The financial lingo rarely
lets the outsiders understand plainly how markets function. Most of the terms
used are abstract, complex ones, and sound unreal to most people.
It is hard today to explain
why it is so important to own physical gold in the actual context and why the
spot price doesn’t
matter that much in determining the real value of gold without being aware of
certain key elements moving the gold market.
And it is of the utmost
importance to understand some of those elements, if one is to be able to
support a seemingly discouraging volatility.
Thus we will try to explain
the situation by making an historical parallel with the Titanic shipwreck:
You’re on board the Titanic,
it just hit the iceberg (2008 crisis), and it’s going to sink.
Not all passengers are aware
of it, except you and a few others who have the technical know-how (an
understanding of the monetary system crisis) to know that the ship cannot be
repaired and that it will sink.
The situation being so
compelling, you belong to those who fully understand the importance of owning
a lifeboat (physical gold or silver).
But, for the moment, the value
of your lifeboat (the price of gold) isn’t perceived as extremely high by the
other passengers, because most of them are convinced that a ship like the
Titanic cannot be shipwrecked.
The “spot price” of your
lifeboat on the bridge of the Titanic has gone up since hitting the iceberg,
but it has not reached its maximal value, because most passengers cannot
believe the ship is sinking.
But, since you know what is
going to happen, you’re not really worried with the “spot price” of your
lifeboat.
Especially because you know
that the staff members are lying when they’re telling the passengers that
there are lifeboats for everyone, and not to worry.
By telling passengers there
are enough lifeboats for everyone (virtual offer), the staff members
contribute to keeping the price of your own physical lifeboat low (gold price
manipulation).
But, you know that those
lifeboats do not exist, and that the value of your actual physical lifeboat
is much greater than its “spot price” on the bridge of the Titanic (the
difference between “paper” gold and physical gold), or than the value of
certificates given by staff members to passengers and claiming “lifeboat
delivery promise”.
The “spot price” of your
lifeboat on the bridge of the Titanic does not reflect its real value, but
you know that, in time, its value will explode to the upside.
The staff members are
“manipulating” the price of the lifeboats by creating an offer of virtual
lifeboats (“paper” gold) that do not exist.
As the owner of a real
lifeboat you aren’t that much worried about the “manipulation”, because you
know it will cease when all the passengers try and get their hands on a real
lifeboat.
On the other hand, knowing the
reality of the lies of the staff members, and not trusting them since the
crash, you’re not going to let them keep an eye on your lifeboat for you
(owning outside of the banking system), because they just might have promised
it to many other passengers (gold re-hypothecation) and, thus, they might not
be able to “deliver” it to you when you need it…
The staff members are trying
desperately to avoid a movement of panic, and they’re trying to control the
situation (delaying the outcome) by influencing the price of the only asset
that has real value on the bridge of the Titanic, the one that will make you
survive the shipwreck.
Of course, this parallel is
simple, it was meant so, but it gives a clear explanation of the situation.
P.S.: All the “staff members”
own lifeboats (physical gold) since the crash…
