dark Side of Gold.” Its important to note this isn’t the first time the news organization has attempted a hit-piece on Gold. I wrote about this exactly oneyearagoand identified the cases and examples of Bloomberg’s gold bashing.

The crux of the biased series (one that even makes CNBC blush) is how Gold ETF’s are responsible for Gold’s rise and contributing to a bubble. It is insinuated that because the ETF’s are easily tradeable, a torrent of sell orders would cause Gold could to fall sharply, ala 1980.

Gold’s rise actually has very little to do with the GLD ETF. It really is a non-factor when you consider any of the following reasons: Threat of sovereign debt defaults, debt monetization in Europe, Japan and US, 0%-1% interest rates, commodity bull market, and falling gold production. The GLD ETF is an effect of the bull market, not a cause. The same is true with mutual funds during the bull market in the 1980s and 1990s.


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Faulty Logic - Supply and Demand

Suppose there are one billion dollars invested in gold, gold ETFs, and gold jewelry. Or, in other words, one billion dollars worth of demand for gold.

If the ETF's are wiped out because they are revealed to have no gold in them, what will happen to their share of the demand?

All of a sudden, those who actually have gold, will experience a jump in demand for it, as the world wakes up to the sudden realization of scarcity.

I would imagine that very quickly the lost value from the ETF's will transfer to the real stuff and to alternatives like silver. The only reason it won't happen instantly is that people who lost money will be busy suing to recover it, and the chaos of that will keep those investors from switching, but everyone with resources will make the move right away.

When this happens, don't panic! Just make sure that if you own an ETF they actually have the metal, because it may take a while for them to prove it and for investors to trust them even though it was some other fund that was exposed.

I think, if all the ETF's were suddenly revealed to have half the metal they say they have, the half they have would double in value in a short period of time: they'd have to have audits, proof, rebuild confidence, send people to jail, etc.

The total metal value is equal to demand. Supply simply tells you how much value per unit of measure. When you reduce the supply, the value of what remains goes up equally (more or less--I imagine it can get sloshy and maybe even bubble).

What do you think? http://consequeries.com/

bloomberg is a mouthpeice for

bloomberg is a mouthpeice for the elite. When a person owns and trades in gold or silver it is FREEDOM. they can not have this. They can not have 300 million Americans exchanging their worthless peices of paper for another currency. They also do not want to not be able to track businesses and individuals to collect their tax. Its that simple.

Michael Nystrom's picture

Repeat after me

The point of a profit driven 'news' organization is to garner eyeballs.

It matters not if the information is 'true' - the point is to stir the pot, stir debate, generate 'buzz.' It is not the content that is king, but the advertising revenues.