In the final analysis it all comes down to trust. The world's monetary system has been totally based on the ascribed 'value' of paper-based units since the last vestiges of the gold standard were abolished by Nixon back in 1971.
At that time the nominal ratio of gold to the US$ was $35/oz. Since then we have all become used to the insidious creep of inflation as governments have used the simple expedient of printing their deficit shortfalls.
Most of us have managed to hedge against inflation by simply owning property but, wishing for a more dynamic way of profiting from this inevitable process, I have been heavily focused on hard-asset equities since 2001.
Amongst the gold equities, MML has been a stand-out for me since the summer of 2008. Hence, this recent harshly over-sold situation has looked to be yet another fantastic opportunity to add shares in one of the best growth and value situations in the global PM sector - IMHO of course!
As for 'joining the dots' which you mention in your post: there certainly do appear to be a lot of 'dots' to consider!
- 2 bullion banks have now announced they will only settle gold accounts in cash. - the Germans have to wait 7 years to just get back 300 tonnes of their much larger holdings stored in the USA. - Sprott have noticed that the US have reported the unexplained export of c. 4,500t of gold over recent decades (no audit of US reserves has been carried out since 1968). - the largest gold market (LBMA) has been in backwardisation for many weeks - a situation that should never occur for the prime monetary asset! - DAILY transfers on the LBMA in June were running at 902tpd. But this number is netted out. The LBMA CEO replied to a query from the EU Commission that the actual transfers are some 5x to 9x the netted figure. That would imply actual transfers of 4,500t to 8,100 tonnes per DAY ! For a metal that is only produced at c. 7 tonnes per day this does rather demonstrate the extreme 'pass the parcel' paper gold fractional system that is in operation, yet it is the fractional systems (LBMA & COMEX) that set the world price. - the 400 tonne sale of gold future contracts during the quiet hours of April 12th (c. US$25B worth!) was hardly the action of a 'normal' seller. The cascading down of gold and the gold/silver equities that followed appear (to me) as a major aberration and a blatant manipulation of markets. - the Bank of England has reported the transfer of 1300 tonnes of gold out of it's storage in recent months. - Bank of India has raised import tax on gold to 10% and also requires banks to export 20% of all gold they have imported. - difficult to know the actual figures, but apparently China has been importing significant quantities of gold this year.
etc, etc, so plenty of 'dots' to try and join up!
As ever, the actual market for gold bullion is all 'smoke and mirrors' but the actions on 12th and 15th April smack of real desperation to stop gold reflecting the precarious position of the US$.
'if it waddles and quacks it's likely to be a duck'! CPDLC
MML Price at posting:
$2.72 Sentiment: LT Buy Disclosure: Held
(20min delay)