Gold Facts: Zerohedge, Goldman Get It Wrong Again

In this commentary posted by Zerohedge, Goldman Sachs writes this about gold: “In gold, money managers have generally taken profits and managed their overall exposure as prices have continued to push and rip higher.”

The analysis is discussing whether or not gold is “overbought” after the relentless move higher since mid-November.

But the concept of whether or not gold is technically “overbought” or “oversold” is complete nonsense. When the mainstream media, Wall Street, Zerohedge, the Market Ear, etc discuss “gold,” they are referring to paper gold: comex futures and $GLD. Both are manufactured derivatives.

Sure analysts can run RSIs and MACDs on gold futures and GLD and discuss Comex COT positioning until they’re blue in the face. But by what standard can the technical condition of the physical gold market possibly be evaluated? It’s impossible.

Make no mistake, the paper derivative gold market and the actual physical gold market are two entirely different animals. To be sure, since 1974 when Comex paper gold began to trade, it connected the use of derivatives to the price of gold and gave the Central Banks via the bullion banks the ability to somewhat control the price of gold. But the ability to do this using paper is waning as the big physical gold accumulators everywhere outside of the U.S. and Europe aggressively buy as much physical gold as possible.

What can be said is that gold is under-owned by the entire world (except maybe China and India). Using historical standards when the currencies were backed by gold, Central Banks, on average and in general, held 40% of their reserves in gold. Once the gold standard was removed, most CBs unloaded a large portion of their holdings.

But that pendulum has been slowly swinging the other way as distrust of the dollar and the U.S. grows. It is likely shifting into the “suddenly” phase and Central Banks have a lot of gold to buy in order to reach the 40% of reserves standard.

Gold is thus not even remotely close to “overbought” unless you only look at the Wall Street paper gold fantasy market of fake gold - the market in which Wall Street makes its trading commissions.

With respect to the idiotic assertion that Bitcoin is “money” and gold is not money because someone can use Bitcoin to pay for a haircut, why is gold designated as a Tier 1 bank asset by the BIS along with fiat currencies and sovereign-issued bonds? Bitcoin does not have that designation nor will it ever. The answer: gold is “big boys’” money and the world’s oldest and most durable form of money. Period.