Thursday, February 09, 2006

An Open Letter to Bill Murphy of GATA for his Midas Commentary

Dear Bill,

First, I wanted to congratulate you again on the superb DVD of GATA's GoldRush 21 conference and for publicizing the Credit Agricole Report on the manipulation of the Gold Market. Both are important contributions to ending the Federal Reserve's pyramid scheme and returning the US to sound, honest money sooner rather than later.

More importantly I wanted to give you a report from the front lines on the status of the retail market. Because I blog anonymously to protect my career I can't be specific about the community but can tell you that I deal with with two different retail coin and bullion dealers in my town. Last week I went to purchase silver bullion from dealer #1 and had planned to add about $1,000 to my portfolio in American Silver Eagles. Dealer #1 is a substantial dealer and was totally out of Silver Eagles and had to satisfy my order with Canadian Maple Leafs.

Today I went with a good friend of mine who was buying precious metals for the first time and wanted to start out with ~ $1,000 in gold and silver bullion and we went to coin and bullion dealer #2. We had started to go yesterday during the dip but my friend got tied up on errands and we postponed it for the day. Needless to say it was a decision that ended up costing my friend ~$30-$35 dollars in hindsight.

Dealer #2 was totally out of Silver Canadian Maples Leafs. My friend ended up with one gold Krugerrand, an assortment of one ounce silver rounds, and a 10 ounce Engelhardt bar. When I asked the clerk if people had been buying on the dip she replied that YES they had seen substantial buying yesterday on the dip. The last time that I had been to see dealer #2 shortly after Gold had passed $500 an ounce and had asked if folks were buying and taking possession of physical metal she had told me that yes sales had definitely increased but people were coming in and selling gold as well with the price at 25 year highs. This time she indicated that it was mostly buying.

My take-aways:

1. The fact that two of the best dealers in town can't keep up with retail demand for Silver Eagles and Silver Canadian Maple Leafs means that the hoarding of precious metals has begun in earnest.
2. The suckers that sold at $500 an ounce are kicking themselves and don't have anymore gold to sell or wised up and even with Gold at $545-$566 and what appeared, momentarily, to be a precipitous drop in the market are NOT willing to sell at these prices.
3. Everytime the cartel bombs the gold price they can expect to see the retail market respond and demand more and more physical metal exacerbating their predicament.

Keep up the good work and GO GATA!! - Etienne

"There is no means of avoiding the final collapse of a boom brought about by credit expansion." --Ludwig von Mises