Power Pentagons, Hayek, GFMS and Bear Traps

It is certainly quite interesting in Goldland these past few months. Both of my anecdotal indicators are down compared to a year ago when retail shortages were rife: posts on Kitco’s forum and comments to article about gold on Seeking Alpha. Seems everyone is distracted by green shoots.

I have just finished The Myth of the Machine: The Pentagon of Power, which I mentioned in a Sep 08 post and republished on Seeking Alpha to very little acclaim :) . I have pages of notes to bash into shape, nothing to do with gold but more on management theory (my BComm major) – organisations as totalitarian “regimes”, CEO’s as dictators and if this is the environment in which people spend a lot of time and see as normal why would they see any problem with increasing Government intrusion and authoritanism. Considering that, was it a good idea to make organisation’s legal entities/persons leading to reification that acts as a shield against any sense of responsibility by the individuals who actually make decisions? Anyway, I did say some panel beating was required.

I am currently reading Hayek’s Serfdom Revisited (1985), put out by The Centre for Independent Studies, which should be familiar to Australians. Considering my previous comments about Governmental intrusion, I may wait until I finish this before writing a blog on the Lewis Mumford book.

I also found this article of interest: Adrian Douglas: GFMS cooks books to make gold look bad.I do think the GFMS/WGC numbers have some sticky tape and rubber bands holding them together. Admittedly it is difficult to really know what is going on in gold, but they don’t really explain how they do their numbers or give some +/- confidence levels. I think they want people to think it is super accurate and this works because a lot of people really treat it as gospel.

The dodgy nature of the GFMS numbers is revealed if you go to the WGC website and go through their past Demand Trends reports, which I did when putting together some numbers for the Mint’s CEO on general supply/demand trends (as detailed in this Mar 09 post). If you go through each Demand Trends report and compare the figures it it to the previous report, you will see all the revisions. And I’m not talking about just revising the prior period’s figures, which you can expect. The reports usually have 5 quarters of past data. If you look at a specific quarter as reported originally and then subsequently in the following 5 reports, you can see them changing the figure each quarter, that is, they are revising supply demand numbers every quarter over one year later!

If I could be bothered getting the data off it, it would make for an interesting analysis of the accuracy of the data – memo to self: write GFMS expose blog.

Finally, I found in the Mint’s library/archives a report by Blanchard and Company Inc titled “Gold Bullion: Caught in a Bear Trap”. I remember when it first came out, we got one of the advance copies December 2001 (note the date), 53 pages in all. Quote: “Sell your gold and take your tax losses now, before they get even bigger. If, at some time in the future, you find that you miss your gold, you’ll be able to buy more of it for less.” I leave it to Mineweb, Maurice Rosen and Clif Droke to give you more details (everything is remembered on the Internet). Memo to self 2: never make ballsy calls on the direction of the gold price!

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