gold accounted for just 0.2% of the world’s investable wealth. By the end of 2008, gold represented 0.6% of world wealth. Going back to 1968, gold represented about 4.75% of world wealth, according to Jeffrey Christian of the CPM Consultancy, so we still have a long way to go.
The holdings of gold are increasing. Gold investments increased 248% in the first quarter of 2009 over the same period in 2008. Gold ETFs purchased 465 tonnes of gold; the previous record was 149 tonnes in the third quarter of 2008.
There are two ways to increase the percentage of wealth held in gold and other precious metals. Investors can buy more OR what they own increases in value faster than other assets. Both go hand in hand: the more gold investors buy, the higher the price goes. If we look at the price increase in gold as the slope on a very tall mountain, we are barely out of the valley. We will sell when the air gets thin.
The U.S. Treasury auctioned $40 billion in two-year notes Tuesday and $35 billion in five-year yesterday. $26 billion in seven-year notes were planned for yesterday, with three, ten, and thirty-year bonds for sale next week. Over $100 billion this week. The borrowing never ends. Our interest rate play at galtstock.com, entered less than two weeks ago, is up 13%. (The five-year treasury auction did not go: interest rates bounced; we picked up another 3% against interest rates.)
Banks that have received TARP funds want to take advantage of the Public Private Investment Program (PPIP), buying toxic assets from other banks. The bad dream continues. I predicted this would happen on April 3rd in a MarketToday article titled “Public-Private Ponzi”. Sometimes, you might think my musings and predictions are bordering on paranoid, but repeatedly, the government and those that collude with the world improvers do not disappoint.
On April 3rd I wrote,
The government Ponzi scheme is almost impossible for us to comprehend. The more we learn, we find out the whole enterprise of “saving the financial system” is manipulated to line the pockets of a few politically connected individuals….
What if the whole idea is to let the insiders buy each other’s toxic assets, with a Fed backstop of 95%? Bank of America buys Goldman’s for 86 cents on the dollar, Citi buys Bank of America’s for 88 cents on the dollar, and Goldman buys Citi’s for 87 cents on the dollar. Each trach is for $10 billion in face value. $26.1 billion dollars just changed hands, but now $24.795 billion is backed by the Fed! The securities that were trading for 20 cents on the dollar are now worth 82.65 cents on the dollar in Fed guarantees!
