Nick Barisheff: The Case for (Much) Higher Gold Prices

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This interview was recorded three weeks ago. We've been unsure of how well-received an interview about "$10,000 gold" would be received while the yellow metal experiences its worst quarter, price-wise, in history. But rather than sit on it any longer, we're releasing it now and will trust our readers to look past the current price of gold and focus on the long-term macro arguments Nick presents. ~ Adam

Nick Barisheff, CEO of Bullion Management Group recently published the provocatively-titled book: $10,000 Gold: Why Gold's Inevitable Rise Is the Investor's Safe Haven. In this week's podcast, Chris sits down with Nick to learn the math behind this forecast.

I was reluctant to put up a number and a timeframe. And when I say $10,000 gold, I do not mean this year, or even next year. It is probably a plus or minus five years scenario. What changed my mind was in 2011, when in the U.S. there was the raging debate over the debt ceiling. 

You could see that there was no political will or ability to ever change [the United States' debt crisis], because it is impossible to either increase taxes or cut expenditures enough to really make a difference. You are not going to grow your way out of it. Nobody is predicting that that is going to happen.

So the only choice left is essentially, in simplified terms, to call it printing. When you look at that, then what you get is that the printing is going to continue, the deficits are going to continue, and, in fact, they are going to increase. And the interesting point is that if you plot U.S. debt versus the gold price, you almost get perfect correlation. So this is just a straight progression. Like, if you keep printing at the rate you are printing, you are going to get to $10,000. $10,000 is by no means the peak, and people have trouble coming to grips with $10,000. But if you hit $10,000, then we are into hyperinflation, and the numbers after that will sound absurd.

In making his price prediction, Nick also takes a historical view of the perfect record – of failure – of paper-based currencies:

Throughout all of history, there has never been a single instance where a fiat currency did not end in hyperinflation and complete collapse. There is not one example of a successful fiat currency. Because the simple thing is that if you give a printing press, in simplified terms, to a politician, a king, an emperor, a president, a prime minister, you name it, they will overuse it every single time. That is just human nature. And that is what happens.

It is particularly a deficiency in democracy, because democracy will also always have people vote themselves a bunch of benefits that the politicians promise to get elected. And that is how you get this spiral effect that keeps going. So the end result is the same.

This time around, though, we are in unchartered territory, because you have got global fiat currencies and you have got a global reserve currency. So unlike hyperinflations in the past – like, everybody knows about Germany, it was restricted to a country – this time it is going to be global.

In terms of the short term, there is probably no other choice but to print more, because if the Fed pulled back in its quantitative easing, we would have a massive depression. So for the moment, you print more. But the problem is, what happens down the road?

Click the play button below to listen to Chris' interview with Nick Barisheff (39m:49s):

This is a companion discussion topic for the original entry at https://peakprosperity.com/nick-barisheff-the-case-for-much-higher-gold-prices/

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Adam,
It sounds like you might be wavering on your belief in Gold and Silver. I guess the strong move on Friday gave you courage to publish your interview. 

"This interview was recorded three weeks ago. We've been unsure of how well-received an interview about "$10,000 gold" would be received while the yellow metal experiences its worst quarter, price-wise, in history. But rather than sit on it any longer, we're releasing it now and will trust our readers to look past the current price of gold and focus on the long term macro arguments Nick presents. ~ Adam"

You may be underestimating the resiliency and depth of understanding of your readership. I would bet that not many have capitulated in this downturn. I, for one, welcome an article on $10,000 gold because I believe that will be the outcome. By the way, I called the reversal on Thursday on this blog, and backed up my hunch by buying more shares of CEF. Since PM's are my insurance policy, I am in for the long run.

 

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OOG -
Personally, I'm not waivering in the slightest. As outlined in my recent analysis, I believe the fundamentals of owning PMs are stronger than ever, and these artificially low prices are an epic opportunity to acculumate on the cheap.

But, given the big price declines, I know a number of PP readers are smarting right now at how much lower their net worth is now vs the start of the year. I have talked & emailed with many of them over recent weeks as the repeated and relentless selling frayed nerves raw. It is that pain I'm expressing sensitivity to.

I did note your reversal call on Thurs. I don't claim to know whether the bottom is in, but I think we're close if not there. As Charles Hugh Smith and I discussed on Wed, when it is, I think there's a good chance PM prices will recover quickly due to how oversold they are and how many shorts will need to start covering. Let's hope your call was indeed on the mark.

 

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Chris & Adam, The gold blogosphere has beem spectacularly wrong, misguided and misleading about the value of PMS and the likely future direction of the variables that are presumed to underpin gold, for the last 2 years.
There's no sign of inflation, the IOUSA economy is strengthening as well as  the US$. The Fed is clearly in control of the agenda, and as they say, there be QE more or less as needed, indefinitely, and interest rates will remain low for the foreseeable future ! If the pundits are correct and Janet Yalen is the next head of the Fed, she is reportedly, even more likely to extend QE and ZIRP, to stimulate and maintain economic growth, and according to Erik Townsend (being interviewed by Jim Puplava last weekend), she has said (to him) that its proper that those with savings subsidise the economy ---- how do you like them eggs ? But to assume this will be good for gold is well, idle speculation ! 

Gold bugs constantly refer to 'physical shortages' - well these simply dont exist as stated by a London Gold merchant in a recent interview with Alister Macleod in a Gold Money podcast, and this somewhat flumoxed poor Alister. Gold merchants are not going to hold much stock in a falling market, as it loses value and when they charge clients what they paid for it, clients comp[alin about 'surcharges' ! So, gold merchants are taking orders which they can fill at current prices, which of course will take time to deliver.

Denis Gartman ( good subject for an "Off the Cuff" ??) in a recent interview with Jeff Candy on the Mineweb site, was very negative on gold, calling it a "broken commodity" and was absolutely scathing about the furility of investing in gold miners, because of their geological problems, cost problems, poor management and an unwillingness or inability to hedge (take out insurance for their number one risk - faling gold prices) !!

 The continual reference to the history of fiat currency is surely invalid, as it always occured as an isolated country event. Nowadays, currency is digital & international,  and all major central banks cooperate to some degree, so that money and credit can be digitally created and warehoused as needed. And while we're at it, when did bullion bankers get to be treated as serious financial experts let alone serious historians ?? These guys have grown rich leasing gold from central banks and then onselling, and reinvesting the procedes for their own profit. If Grant Williams is to be believed (see his YouTube video "Risk - Its not just a board game) then many bullion bankers re-hypothecate their gold creating a virtual fractional lending copy of bankers, for enormous leveraged profits - hence bullion banks have been very active in shorting gold in the futures market. Williams suggests mechanisms which might bring this ponzi scheme undone and hence cause a big increase in gold prices ---- and PIIGS will fly !

 The brutal truth about PMS is that one just doesnt need to be there - high risk, low or no return. The trend is your friend, and if a new trend (bubble) starts in PMS, go for it, but treat it like any other stock or asset class. Have a trading plan, set your stops, take profits, and try not to become captive of conspiracy theories or 'end of the world as we know it' scenarios. ( Jim Puplava refers to them as "doomsters" )

 Many gold blogers are predicting a big reversal in gold, like Sprott's John Embry (based on his expectation of hyperinflation ---- LOL — same old, same old – what else does one expect of this old windbag, who runs a gold fund ?) as well as Weiss Research's Larry Edelston, who is currently giving a series of video lectures on the likehood of a major reversal in the PMS space (and if you subscribe to his blog, he'll give you more tips (sic) ) and Jim Puplava, in response to many embittered gold bugs requests, will have a series of gold expert guests over the next couple of weeks, as he too thinks that gold may be 'bottoming', but he adds the big qualifier, that he doesnt see any major factors to support gold yet. Meaning, no inflation, stronger IOUSA growth, stronger US$, rising interest rates, strong US stock market, rebounding housing market, resurgence in US manufacturing, falling energy prices, rising US consumer sentiment, uptrending LEI's — just to mention a few!                                                                  

 So, by all means, be ready for a reversal in the PMS space, but beware of false breakouts caused by short covering and other Fed-aches.  

 By all means, engage in permaculture, self sufficiency, sustainability and try and keep debt free, but keep your headspace clean and remain sceptical of dogma and extremism — things revert to the mean, and mankind will likely bumble through, unless 'aliens' or a planet destroying asteroid hits the earth.

Cheers, GBCM

PS:  if and only if China declares it has massive reserves of gold, to underpin its currency and to be a vehicle for trade settlements, do I believe gold will become central in world affairs, and "go to the moon". Then of course, gold ownership would be declared 'illegal' as FDR did in  1933 ---- game over ?

 

 

 

                      

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So for anyone thinking about listening to the podcast about $10,000 gold, let me summarize it for you:  "hyperinflation … shadowstats … money printing … lying government statistics … fiat currency … paper markets … physical gold … naked shorting … $10,000 gold is inevitable!!"  There.  Saved you 39 minutes that I for one will never get back again.The guest is a charter member of the Church of Gold Will Always Go up.  Those exact same arguments could (and indeed were made) back at gold $1900 so to me, they're uninteresting, and (to my belief) possibly actively harmful to my portfolio.  If I'm trying to figure out whether to buy more now, this guy provides me zero information that I trust, because he was without a doubt telling me to buy at gold $1900 too.
The one new bit of information I heard from him was when he talked about banking, and how you only owned your bank-held gold if you had a document transferring title to you that described a specific bar, serial numbers, and the like.
I'd love to hear from a guest that:
correctly called the rise of gold from 300
correctly called the top in 2011
now has a forecast for what will gold do going forward
Now that person might have a worldview that I'd find credible.  Does such a person exist?
Here's a guy - with a weekly interview spot on King World News - who looks at gold from a somewhat more balanced worldview.  http://traderdannorcini.blogspot.com … I'm not saying he called gold at $1900, but he's definitely told a cautionary tale about gold prices during this downturn.  Perhaps he's worth some of your time.
Here is what he wrote last Friday:

Let's be clear - all the way down we have had bottom callers and none of them have been correct. Eventually they will get it right but as the old saying goes, even a stopped clock is right twice a day!  Let's monitor the subsequent price action for a while before getting too dogmatic. Remember the trend in gold is now down on the shorter term charts so specs will be looking to sell rallies unless something changes on the QE front or the psychology in the market changes to one of expecting a pickup in inflation.  There is no need to be a hero and try nailing an exact bottom. It is next to impossible to do that on a consistent basis. Traders do not need to call exact tops or exact bottoms for that matter. All they need to do is to spot the change in trend and position themselves to take 60-70% out of that trend to make money. Remember, Bottom pickers and Top pickers eventually become cotton pickers!
Bold added by me.  Best of luck to everyone.  Apologies if my remarks were ... too straightforward.
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what goes up
must come down

spinning wheels, got to go round

talking about your troubles is a crying sin

let the painted pony

let the spinning wheel, spin

                                                                 ***********************************

I gathered some wisdom I think in this article. Gordon G.Chang gave a nice presentation I thought.

https://d21uq3hx4esec9.cloudfront.net/images/uploads/world-money-analyst/6639/Jun_2013_WMA.pdf

 

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Thanks for the straightforward summary, Dave…I gave up on the same ol same ol after 10 minutes, good to know I didn't miss anything.

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The negativity surrounding precious metals these days is pretty bad, when even a pro-gold site is getting hammered by its readers. I think some of the comments above are a bit rude. Mr Barisheff is sharing his viewpoint and life's work with us, and we yawn and say, "Whatever, I already heard that." I think these comments have everything to with the current price, not on any fundamental based analysis. If you want to be a contrarian, I couldn't think of a better time.
I don't think anyone knows for sure what the future holds for PM's, and if anyone predicted the rise and fall exactly, they probably got lucky. I'm with Dr M, who says we need to trust ourselves.  

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I have no issues with opposing points of views and find them most helpful when I make the ultimate decision to move in this market or not.When trusting my gut it is a personal requirement to have all views expressed because it is I who must ultimately live with the consequences of "trusting my gut".
I understood for instance exactly what Dave was expressing, he cut to the chase and, I like this tact that he took. I just wish I would have read his thread before I listened to the podcast. In reading Dave here I have come to respect his inpartiality/opinions/convictions very much and perhaps I may have passed on this podcast because I no longer are looking for more physical gold at this time.  
If I were going to invest in gold then I would and have listened to the podcast as it is just important to do so, if I were looking to buy gold here. If I were to take Dave's thread and invested or not invested in gold then I probably shouldn't be investing in anything as this is hardly responsible due dilligence. Further, to believe or not to believe the opinions of the person interviewed in this podcast would be irresponsible also as he most certainly is probably talking his book and, maybe just maybe isn't saying all that needs to be said from a risk/reward aspect.
Believe but verify.
I will conclude by saying that YES, I have heard all this before (in the podcast about gold) too and Dave frankly would have saved me a terrific amount of time as I could have been interviewed and expressed all that the guest spoke here in this podcast. Easily too. 

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Phil, I couldn't agree with you more, the sentiment on PM is horrible, worst in 5 years.  That's a very good contrarian signal.However, I'd like to be clear about what I am negative about.  I'm not negative on PM - especially not at these levels.  I'm negative about guest selection, when all of them who comment about gold say virtually the same thing.  I'd like to hear at least one guest talk about how it might have been possible for gold to have dropped from 1900 without resorting to using phrases like "naked shorting", "bullion banks", or "manipulation."
I'm not asking a "gold bear", just a person with some real futures trading experience that has a neutral opinion about gold itself.  My ideal guest of this sort would be happy to go short, or long, depending on what's happening with prices.  And then he could educate us as to what he thinks moves the markets, and what he sees ahead for PM in the short to medium term.
 

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[quote=davefairtex]  My ideal guest of this sort would be happy to go short, or long, depending on what's happening with prices.  And then he could educate us as to what he thinks moves the markets, and what he sees ahead for PM in the short to medium term.
[/quote]
Dave. Is it possible that the Gold market is rigged? and that what "moves the markets" is a top down manipulation? If that is the case, then some bullish macro views from the PM cheerleaders might be the exact antidote needed to save those who are drinking the Main Stream Media anti-Gold Kool Aid.
I certainly respect your mathamatical skills, but when you input flawed data the answer may not mean much. Yes…we all know who John Williams is, but we need to be reminded daily that the measuring tools are constantly being changed to obfuscate the data.
My personal opinion is that the PM market is so small (relative to the Equity or Bond Space) that it is being manipulated quite successfully by the Large Banking Interests. My opinion is that there is no price discovery in this space. 
Therefore, the only way I see to chart my course in the PM space is with fundamental analysis. So thumbs up to all the Nick Barishefff's in the world who have the courage to call for higher prices in a market that is getting hammered.
 

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[quote=davefairtex]SI'd love to hear from a guest that:
correctly called the rise of gold from 300
correctly called the top in 2011
now has a forecast for what will gold do going forward
Now that person might have a worldview that I'd find credible.  Does such a person exist?
Jim Puplava or Erik Townsend, but Jim Puplava would be better because of his dad being a gold bug from the 70s and Jim is not qoite so.

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At the risk of being rude again (last time I promise) I have to say, the problem with the 'gold bug' / conspiracy / doomers is that instead of looking at whats going on, as illustrated by the gold chart, which is a snapshot of price action that is determined by the current 'zeitgeist', which since 2011 has been clearly signalling that world 'big boy' investor opinion had changed and gold, and especially gold mining stocks have been trending down since late 2011, but especially mid 2012 when gold again failed to go above $1800/oz. and settled into a steady down trend channel, as sophisticated  investors continued to exit, while gold bulls contined to buy all the way down — dollar cost averaging (of losses) (LOL) a practice much beloved & preached by the gold bullion sellers. It was obvious the situation was much more dangerous, because many more 'shorts' joined the game in early 2013, and that logically, $1500-1550 would be were many 'stops' would be placed, and would be triggered by any move below $1550 causing an cascade event to much lower supports ---- and so it came to pass, predictably.                     But what were some gold enthusiasts doing, despite professing to have technical analysis skills — focusing on 'out of hours takedowns' (code for manipulation) and reiterating the rationale for 'owning gold' instead of saying "holy cow, this looks dangerous - get out or protect your postiions ! "
 Sophisticated investors decided that the Fed meant what they said, and that QE would remain as long as needed, that ZIRP would continue indefinitely and that inflation remained subdued, all of which meant, logically, that yield stocks would go up and gold would go down. But what did the prophets of The Church of Precious Metals say and do ---- endless articles about 'manipulation', looming 'hyperinflation' and the US$ becoming worthless (yes, some actually say, "totally worthless").             John Williams typically periodically moves his hyperinfaltion scenario further into the distance, and his 2012 prediction became 2013/14, and now is 2015/16 — and people mock cults who believe doomsday predictions supposedly revealed by the Mayan calender ! 

 Mark Twain once said that there are 2 types of prophets: those who know they can't predict the future, and those that don't know they can't predict the future. So where does that leave one? Well one has to be a trend follower in the first instance, with an eye to past cyclicality and history, but being aware that history changes irreversibly when quantum leaps occur. Constant use of the supposed lessons of the Roman Empire etc as it supposedly applies to gold, is tiresome, because the Romans didnt have the printing press, let alone the internet, nuclear weapons and world domination as does the IOUSA.       Does anyone think the Roman Empire would have fallen if they discovered nuclear weapons and had the internet surveilance that recently been exposed, let alone General Bernanke and his QE doomsday machine? MarkTwain also said, "history does not repeat, but can rhyme" — similar is not same !

 Being captured by monetary/gold/economic/societal  theories, especially of the 'doomsday' conspiratorial variety, is dangerous,  if people take their eye off the ball and neglect clear warning signs of danger, and dont act appropiately!   Anyone with a stop loss in their PMS positon or mining stocks would find this discussion somewhat bemusing, tiresome and unnecessary.

 As an anesthesiologist, I was not infrequently, confronted with the dilemma of having a chart ( the patients vitals on the monitor screen) that was (unexpectedly) looking bad, despite being told by his physician ( gold analyst / promoter ) that he was healthy and should be perfectly OK.  If you believe the analyst and ignore the chart and dont react, the patient may die. If you see an unexpected tornado coming, then the weather report is wrong ! Safety first - react, then find out later, what changed, and why things didnt go as expected. Preservation of capital is paramount in investment. Even the average Las Vegas tourists have limits and basic rules to limit losses to inconsequential size, as Kenny Rogers might say.

 Sophisticated gold investment advocates should know they are influential and hence have an oblgation to be open minded, and when the facts change, as Keynes famously said, then one should change their minds – this they didnt do, in the main, but, puffed up by past success, went into reflex rationalisation mode of their status quo ! ---- thats why those who followed their advice, because they were assured that Titanic was unsinkable, are now feeling foolish, angry and intolerant of contined cant, especially from false prophets like bullion bankers whose sole claim to fame is they cashed in on a fad, bigtime, by being the PMS equivalent of Walmart. Eric Sprott is reputed to be a billionaire !  They are rich from selling PMS not from owning them. To regard these individuals as anything other than retailers trying to protect their business model is being 'too kind'.

 Lets hear Chris talk to Denis Gartman, or some other gold sceptic (other than Jim Puplava) whose reading of the market has been correct. Remember, this is a discussion site, not a choir meeting, and we dont have to sing the same song, in tune and in tandem. 

Cheers, GB.

 

 

 

 

 

 

 

Cheers, GBCM

 

 

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Wow, gbcm, that was…awesome!What should I add?  Hmm.  One thing, brought up by OOG.
Is it possible the gold market is rigged?
Let's use logic to answer the question.
If the gold market is rigged, how might we explain the move from $250 to $1900?  Was this massive bull market just something that was cleverly engineered by the bullion banks - who refrained from naked shorting all the way up, only then to spring their evil trap at $1900 just to test the faith of the plucky gold advocates?
Seriously though.  Rather than a convoluted conspiracy where first the evildoers refrain from acting (or they acted in fits and starts 2001-2011, motivated only by periodic desire to do evil, followed by a sustained campaign of evil-ness 2011-2013), how about simple and more market-oriented explanation: namely, after no hyperinflation has occurred after five years of money printing, the long-gold crowd just thinned out, and a healthy percentage of the same people who jumped on board 2008-2011 just decided to bail out because hyperinflation never showed up.
In other words, since 2011 the long gold crowd has gradually thinned, some actors in the gold market sensed this, and took advantage of it by pounding the market in the early hours in asia every so often.  Since the buyers were drying up for fundamental reasons, lower prices didn't drag in many new buyers, so the bounces got lower and lower.   The shorts started making serious money, and so - rinse, repeat until they stop making money.
But again, the story is one of supply & demand.  The fundamental cause of the drop is that buyers dried up because of no hyperinflation.  Naked shorting made it all drop faster than it might have done on its own (think: hyenas dragging down the sickly antelope before it can expire from natural causes), so they appeared to be the cause, but the real cause was that a good chunk of buyers have basically fled, because the story isn't hanging together.
Now one can also blame "lying government statistics" - I believe the government lies too, but - weren't there government lies during 2001-2011 too?  Or did they just suddenly start lying more effectively 2011-2013?
As gbcm suggests, if new facts present themselves, might it not be reasonable to alter one's worldview?
Now then, I'm not saying gold is dead.  Just that money printing, at its current level, with the current economic conditions, isn't causing hyperinflation, and that disappointment caused a bunch of gold longs to gradually bail out.
Markets move in cycles.  This is a down-cycle.  If more money printing happens, or if inflation starts to show, the cycle may change.  Or it may change for a different reason.  But a down-cycle is explanainable without resorting to evil-doers actions as the proximate cause for the gold downturn.
 

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So a trader I greatly respect has suggested given the current collection of price charts (he watches bonds, stocks, the US dollar, as well as PM and all of that goes into his calculus as to when a trade is more likely to work out), gold was a "buy" yesterday as gold broke above 1230, with a stop below 1179.  Stops are used to control risk - so that if the buyers decide not to show up, you only take a small loss.  Risk control is required, since outcomes are uncertain - not because of "rigging" but because its all about people: fear and greed, and the uncertainty of which one will win out this time around.
This is not a recommendation, but rather just an example of how real traders approach their craft.  He made no mention of market-rigging, manipulators, naked shorts - he just talked about volume and price action; the possible short-term top in the dollar, analysis of both daily and weekly timeframes, and the almost-vertical nature of the recent decline in gold most likely leading to a bounce.

Its all about odds; making a trade when the odds are more in your favor, all the while taking precautions against things not working out.

 

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I have gold, and while it was easier to purchase the physical before and after the crash I have my core position. I will hold my core position until this economy clears itself and that will be a long, long, time. I am still ahead of the game but I didn't buy gold to make money, I bought gold as a catastrophic coverage and to protect myself from rear end and blind side collisions. I have no psychological feelings one way or another except to know that I am covered my accidents. Return of capital frankly. That's it.
Dave and gbcm have provided good points here that all should heed. If you want to put all your cash in gold and make it your sole bank for the protection of your wealth then have at it. No big deal and I wish you well. Me, I  can live quite well for the rest of my life by preservation and preparations. We all seek the truth and is why we are here I presume so, all viewpoints are necessary. IMHO

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Please.  Read this post.  Trader's name is Peter Brandt.  He was bullish on silver in 2005-2006, through 2011, when he turned bearish.  Then he's been bearish since 2011 through…now.  He does have some good news for the PM crowd (which includes me) but - its critical to really understand his whole story, so we don't end up repeating history once PM starts to bounce.  I for one want to continue owning PM, but I will never again be a "faith-based investor."  Never.  Again.  These things need to remain nothing more than pieces on a monetary chessboard. 
The rest of you all have a choice to make.  Would you prefer to make money (i.e. retain your purchasing power), or do you want to "be right" (i.e. stay true to your "faith" in the face of contrary evidence) - effectively telling yourself a lie as to why your trade isn't working out, or as a certain doctor might say, ignoring the patient's poor chart because "you know he's healthy and there couldn't possibly be a problem."

Of course you can relieve yourself of the burden of self-examination by saying "oh, this guy was just lucky" and remain a faith-based investor sure "the market is just rigged", or you might possibly consider another course of action.  If you start understanding how the market functions, it would allow you could go short in the paper market when PM looks ill, and remove the short positions when PM looks to be recovering.  Or - simply figuring out where the bottom might be more likely to happen.  That would be nice, wouldn't it?

http://peterlbrandt.com/some-hopefully-final-comments-on-silver-bulls/

Perhaps there have been other traders as adamantly bearish on Silver, but if so I am not aware of them. I have been unapologetic in my opinion and openly in the face of Silver bulls.

Then, late last week I Tweeted that “We are in the final portion of this phase of the bear market [in Silver and Gold]. At the time Silver was trading at 18.63. On Friday I Tweeted that if I were a bottom picker I would buy Gold with a tight stop. Gold was at 1213 at the time. It has not traded below 1209 since.  Also on Friday I announced I had bought some bullion for my safety deposit box.

I think the vast majority of the bear market in metals is over. I have no desire to be short — at least at present levels and at this time. Should metals put in a good rally, then I would likely be looking for a short trade. But I am in no hurry. The metals have dropped a very long way. Now is not the right time to become a metals’ bear. What kind of a rally might interest me in shorting — a big enough rally to blow all the late shorts out of their losing positions. I have no idea what the price levels would be. I have not turned constructive on metals. In fact, I am 50% sure the low prices are not in place. But, I have no desire to be short.

I bought bullion because I do believe in holding some insurance against fiat currencies. But, I will not campaign for or be married to this idea. I put a small amount of cash into the bullion purchase. If I do not need the Gold as insurance in my lifetime I will pass it along to my grand kids. Perhaps they can make some jewlery out of it.

Bold added by me.
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I'm not disputing any of your points, but note that your analyses appear to be relevant to western markets, largely centered somewhere between London and NYC.  How do you take into account the massive flow of gold from west to east?  It is clear that the east, centered between India and China, at the personal and governmental levels are buying and hoarding gold as fast as they can.
That says to me that the selling we've seen in the west is depleting gold stores to the advantage of the east.  Of course, that's physical gold, not the futures markets where you guys are apparently focusing your attention.  Do you think that the futures and physical markets will at some point diverge and what happens as western gold stocks continue to diminish?

Maybe a better question would be how much the bull market of the 1st decade of the 21st century and the current bear market are just phenomena of the futures markets rather than physical ownership?

Doug

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Doug -As long as you can still get physical gold via the paper market price, the paper price will drive the physical price.  So, in other words, there's only a marginal difference between paper and physical except in times of great dislocation, which as we've seen, correct themselves in time.  Remember back on April 12th everyone was talking about how "paper prices" and "physical prices" have diverged?  Many articles, a flurry of posts.  And now?  Not so much.
Certainly if/when a COMEX default occurs, then that breaks.  This is a much-spoken-of event, and it may actually occur someday.  Until it does, it would seem to be most prudent to focus on the structure that is in place today that actually drives prices of all that physical PM.  "If we had ham, we could have ham and eggs.  If we had eggs."  Or to put it another way, things are as they are.  To paraphrase Don Rumsfeld, we must trade in the markets that we have, not the ones we might want or wish to have at a later time.
If you put real money on a trade that depends on a market system working in a way that does not yet exist, how well will this work out for you?  How has it worked for you from $1800 gold down to $1200?  I know how its worked for me.  But perhaps you are made of sterner stuff.  Perhaps these things don't bother you because you have faith.  Yet as I pointed out, without hyperinflation appearing as "the inevitable result of money printing", even if all we had were physical markets, the price likely still would have declined because of course there is no hyperinflation.  The decline might not have been as rapid (and it wouldn't have happened overnight in asia), but it still would have happened.  Or so I hypothesize.
As for gold moving from west to east - I can believe it.  How long can that continue?  I have no idea.  Russia now has 10% of their reserves in gold, they've been buying steadily since mid-2007.  How much gold remains in the US?  I have no idea.  How long can this transfer continue?  I don't know.  Perhaps - "markets can remain irrational longer than you can remain solvent."  Perhaps it can continue longer than we all expect.  Or maybe not.  Call it a known-unknown.  We know that we don't know.
Last point.  My conjecture is that signs of any upcoming dislocation will be visible in futures-market pricing.  Or in premiums.  I'm watching for that.  If a default is going to happen, my worldview is that the well-connected will know about it beforehand, and they'll set themselves up in order to either insulate themselves, or to profit from it.  They won't be able to resist.  Signs will be visible to those watching for them to occur.
Easy trade for that one: short one Silver futures contract, long the appropriate shares of PSLV.
I don't think the global markets will just disappear in a flash of EMP.  If they leave, it will be in fits and starts.  I dont believe a big switch will be flipped and things will all just suddenly go dark.  And I believe that Asia will have their own futures markets tied to physical, simply because hedging is just such a valuable thing to have for (say) people that own gold shops.  Just that the asians will take delivery far more often.  I've seen that in practice.
 

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Forget the dollar. It is an illusion.
Concentrate on the gold/silver ratio. When a unit of gold will buy many units of silver, convert your gold into silver and vise versa; if you must.

The only argument that I have seen for this facination with gold and silver is the historical one. The Limits to Growth curves tell me that things are going to be different this time.

The Gold is within you. Everything else is a shadowplay.