Commodities | - Part 5

Learn from Buba

This is a pretty remarkable commentary about the opaqueness of the physical gold market considering that the story appears in the Financial Times (alternate link here).

I mean, it’s one thing for someone like Glenn Beck to be looking askance at the difficulty that Germany has had over the last year in repatriating a small portion of its gold reserves from the vault of the New York Fed in the video below, but it’s quite another for one of the world’s most respected financial news organizations to be doing the same thing.

From the Financial Times:

In the “armchair farmer” fraud you are told: “Look, this is your pig, in the sty.” It works until everyone wants physical delivery of their pig, which is why Buba’s move last year caused such a stir. After all nobody knows whether there are really 260m ounces of gold in Fort Knox, because the US government won’t let auditors inside.

“Won’t let the auditors inside”? That sounds a lot like Mr. Beck.

Commodities Supercycle Not Over?

Via the Economist’s Daily Chart feature comes the graphic below in defence defense of the view that the most recent commodities supercycle has not yet run its course.

From the short article accompanying the chart we learn that current China growth rates of about 7.5 percent today is the equivalent to 12 percent growth back in 2008.

As for the chart, it’s kind of hard to glean too much from the 19th century data since there was virtually no inflation the entire time. The notable exception was the Civil War period when both sides issued lots of paper money before order was restored.

Of course, things really changed when WWI started and the Fed began operating…

This item at The Economist provides a handy scorecard for asset class and stock market performance for various countries around the world, some of which make the impressive U.S. equity market returns in 2013 look quite pedestrian.

After a dismal showing last year, precious metals are starting out 2014 with a bang. It will surely be interesting to see how long that lasts.

2,000 Tonne Gold Vault Opens In Shanghai

Many once had high hopes for emerging Asia, but count this development as one more piece of evidence that they’re as backward as ever over there, spending time and money foolishly building a vault to store upwards of 2,000 tonnes of gold bullion as detailed in this report at Bloomberg when they could be buying shares of U.S. stocks and making a fortune.

The vault can store over $80 billion worth of gold bars at today’s prices, much of that metal transferred from vaults in London and New York as part of the ongoing flow from West to East, what Warren Buffett would no doubt deem a colossal waste.

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