Is The Takedown Of Gold A Sign That The Entire Global Financial System Is About To Crash?

Trade with Dave: Do you know the difference between these two expressions?  If you’re Mike Huckabee and you’re describing then Massachusetts’ Governor Mitt Romney’s health care plan, you don’t need to distinguish between the two and can simply refer to the “800 pound elephant in the room.”  I don’t think an “800 pound elephant” is really that big of an elephant as it would be the equivalent weight of four average-sized golfers riding in a Buick Lucerne, (not including their golf bags).  Then again an 800 pound gorilla is plenty big and probably justifies careful consideration (read: lifesaving) of the  riddle… Q: Where does an 800 lb. gorilla sit?
A: Anywhere it wants to.
In February of 2003, the investment newsletter world lost Martin Zweig who was probably most famous for his sage advice of “Don’t fight the Fed, don’t fight the tape.”  Is it possible that with the passing of Martin, we are also witnessing the passing of an era when the Federal Reserve’s ability to maintain control is finally coming apart at the seams?  Would you have to be crazy to go up against an electronic paper fiat funded naked short selling of precious metals ETF’s where the bullion banks have seemingly unlimited access to capital in an effort to drive rank and file “investors” out of the precious metals markets while simultaneously Central Banks continue to load up on the goods at ultra-cheap prices?

The following is a comment from a user named “Cal” to a recent post I made at www.maxkeiser.com titled “Who can save gold?”
@Cal

Your all kidding yourselves. Gold and Silver have little intrinsic value. You can’t quote the past .. it is meaningless really, as the value of precious metals varied significantly depending upon the times. At one stage, a piece of Gold would buy you a loaf of bread, at another a bakery. It is meaningless to think that Gold will be a safe store of wealth. Yes, it certainly will always have some value, as long as people want it, and demand is strong, but it provides no certainty.Gold & Silver have been in a bubble for the past few years, and just as we saw in 2008-09, in uncertain times it goes down in value, not up. Have you watched the news lately. Every time the share market goes up, so goes gold & silver. A clear sign that it is a speculative trade … and the quick buck merchants are in play. Now the players are unwinding, and don’t want to be left holding the baby. Let’s see – Golds next stop will be under $1,000. 

Here’s another comment in reaction to the Holter article on Max Keiser that I referenced yesterday from someone with handle Petrus. 

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@Petrus

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“There will be no default next week.  First, you would see limitations on  and other tricks.  There would also be massive buying all over the place.  We are not seeing that at the moment.  there are no signs that the system is breaking down yet – although we can see it coming.” 

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Then this morning on ZeroHedge I guess this is what we see “coming” that “there are no signs of.”  

India’s Response To The Gold Sell Off: A Massive Buying Frenzy

“It has been very hectic in the last two days,” said Deepak Tulsiani, owner of Dwarkadas Chandumal Jewellers in Mumbai as he surveyed his 11 employees, who were busy with customers. “There has been a rush to buy gold because now people are getting jewelry 15 percent cheaper than before. It’s value for their money.”
From Zaveri Bazaar, the largest bullion market in India…

“Whatever be the price, Indians buy gold because it is an age-old tradition,” C.P. Krishnan, a director at Geojit Comtrade Ltd., said by phone from Kochi.

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http://www.zerohedge.com/news/2013-04-16/indias-response-gold-sell-buying-frenzy

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Besides our friends in India, who else believes that gold is a “tradition”?

 

Dave is all about tradition.  As a matter of fact, the entire idea behind this website “Trade” With Dave is based on tradition in the Latin sense.  What is tradition exactly? Tradition is traditus and traditus is that thing that happens when your wife is standing at the cash register at Kohl’s with a credit card and some “Kohl’s Cash.”  She tenders the payment and they hand her the low-priced made in Bangladesh madras shorts or Vietnamese-made sundress.
It is at that exact moment that she has handed Kohl’s the “cash” but she doesn’t have her Kohl’s bag yet that traditus happens. It’s the same thing that happens when you hand a street vendor three dollars before he hands you a hot dog or you pay the cashier at Starbucks $9 for your drink but you don’t actually get your drink, but rather you go stand in the corner near the bathroom and wait impatiently for your name to be called out along with other caffeine deprived customers. There’s some tension with traditus because there’s always a moment when someone has your money and you don’t have your stuff.
The picture of traditus is the picture of the counterparty transaction.  It’s the picture of the handshake and the exchange of goods.  However, if you have ever  been to the movies and witnessed the big screen cliche’ of a drug deal gone bad, then you know what happens when even a split second of traditus gone bad looks like.  One minute Party A has the duffle bag filled with cash and Party B has the duffle bag filled with drugs.  Then there’s a moment when one of the party’s, usually the one with more guns and more guys (think IMF, ECB or JPM) demands to inspect the goods of the other party across the counter.  Whichever party trusts the other for even a moment you can witness a collapse of traditus.  You see traditus isn’t an investment strategy.  It isn’t about comparing internal rates of return or incremental transaction costs.  It isn’t even about value in a Karl Menger consciousness sense of the word.  Traditus is about trust vs. execution.  You can experience trust in absence of execution and execution in absence of trust, but in either scenario you haven’t “handed over the goods” so you don’t have traditus.
It’s tough to swap the bag of drugs with the bag of money and to perfectly sequence the timing of the hand-off without introducing the possibility, however remote, that one of the parties just may “Break Bad” on you during the hand-off and make-off like Madoff with your Kohl’s Cash and your meth stash (speaking in mainstream media primetime TV terminology – not real life experience… for that you would need to examine MFGlobal, JP Morgan and Jon Corzine or Sentinel, or Cyprus or Dave’s still theoretical suspended animation of the entire global derivatives market inside the computer at LCH.Clearnet).
Traditus is based on at least a modicum of trust. That’s why you traditus with Dave. You see trading is a tradition. It’s a tradition that is handed down from generation to generation. Trading, say in physical metals in the absence of any counterparty, isn’t an investment. It’s not really even insurance against tail risk events or black swans.  It’s simply a choice that people undertake when they lack trust.   Trading is what we all do with the limited time that we have here on earth. We trade it. We trade it with the television networks (Dave withstanding). We trade it with the mainstream media for our news (Dave withstanding) and we trade our bucks with Starbucks or cash with Kohl’s – got me on that one.
The word “tradition” is based on the idea of handing something over or handing something down or simply dying and leaving something to your heirs.  It’s a handover rather than a handout.  It’s generally done in a voluntary manner by the giver and the receiver.  Handing down to your kids and the hot dog vendor handing over your change rather than taking off with your money and your hot dog like a scalded dog is what traditus is about.
Sure, gold and silver don’t pay a dividend.  Sure the paper ETF gold and silver markets collapsed attempting to take the physical gold and silver markets with them.  Sure, gold just sits there and doesn’t do anything, but remember it was just a couple of weeks ago that George Soros told us “I don’t expect gold to go down.”  Here’s George in his own words back on April 6th before the price collapse:
Gold was destroyed as a safe haven, proved to be unsafe. Because of the disappointment, most people are reducing their holdings of gold. But the central banks will continue to buy them, so I don’t expect gold to go down. If you have the prospect of a crisis, you will have occasional flurries or jumps. So gold is very volatile on a day-to-day basis, no trend on a longer-term basis.
http://tradewithdave.com/?p=16116
What’s Dave’s point?  You can buy physical gold or sell physical gold.  You can buy paper SLV or sell paper SLV.  That’s up to you.  The point is that “tradition” isn’t an investment.  Tradition is some strange blend of love, trust and responsibility.  If you ask Dave, the government, it’s regulators, the central bankers and the bullion banks are not worthy of my traditus.  How ’bout yours?

photo: Cody Simms

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