Gold crash or gold rush?

The price of gold went a little haywire at the beginning of this month, and it turns out it wasn’t an April Fool’s joke. The price crash has caused a bit of a panic, including long lines all over the world as customers scramble to get their hands on physical metal, and ecstatic “told you so”s from court-economist, Paul Krugman who is pretending a price correction validates the suicidal economic course he advocates. But it’s not so simple as that. There’s some pretty significant disagreement among the analysts that tend to be in the know. Let’s take a look.

There are many for whom a gold crash foretells economic doom, and I’m admittedly biased in this direction. Zero Hedge compares graphs of this recent crash to the 21% price drop in 2008 and the 20% price frop in 2011 and predicts economic catastrophe similar to what followed those events, both of which were described at the time as the worst financial crisis in the US since the Great Depression. The Economic Collapse blog exasperated this prediction by also comparing the gold crashes of those periods to subsequent crashes in the price of oil, which it appears is happening right on schedule this time around too. They add a similar crash scenario in 1980 to the list, painting of an ominous picture of a major recession and stock market crash on the horizon.

Maybe. It would be another notch on our belt when it comes to the predictions we made in the Silver Circle movie about 2019 that came true. But there’s another way to look at this.

While court economists are predicting gold flight, and real economists are predicting deep recession, plenty of people are speculating all of this smacks of price manipulation by billionaire types like Warren Buffet and George Soros. If this is some kind of orchestrated event maybe it is a sick April Fool’s prank, but the joke is on them because attempts to manipulate the market in some nefarious way often produces the opposite unintended side effect. So, while the investment class is hurriedly dumping their paper gold, the consumer class is buying up physical gold in record amounts all over the world. In other words, the “official” price of gold does not reflect the real demand for physical precious metals.

The US Mint reported a record 63,500 ounces of gold was sold on April 17th alone bringing the total sales in the first half of month to more than the previous two months combined. Precious metals dealers all over the United States are reporting increased wait times as they scramble to fulfill record sales. Sound like gold flight to you? But it’s not just in the US.

Multiple-hour waits are reported at the gold window at The Bank of Nova Scotia in Toronto. An emergency message posted by a precious metals dealer in the UK read “Due to the unprecedented demand triggered by the recent fall in the Gold Price we are currently not able to guarantee Next Day Delivery of orders. We anticipate that all orders will be delivered within 7 days of receipt by us.” Gold rushes have been reported inAustralia and China. Shortages have been reported in Japan and Singapore. In India people are “flocking to stores” to purchase everything from bullion coins to gold jewelry.

So, while the court economists try desperately to convince us that gold flight signifies a strengthening economy, in reality it’s just their big bank buddies that got the memo. Long lines has always, and will always signify that something is undervalued. And this time it’s the common people who are walking away with physical metal in their hands, which is probably the opposite of what the big banks had hoped.

Find out where you can see Silver Circle by checking our theater and special screening schedule on  -->our event page -->.