Gold as a Symbol of Power, Perfection and Prosperity

It’s incredible just how widespread the use of Gold is in western culture, as a symbol of power, perfection and prosperity.

It's used in figures of speech to note something being of excellent quality (that’s gold) or as something that should always be followed (a golden rule).

It's used to colour jewellery as decoration and/or a display of wealth, sometimes where the piece contains little or even no gold (the west shows off Gold poorly compared with many other places, see 'Gold in Istanbul').

It's used as a symbol of winning the ultimate prize such as in the movie 'Charlie and the Chocolate Factory' (golden ticket) or in competition (gold ribbon, medal or trophy).

Despite all this, the west seems to have lost it's connection with the physical metal this symbolism represents. Take for example the front of the current issue of Money magazine which displays Gold bars (3D rendered, that look plastic) as a symbol of wealth (prosperity), but Gold didn't even get a mention on the cover (only property, shares and cash).

Now I couldn't bring myself to buy the magazine at the time and didn't want to treat the newsagent as a library, but I'd be fairly confident that Gold doesn't even get a mention in their article on wealth building strategies. 

I did find a portion of the article online (read here) which talks about some of Australia's favourite investment strategies including negatively geared property and borrowing to buy a diversified share portfolio. The writer of this section was Suzanne Haddan, Managing Director of BFG Financial Services who claim on their website to specialise in "holistic personal financial planning". How 'holistic' is their approach when Gold, the most commonly used symbol of wealth, doesn't even rate a mention on their website?

In comparison a search for 'property' returned 33 hits and 'shares' was 29 hits. I'm sure this deficiency of Gold on the websites of financial planners is common and it's one reason I think Gold is still heading higher in the near future (lack of exposure to the asset even after a magnificent price gain over the past 10-15 years). While there were signs of the market heating up a few years ago (I speculated we were entering the third phase of the bull market), I think it's unlikely that 2011 was the pinnacle. The correction we've had over the last several years is not unlike that experienced in the midpoint of the 1970s Gold bull market (see below from The Short Side of Long):

"After a few requests to compare the current correction to 2008 as well as 1975/76, I am posting this chart below. The timeframe is from September 2011 peak all the way until this mornings Asian low at $1179 per ounce."

Of course when talking about wealth, PRICE shouldn't be the only focus, even if we are constantly bombarded with such thinking... especially so in Australia where rising house prices have led to Australian's having record household "wealth":

Wealth that is "accumulated" through the flipping of an asset amongst investors at higher and higher prices can just as easily reverse, whether it be held in property, Gold or shares. Furthermore, wealth measured in nominal dollars doesn't account for the decay in value of the fiat currency used to measure it.  A better way to measure wealth is in a tangible sense such as ounces or acres, either that or by the income it returns (yield).

Personally I would measure ‘wealth’ in ounces, acres & yield, not in the nominal price paid by speculators... http://t.co/lezUzUqyhr
— Bullion Baron (@BullionBaron) March 27, 2014

Yields can fall of course (though the flavour of our current monetary system with inflation targets tends to keep pushing them nominally higher measured against purchase price), but those who have some wealth tied up in tangible assets need not worry about the number of their ounces or acres reducing. The definition of wealth is simply an abundance, plentiful amount or great quantity of something valuable, there's nothing to say that the measure used must be dollars.

So stack some Gold for price gains if you like, personally I am positioned for this too (with intention to exit when Gold represents poor value relative to other assets), but put aside some ounces that you aren't selling and don't measure in dollars... because it doesn't need to be in order to be considered wealth.

"To most Westerners, gold is an investment. To the gold bugs and HMS crowd, gold is money. And to the bullion banks, gold is a currency (ISO code XAU) upon which credit is issued and traded. So what did A/FOA mean by the statement that gold is wealth, not any of these other things? I mean, surely gold is whatever its users think it is, subjective use value and all, right?

Actually, that's exactly right! Gold is whatever its users think it is. And the point A/FOA was driving at was that the vast majority of the above-ground gold, today somewhere around 165,000 tonnes, is held by people who understand it as wealth." - FOFOA

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Krieger & ZH Wrong On German Gold Repatriation

Update: Since I posted the below Michael Krieger has updated his blog post to confirm the repatriation schedule is unchanged. Zero Hedge also posted a follow up article. Both point to the Bloomberg article as being misleading, which I agree with (particularly the title), but still think that anyone reading the article in it's entirety (and is familiar with the German repatriation story) should have picked up that there was no plans to change the repatriation of 300 tonnes from the NY Fed.

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Today Zero Hedge is headlining an article by Mike Krieger suggesting that Germany will stop repatriating their Gold: Germany Gives Up On Trying To Repatriate Its Gold, Will Leave It In The Fed's "Safe Hands".

Unfortunately this is misinformation and they have both either misunderstood or are purposefully misreporting what the Bloomberg article they reference is actually saying.

They are not the first to get it wrong on the German repatriation story, it seems to be common as I have covered previously:

Is Germany's Gold Repatriation Causing Lower Prices?

Dave Kranzler Gets It All Wrong On Germany's Gold

Here is an excerpt from the Zero Hedge article which includes part of Krieger's piece:

Several months after it was revealed that Germany was able to only recover a miserable 5 tons of its gold in all of 2013 (under 10% of the 84 tons it was scheduled to repatriate), Germany appears to have given up entirely in its attempt to recover gold which simply is not there, and as Michael Krieger reports, citing Bloomberg, has decided to keep "it" (by "it" we don't mean the gold since that clearly has not been at the Fed for decades, but merely the paper promises of ownership: for more see China's gold rehypothecation scandal and how the unwind works) at the NY Fed after all. That is to say, in the "safe hands" of former Goldmanite Bill Dudley.

Via Mike Krieger's Liberty Blitzkrieg blog,

Just last week, I published a post titled, Video of the Day – “End the Fed” Rallies are Exploding Throughout Germany, which subsequently went viral. Interestingly, only a few days later we find out that Germany’s very own criminal political class has decided it will continue to store the nation’s gold in New York rather than bring it back home as had been the intention. It’s quite ironic that just as protests against the fascist Federal Reserve are spreading throughout the land, the political class officially decides to keep Germany’s treasure across the Atlantic, in care of none other than The Fed itself.

Both Zero Hedge and Krieger imply there has been a change to the repatriation schedule, but the truth of the matter is that the Bloomberg article only refers to stopping earlier attempts to bring home all of Germany's Gold:

Surging mistrust of the euro during Europe’s debt crisis fed a campaign to bring Germany’s entire $141 billion gold reserve home from New York and London. Now, after politics shifted in Chancellor Angela Merkel’s coalition, the government has concluded that stashing half its bullion abroad is prudent after all...

...“Right now, our campaign is on hold,” Peter Boehringer, a Munich-based euro critics who co-founded an initiative to bring home all of Germany’s gold in 2012, said in an interview.

And there has been NO CHANGE to the repatriation schedule of 300 tonnes from New York & 374 from Paris which will ultimately result in 50% of Germany's Gold being stored at home. This is the schedule that was published by Bundesbank last year.

Germany's Gold Repatriation Schedule

It was confirmed in today's article from Bloomberg that there is no intention to change the schedule:

The central bank met the critics halfway. Last year, it began moving the Paris gold to Frankfurt, pointing out that Germany and France now have the same currency, the euro. Enough of the gold in New York and London will be brought home so half the reserves will be in Germany by 2020.

No doubt there will still be plenty of commentators in the precious metals space continuing to twist the story as they see fit, especially so if Bundesbank remains behind schedule when they publish an update later this year or early next, but in my opinion:

- The NY Fed has the physical Gold

- The repatriation will complete on or near schedule by 2020 &

- There is no conspiracy (missing or leased Gold)

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Gold in Istanbul

Following the theme of a post I wrote a few years back (Gold in Japan, October 2010) I thought I'd write up a short travel blog on some precious metal related highlights from recent overseas travels (Istanbul via Kuala Lumpur).

I flew to Istanbul via Kuala Lumpur (from Adelaide). The flight from Kuala Lumpur to Istanbul was on Qatar Airways so had a stopover at Hamad International Airport (Doha, Qatar). The airport only opened earlier this year and is very impressive. Along with rows of Apple computers setup for use in family areas, giant TV screens and impressive internal architecture, I spotted this Gold jewellery store, simply marked as 'Au'.

'Au' at Doha (Hamad) International Airport

After landing in Istanbul, one of the first things I was keen to checkout was the Grand Bazaar which has some 3,000 shops and hundreds of thousands of visitors each day.

Approaching from the Galata Bridge side of the market, I was not disappointed as I walked up the hill to the markets (through tight city streets covered in stalls)... this path led me through what I could only describe as the 'Gold district' of Istanbul (although there may be others) with dozens of Gold jewellery stores adorning the streets.

The windows were absolutely packed with Gold necklaces, rings, bracelets and more. Some of the pieces were very intricate, others were quite simple, but almost all of it was of a high finesse with a large selection of 22 Karat, along with some 14 - 18 Karat. Very different to Australia where most jewellery store windows are filled with 9 Karat or even 'filled' pieces.

Once under the cover of the Grand Bazaar there were many bullion dealers (some of whom also did currency exchange), much of their inventory was similar between stores with lots of Nadir or Istanbul Gold Refinery bars and coins (mostly Gold, some Silver). Only the occasional foreign coins and bars were seen... I did spot these heavily worn Perth Mint coins in one of the windows...

Perth Mint Coins - Bullion Dealer Window @ The Grand Bazaar

I didn't purchase much as I was wary of being ripped off on any high value purchases (although I'm sure most of the jewellery stores there are reputable). All I picked up were these cheap 5 gram Silver bars as a memento:

Istanbul Gold Refinery - 5 Gram Silver Bars

While in Istanbul I also took a walk to the Turkish State Mint which was around a 5km walk from my accommodation near Galata Tower. From the outside the Mint was fairly nondescript and off the main streets, only a small window with coins and the word 'Darphane' meaning 'Mint' in Turkish were the giveaways.

Turskish State Mint - Retail Shop

Unfortunately I was unable to visit the museum which is onsite as it was closed (website was out of date with opening days and I didn't have time to return). The retail store had a few display cabinets, but was fairly unimpressive (relative to the Perth Mint & others I have visited). Most of their coins appeared culturally significant, the assistant in the shop didn't speak much English so I wasn't able to get much more information than prices on the coins. I purchased a 1 gram Gold coin (generic) and a 1 ounce sterling Silver coin celebrating the XVII Mediterranean Games - Mersin 2013.

On my way back from Istanbul I stayed a couple of nights in Kuala Lumpur and visited Berjaya Times Square Shopping Complex as there were a few coins stores listed. I was disappointed with only two of the stores being open and having very limited content, though the shopping centre itself was pretty impressive with a roller coaster running through some of the upper levels. I only bought a couple of trinkets in Kuala Lumpur, namely a certified (LOL!) Gold foil keyring and some fridge magnets.

It was a great trip and although I haven't covered the general tourist aspects of Istanbul in this post, I think it's a city well worth visiting if you ever have the opportunity (not only to see all the Gold).

View of Istanbul From Galata Tower

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Volcker Calls For New International Monetary System

Following on from the theme of my post here:

Road Map To A New International Monetary System

I thought I would share an interesting speech presented by Volcker to the Bretton Woods Committee around a week ago. While he doesn't mention Gold playing a part (as is the focus of my previous post), I think his comments are worth sharing (and don't appear to be covered on any other finance news sites that I can find).

Click below link to read in full (and I have included a couple of excerpts below):

REMARKS BY PAUL A. VOLCKER AT THE ANNUAL MEETING OF THE BRETTON WOODS COMMITTEE (WASHINGTON, DC)–MAY 21, 2014. A NEW BRETTON WOODS???

He suggests a return to fixed/managed exchange rates & balance of payments equilibrium:

"We should be able, within a broad range, to manage exchange rates among major 6 currencies in a manner that discourages the extreme changes that are inconsistent with orderly adjustment. We can and should consider ways and means of encouraging – even insisting upon – needed balance of payments equilibrium."

And an end to the US Dollar as defacto global reserve currency:

"Nor would I reject some re - assessment of the use of a single national currency as the dominant international reserve and trading vehicle."

Having earlier in the speech mentioned the dilemma of building a monetary system around a national currency (Triffin Dilemma).

Volcker does highlight that significant change to the status quo is some time off, but that could easily be bought around faster with another major crisis.

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Dave Kranzler Gets It All Wrong On Germany's Gold

Long term readers of this blog or those who follow my comments on other sites are probably aware that I'm skeptical of the conspiracies surrounding Germany's Gold repatriation. I wrote the following post mid last year:

Is Germany's Gold Repatriation Causing Lower Prices?

Since then it's been revealed that only 5 tonnes of Germany's Gold has been delivered and the conspiracies have exploded in number again. When I see misinformation on the Gold blogosphere I will sometimes take time to correct the writer or provide an alternative perspective to their view. A recent occasion was on Koos Jansen's blog where I refuted (in the comments section) some of the conclusions he'd drawn (although on the whole I think his site is well worth reading). This led to an interesting discussion, which may not have changed the mind of any involved in the discussion, but it did provide a range of views for those reading the site.

Another site I've commented on a couple of times is that belonging to Dave Kranzler otherwise known as 'Dave in Denver' who writes at Investment Research Dynamics (previously his blog was 'The Golden Truth'). He's written about German Gold repatriation on previous occasions and clearly has a different view to mine. A post of his a couple of days ago suggested that the German Gold repatriation request from the US Fed had initially been for a higher amount (than 300 tonnes). I questioned this in the comment section, following which he silently edited the post (which you can read here) and proceeded to reply to my comment with profanity and personal insults:

I won't stoop to the use of profanity or insults to get my view across, but will point out that my comment was factual, while Dave's post and follow up comment were riddled with inaccuracies.

The only real claim that I made was that Germany's Gold repatriation request was initially for 150 tonnes and later increased to 300. This FACT was confirmed in an interview with Carl-Ludwig Thiele (Member of the Executive Board of the Deutsche Bundesbank):

"We specified our initial target in October 2012. In January 2013, we then presented a new gold storage plan and specified a new target that is considerably higher than the first. Instead of only 150 tonnes, we are now transferring 300 tonnes of gold from New York to Germany."

Meanwhile Dave claimed that:

1. "They [Germany] initially wanted more than 300 tonnes [from the United States]". As per above this was silently edited from his post, so we shall assume that he changed his mind on this statement? Dave, please do provide the evidence for this claim or otherwise could you explain why you didn't address it's removal in your response to me?

2. Dave claims further that "it should have been nearly effortless to ship 300 tonnes back to Germany via two cargo flights". Now from a logistics perspective that may be so, but you need to take into consideration insurance (for which a Forbes contributor said a maximum 3-5 tonnes per flight would be possible), not to mention that 2013 was a particularly busy year for Gold refiners ("the capacity of smelters are just limited" wrote one German newspaper). So while it may have been technically feasible for Germany to ship the Gold in two cargo flights, it would have incurred unnecessary risk (in that the Gold would not have been insurable), not to mention making it particularly difficult to have the bars recast without a refinery able to safely store and process the Gold in a timely fashion.

3. In the follow up comment to me he suggests that the German Gold stored in the US originated from Germany: "let alone the original bars Germany shipped over here to keep away from the Russians right after WW2". The reality is that Germany's Gold holdings stored in the US have never been in Germany. From Carl-Ludwig Thiele in the interview previously linked:

"It is not a question of “returning”. The gold is being transferred to Germany for the first time. Until 1998, only 2% of our gold, or thereabouts, was stored in Germany. In the first year, we transported five tonnes from New York. This year, we will transfer 30 to 50 tonnes, or perhaps even more, from New York to Frankfurt. And there is still next year to come."

It's no secret that Germany's Gold in the US wasn't all in 'Good Delivery' form, this is the reason the bars are being refined in Europe during their transit to Germany. The United States built up an impressive Gold hoard, more than tripling their reserves between 1930 and 1940, as they hoovered it up from citizens following the 1933 Gold confiscation. It wouldn't be surprising if some of the Gold bars that Germany acquired in the United States over the 1950's and 1960's consisted of some 90% pure bars which were melted from the coin confiscation.

Anyway, the point here was to highlight that you shouldn't believe everything you read about Gold on the internet (I would even encourage you to double check my claims), especially in relation to German Gold repatriation (is this even the right word given the Gold didn't originate physically in Germany?). There is a lot of misinformation, factually inaccurate claims and emotive wording used by commentators in the precious metals space to try and draw readers to their point of view.

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