Monday, October 15, 2012

Gold Slides Even As Ongoing South African Gold Miner Strike Means No Production On The Horizon

When markets are irrational, it is time to BTFD--largely due to market manipulation by the big institutions.  For those not pre-disposed to vulgarity, BTFD = Buy The F***ing Dip.  Despite South African gold production being taken off-line due to miner strikes, the price of gold plummeted today.  Wall Street is full of head fakes, and this latest bear raid on precious metals is a classic example of the bullion banks shaking the weak longs out of their positions in order to generate paper profits on the price declines, and then buying the lows before the return trip upward.  Wash, rinse, repeat.  Hence, BTFD.  Be bold when the naked shorts want you to panic.

South Africa was the preeminent gold-producing country in the last century, but its production levels peaked several decades ago.  Today, it is the fifth largest producer in the world, with China, Australia, the US, and Russia garnering the top four positions as of 2011.  However, forget production from China and Russia--their entire output is captive domestically and therefore never enters the global marketplace.  The Chinese and Russians are hoarding gold for their reserves, anticipating the demise of the USDollar as the global reserve currency, and the rise of gold-backed hard currencies, with the Renminbi and Ruble as likely candidates.

With Chinese and Russian gold output unavailable, a production shutdown in South Africa will adversely impact global supply, even while demand is soaring in emerging economies.  Expect the shortage in physical gold to intensify.

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