Europe Makes It Easy to Buy Gold
By Jim Cramer03/23/13 - 10:00 AM EDT
TheStreet Premium Services
The Europeans make some decisions simple and easy, a decision like whether to buy gold or not.
For most of the last five months, since gold peaked in October, the precious metal has been only a so-so place to be. The SPDR Gold Shares (GLD), the ETF I like to recommend for those who want exposure to gold, peaked in October at $174 and has been trending down ever since selling off to as low as $151 a month ago.
Until this week it seemed like gold, which has been a monster performer for more than a decade, had finally lost its luster. The drift down looked to be the beginning of something larger and the collapse of the gold stocks en masse seemed to be forecasting the halcyon days of the GLD were over. The great multiyear bull market, alas, was ending.
And then the Europeans stepped in to stem the decline with the absolute dumbest, most bone-headed plan I have ever seen to tax the depositors, the small-time depositors, of a poor country that is inundated with hot money, perhaps hot laundered money from the oligarchs of Russia. That's right, the Europeans with the help of the IMF reminded you just how stupid the concept of the euro is and how it is untenable both to own the euro and now to keep it in a European bank. Their moronic plan for Cyprus gave you a super reason to go right back into gold.
Now, before I tell you how I think you are getting still one more fantastic chance to buy the precious metal, let me just say that I don't want to fall prey to the notion that what should happen will happen. I think that if I had money in a European bank I would just say "to heck with it, I am going to put it in an American bank. Who the heck needs this worry?" I would particularly feel that way if I were wealthy and had the ability to wire the money with a keystroke to JPMorgan Chase (JPM), where I have my money now, even with all of the
It's amazing that gold hasn't been doing better, considering what's been happening in the news. Even the recent story about Governor Perry of Texas wanting to bring Texas' gold back to Texas (from the Federal Reserve in NYC) should raise some eyebrows. Even Texas doesn't trust the Fed anymore.
Sentiment: Strong Buy
See: “Jitters have investment fund for UT, A&M buying gold”, Houston Chonicle
Your comment: “It's amazing that gold hasn't been doing better...”
Cypriot private investment in Euros US Dollars (US Federal Reserve)
US Dollars gain value POG declines Euro declines even further
Cypriot’s who exchanged Euros (and other Europeans) for US Dollars buy gold POG gains vs USD
The timeline is unknown and totally flexible, but near term in its realization.
The only question remains in the interim is where do the Euros end up. Who is the bagholder? Give past history it would seem it is the American taxpayer whose remaining wealth will be used up to prevent a total cratering of the European union. This is not sustainable. Given the recent behavior of Asian currencies, and those in nearby areas it would seem that gold is flowing into their coffers. That is because their authorities, at least currently, are not disadvantaging those who reside there, unlike the European and American variety who are busily “cutting off their noses to spite their face”, meaning they hate their own populous. In particular this is representative of the current Administration in Washington, DC.
IF Cramer is correct about what Europeans should do instead of putting their money in a European bank (put it in a US bank), then the dollar would have to trend higher, and a golden opportunity would arise at even lower POG. Of course all of that is a VERY big IF, as there is a preponderance of very corrupt politicians and banksters in the US of A. They seem to have defined for all others what it means to be corrupt. Besides, anyone who has followed Cramer long enough knows that he is a failure as a fortune teller.
The current short term funk in the POG (last 24 hours) seems to indicate that foreign funds are pouring into Dollars being bought with Euros, the current exceptions, roughly speaking, being the countries along the Pacific Rim. But that could also be an indication that those depreciated Euros will be used to buy gold at some point very soon, which would reverse the dollar’s gains relative to the POG. This seems to also imply that there will probably be a lot of central bank buying of gold by the Fed to exchange all those Euros into gold, further depressing the Euro against the dollar in a continuation of the current slide in the POG? For the past month the dollar has been trending higher against the Euro. A conclusion could be that there are 3 things at play here, the Dollar, Euro and gold, with the current transfer of Euros to Dollars to be followed by a transfer of Dollars to Gold, the winners being those who trade their dollar holdings for gold.
Any critiques of these assumptions will be appreciated, since the smoke and mirrors of CBs are not clear to us ordinary mortals. Who will be the Euro bagholders? Euro CBs? This is “nuts” and implies a melt-down very soon with the velocity of paper currencies trending ever higher and beyond even the capabilities of CB manipulations.