Investment Banks and the Dollar Price of Gold
by Rory, The Daily Coin “Morgan Stanley Expects The Gold Price To Drop” When I first read this headline my only thought was, what else would they say–or isn’t that what their master told them to say? Investment banks are all about paper products and not hard assets. Want to invest in the Dow Jones, credit default swaps or certificate of deposit? Morgan Stanley and a host of other banking vampires are sitting at the ready awaiting your money to be deposited into their account. Gold and silver? They can not control them, they do not make a commission on them and therefore, gold and silver are loathed by the typical bankster. And besides that, most people want to keep their gold and silver outside a traditional bank, once again, cutting into fees and commissions an investment bank can drain from your account.
2015 is going to be the year of the strong dollar and rising interest rates in the US. This, in combination with the absence of inflationary pressure, will make that different precious metals will have a tough year in Morgan Stanley’s opinion. The investment bank also underlined that it expects the gold price to go down over the coming quarters. The lower price will create significant challenges for the mining sector, Morgan Stanley analyst say, because of the rise of mining costs over the last decade. For now, Morgan Stanley forecasts production cost to amount to 1254 dollars. [Source]
If you use the cost of production listed above, $1,254 per ounce, and the current price of gold is $1,223 (as of Friday January 9, 2014) this means dedicated gold mining operations are losing $31 for every ounce they pull out of the ground. Why would anyone continue to sell their product at a lose? If Morgan Stanley is correct and the price goes down, how much more money per ounce are dedicated gold mining operations willing to lose? Another great trick any investment bank plays is hedging. Here’s Morgan Stanley hedging their own comments about gold.
The robust growth of consumers in India and China will only push the demand for physical gold (think of jewelry, gold bars, coins…). The strong correction in the gold price in 2013 has created a lot of demand, according to Morgan Stanley, and although growth in demand has slowed down, the investment bank expects India and China to spark demand worldwide. Although Morgan Stanley does expect the above to happen over the course of the year, it forecasts that the price of gold will regain strength in the coming years, which is visible on the above chart from the investment bank’s report. [Source]
Is this merely a pretext by Morgan Stanley to scare any potential hard asset customer into paper assets? Fill them with double-speak and show them a paper asset and ask the customer to sign on the dotted line. Commission secured. “Well, yes China and India are driving the DEMAND higher, but the price is going to go down, because we control the price. Our master told us to drive the price down and you, Mr. and Mrs Customer should put all your currency in the safety of the derivatives market.” If you don’t hold it, you don’t own it. How many physical shares of stock, held in your 401K or IRA, do you currently have in your safe-deposit box? None, you say. hmmmmm. May want to reconsider your options. Not one single ounce of gold or silver has changed during the past three year “downturn in dollar pricing“. Not one ounce. But..but look at how much currency you didn’t make in the up-swing of the stock market. Excellent point. My life is just fine and my finances are currently just fine as well. My account doesn’t miss one debt soaked, blood soaked dollar the stock market has generated for the criminals that bring us heroin, war and more debt. Unfortunately, Morgan Stanley and the other criminal investment banks play a role in the pricing of gold and silver. Until this ends, the gold and silver dollar pricing may act the way they wish. I’m still not riding myself of any of the shiny.