Beyond the Gold and Bond Bubbles Shouldn't the Fed Try to Improve Incentives to Invest in Growing Businesses?

By David Malpass
The Wall Street Journal
Wednesday, August 31, 2011
http://online.wsj.com/article/SB1000142405311190487540457653292173566499...

Treasury bond yields have been at near-record lows and gold prices at record highs, attracting millions of investors into idle assets through coins, exchange-traded funds, and even warehousing facilities. This reflects fear about inflation and the stability of the financial system and, for some, the coming breakdown of society under the weight of $3.6 trillion in annual Washington spending and transfer payments.
Last week's letup in the gold and bond-buying bubbles was good news. It meant less fear that the financial system will collapse. The Federal Reserve and the Obama administration should pile on by championing sound money and fiscal restraint as a way to rechannel capital into growth.
Fed Chairman Ben Bernanke's Jackson Hole speech last Friday, in which he did not announce still more quantitative easing, was a welcome step back from the frenetic central-bank activism that has been adding uncertainty to an already weak economy. The Fed has bought over $2 trillion of bonds since 2008 and forced interest rates to near zero, which hasn't helped small businesses or created jobs.

Mr. Bernanke should directly confront the fear index imbedded in high gold prices and low bond yields. Gold at more than $1,800 per ounce is a loud public statement of no confidence in our central bank. It means people would rather buy gold than hire workers or start businesses -- that they don't trust the central bank to maintain the value of their money.

Former Fed Chairman Paul Volcker thought of high gold prices as his enemy and repeatedly said so as a way to build confidence in the central bank. In the 1970s, high gold prices reflected Fed incompetence that had produced inflation, stagnation and malaise. Jimmy Carter named Mr. Volcker to replace G. William Miller as Fed chairman in 1979, a rare moment of Washington accountability. Gold then fell in the 1980s and '90s in what was called affectionately "The Great Moderation." Inflation and oil prices followed gold prices down, tax rates were cut, and jobs became plentiful. Foreign capital beat a path to America's door, the mirror image of the exodus of growth capital the Fed's weak dollar is fueling.
Equally harmful in our current environment, low bond yields (negative yields in some cases) signal fear of deflation and a collapse in the financial system. Investing on these fears hurts growth -- investors buy billions in gold to protect from inflation and billions in government bonds to protect from deflation. It's like a farmer plagued by both floods and droughts and having to buy insurance against both extremes.
It's not an abstract fear. The Fed caused high inflation in the 1970s and participated in a weak-dollar policy in the 2000s that made gold a vital investment for capital preservation. And the Fed has repeatedly warned of a Japan-style deflation over the last decade, itself buying bonds in huge quantities and now forcing more capital into dead-end government bonds by assuring near-zero interest rates into 2013.
Reinforcing investor fears, the Fed has caused extraordinarily wide and harmful swings in interest rates, the value of the dollar, gasoline prices, and inflation in recent decades. This makes precautionary investments like gold, bonds, and foreign diversification more profitable than investing the old fashioned way in small, growing businesses.
The result: Growth has stagnated. With gold prices flying through the roof, interest rates at near-zero and 10-year bond yields at only 2%, too much capital has been diverted into protecting investors from monetary-policy extremes.
The Fed takes the view that gold prices have limited meaning and that low bond yields are desirable as stimulus, not a market-based indicator of slow growth and high risks to the financial system. This leaves the financial world in suspense over whether the Fed will buy back more of the national debt or even new types of assets as some are urging. The uncertainty is great for the Fed-watching community and Wall Street, which profits by buying bonds in advance of Fed purchases. But the suspense hurts growth and jobs.
To break this cycle, the Fed needs to rebuild a monetary system in which the dollar is a strong and stable store of value and capital is allocated based on interest rates and market forces rather than the rationing of regulatory capital. Gold prices would be lower and bond yields higher in anticipation of a growing economy and a safer financial system.
Unless the Fed breaks the cycle, many of the arguments for buying gold and bonds still pertain. The Fed owes $2.8 trillion in liabilities, undercutting confidence in the dollar and the financial system. It is willing to promise zero interest rates for years but not willing to criticize the declining value of the dollar, one of the most important metrics of central banking.
These missteps aren't fatal. The Fed's plump balance sheet can be pared back when growth starts. Last week's improvement in the gold/bond fear index provides an opportunity for the Fed and the administration to talk up the economy and put a bullish top on the price of gold.
Instead of locking in 2013 interest rates, as it has done, the Fed should reassure markets that sound monetary policy will produce lower gold prices and higher bond yields over time, an important step in restarting growth. The status quo -- piling trillions into foreign countries, gold, and idle Treasury bonds -- sucks capital away from growth. The Fed should put an end to it.

Falling Oil Prices: A Worrying Trend That May Be a Saving Grace

When oil prices start to decline, investors and economists get worried. Oil prices in large part reflect global sentiment towards our economic future – prosperous, growing economies need more oil while slumping, shrinking economies need less, and so the price of crude indicates whether the majority believes we are headed for good times or bad. That explains the worry – those worried investors and economists are using oil prices as an indicator, and falling prices indicate bad times ahead. But oil prices have to correct when economies slow down, or else high energy costs drag things down even further. And the current relationship between oil prices and global economic output is not pretty. In fact, every time the cost of oil relative to global production has hit current levels – and that’s after the sharp corrections earlier this month – an economic slump, if not a recession, has followed, according to a Reuters article. The “warning signal” that is currently flashing red is the Oil Expense Indicator, which is the share of oil expenses as a proportion of worldwide gross domestic product (specifically, it is oil price times oil consumption divided by world GDP). Since 1965, this indicator has averaged roughly 3% of GDP and has only exceeded 4.5% during three periods: in 1974; between 1979 and 1985; and in 2008. Each period saw severe global recessions. In 1973/‘74, the Arab oil embargo sent oil prices rocketing skywards in the world’s first “oil shock.” In 1979, a revolution in Iran knocked out much of that country’s oil output and catalyzed the world’s second oil shock. And, of course, in 2008 the housing bubble collided with speculative buying of new debt instruments and a commodities boom to propel oil prices to a record high of US$147 a barrel, which helped to trigger the global financial crisis and the worst slump since World War II. So where are we right now? Well, Brent crude prices would have to fall to the low US$90s per barrel for the Oil Expense Indicator to drop below 4.5%. Instead of that, Brent prices have been above US$100 per barrel for more than six months (aside from an intraday low of US$98.97 on August 9) and are still hovering between US$105 and US$110. Oil prices play a major role in global economic growth because oil is crucial to every part of the economy. It powers manufacturing as well as food and commodities production, it fuels transportation, and it is a building block for industries like plastics and electronics. When oil prices stay too high for too long, they choke out economic growth. Merrill Lynch analysts agree, writing in a recent note: “The last two times that energy as a share of global GDP neared … the current level, the world economy experienced severe crises: the double dip recession of the 1980s and the Great Recession of 2008.” So we face two options: oil prices come down sharply, or we enter a recession, which will drag oil prices down. Either way, crude has to get cheaper. That being said, remember that there are many forces at play in the oil markets, not the least of which is supply. At present the world’s most important supplier, Saudi Arabia, is pumping out more oil than it has for 30 years. In July the country produced 9.8 million barrels per day (bpd), lifting total OPEC production to 30.05 million bpd. If they want, the Saudis can exert considerable influence over prices by reducing supply. And they may want to do just that. Oil analysts generally agree the Saudis want to see oil prices remain above US$85; lower oil prices would impair the country’s ability to meet its spending obligations. Iran, Kuwait, and other OPEC countries similarly want to see oil prices remain strong, to meet their spending requirements. Current OPEC governor Mohammad Ali Khatibi, of Iran, recently said that the cartel’s members have not set a desired price level but some think US$80 to US$90 is appropriate, while others want prices to remain above US$100 a barrel. On top of that, no one is yet predicting a reduction in global oil demand. The International Energy Agency (IEA) reduced its forecast for demand growth, but still expects the world to consume 1.2 million more barrels of oil each day next year than this year. Similarly, OPEC reduced its demand growth estimate, but still foresees oil demand rising by more than 1 million barrels of oil a day over the next 12 months. So, oil prices will come down when the economy falls too, but if oil goes on a tailspin à la 2008, expect to see OPEC step up to the plate, tighten the market, and support prices, so that its members can continue to pay their bills.

Gold gained 12% in August in US dollars and Euros

Gold prices gained 12% in August in US dollars. In Euros, the gain was about the same, reflecting the very narrow  range in which these troubled currencies manage to trade in these troubled times.

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Loopholes using Silver/Gold Eagles as money? This guy is funny!

What are your thoughts?

Venezuela would accept only silver for American oil payments

Chaos continued to confound world energy and metal markets today on news that Venezuela would accept only silver for American oil payments at a rate  of 5 ounces of .999-fine silver per barrel of oil.

Hugo Chavez, president of the oil-exporting South American nation, said last Friday that Venezuela had sufficient “United States Fed promissory notes” in its foreign exchange accounts that it fears future accumulations would render Venezuela “far more susceptible to gyrations in the U.S. economy and foreign policy than we care to be. We don’t need no more stinking Yankee dollars,” he added.

Oil, prior to Chavez’s announcement, was trading for $75 Fednotes per barrel; silver for $12 per ounce. The Venezuela ratio of 5 ounces per barrel confused mainstream media analysts and sent the US dollar plummeting  in overnight trading as traders scrambled to get into silver or silver-equivalent gold physicals in anticipation of much higher opening prices tomorrow.

Chavez hinted that Venezuela would consider accepting silver- or gold-equivalent-backed paper currency in exchange for oil at the same ratio, but added, “I don’t think, other than the Liberty Dollar, that there  are any.”

“This is just plain dumb,” fumed Fox News analyst Bill O’Reilly. “It just goes to show you once again how backward and stupid South America is. Here’s Hugo Chavez, he can’t even add. He’s willing to take $60 worth of silver instead of $75 in cold, hard U.S. paper for his oil. Silver is a barbarous relic; it hasn’t been money for years! How dumb can you get?”

However, religious commentator Pat Robertson, sensing something more complicated was afoot, renewed his call for Chavez’s assassination. “Whatever he’s up to, it’s not going to be good for America. We’d better nip this Bolshevik in the bud, the CIA way,” Robertson said.

At 1.1 million barrels per day, Venezuela is the U.S.’ fourth-largest supplier of crude oil, behind Canada, Mexico and Saudi Arabia. Venezuela’s exports to the U.S. account for one-third of Venezuela’s total daily output  and 10 percent of U.S. total crude imports.

Weekend trading in Asia showed the effects of Venezuela’s oil-for-silver swap resulting in a rise in silver to $20/ounce and a commensurate jump in oil to $100/bbl. Gold was also up.

Analysts without television shows wondered where the United States would get enough silver to pay for its Venezuelan oil, even at the discounted rate of 5 million ounces per day. Prior to 1980, sufficient government and bank stockpiles existed in the U.S. to sustain Venezuelan imports for a year or longer. Now, however, all U.S. silver is gone and daily U.S. silver  production is a mere 107,397 ounces per day.

Fearing a collapse of the New York and Chicago silver contracts similar to the collapse of the London Metal Exchange nickel contract earlier this month, nervous holders of purchase contracts were already lined up around both exchanges early Sunday morning, hoping to be first in line for delivery when the NYMEX and CBOT opened Monday.

The same scene was reported around Bank of America, Citibank, Wells Fargo and other major federally-chartered banks in U.S. cities, where nervous depositors were hoping to be among the 3 percent actually able to redeem their accounts for cash.

In Washington, D.C., White House sources said the President would declare a “gasoline station holiday” on Monday for an indeterminate period of time, in hopes that “hoarders” would not abuse the crisis by filling up their automobiles. “This will not stand, and is proof that Venezuela is hiding weapons of mass destruction and has an active nuclear program under way,” a leaked copy of the President’s speech is purported to have him saying.

Elsewhere in Washington today, from the rooftop of the Federal Reserve building at 20th Street and Constitution Ave., several eyewitnesses reported seeing a large helicopter depart.


http://twitter.com/Big_Stroud

Trade Idea Wrap-up: USD/CHF – Buy at 0.7900

Candlesticks and Ichimoku Intraday | Written by Action Forex | Aug 24 11 15:45 GMT

USD/CHF - 0.7953 Most recent candlesticks pattern    : N/A Trend                                    : Near term up Tenkan-Sen level                       :0.7918 Kijun-Sen level                         :0.7918 Ichimoku cloud top                     :0.7880 Ichimoku cloud bottom                 :0.7865 Original strategy : Buy at 0.7840, Target: 0.7940, Stop: 0.7805 Position: - Target:  - Stop:- New strategy  :   Buy at 0.7900, Target: 0.8000, Stop: 0.7865 Position: - Target:  - Stop:- Despite intra-day retreat from 0.7945 to 0.7875, as the greenback found renewed buying just above the Ichimoku cloud bottom and has staged a strong rebound, suggesting consolidation with upside bias is for test of indicated resistance at 0.7991, however, break of recent high of 0.8020 is needed to confirm the rise from record low of 0.7068 has resumed for headway towards 0.8050 later. In view of this, we are looking to buy dollar on dips but at a higher level. Below said support would prolong choppy consolidation and risk weakness to 0.7853 but reckon support at 0.7807 would limit downside and bring another rebound later.

Ben Davies: Thanks to Venezuela, gold will hit $2,100 within weeks

 In an essay written exclusively for King World News, Hinde Capital CEO Ben Davies accelerates his prediction for gold to break $2,000, on account of quickening recognition, prompted by Venezuela's repatriation of its gold reserve, that the Western fractional-reserve gold banking system is woefully exposed to a short squeeze.

"This," Davies writes, "will get other governments, central banks, and financial institutions that hold their gold abroad to reconsider their gold holding locations. We could see further repatriation of gold home. Maybe the Europeans will ask for a return of their gold. Remember last time a European did that? August, 15, 1971, and Nixon’s closing of the gold window were the response. And the rest is history."

Another Week of Disturbing Economic Data

This week marks the third straight week of disturbing economic data, leaving some to wonder about the health of the United States economy. The national economic measures and the U.S. financial markets have begun to point towards an increased recession probability. Concerns first began to intensify with the revised GDP data which showed not only that the hole left by the Great Recession was deeper than originally thought but also that the economy has been much slower to recover since real GDP bottomed in mid-2009. There's your 2 cents.

New record closing for Gold at $ 1.836,30 an ounce, up $ 32,60

August 19th, 2011 Gold futures on the Comex division of the New York Mercantile Exchange for December delivery closed up $32,60 at $1,826,30 an ounce on August 18^th, after reaching another intraday record high at $ 1.836,65.

 The December contract trade has ranged from $1,786.80 to $1,828.20, another lifetime intraday high for the highest volume contract."

Now don't that make you wish you bout some a few months back. You still have a chance to make some profits. I predict gold to hit $2500 bye the end of the year.

Putting the Country Back on Gold

	by Robert P. Murphy - Mises.org Published : August 11th, 2011
	I have recently completed a study guide to Ludwig von Mises's classic work, The Theory of Money and Credit. (The PDF of the guide is available right now, and the physical book should be ready soon.) In The Theory of Money and Credit, Mises integrated (what we now call) microeconomics and macroeconomics. He used subjective marginal utility theory to explain the purchasing power of money — a task that earlier pioneers in even Austrian economics hadn't accomplished. Furthermore, Mises drew on insights from Böhm-Bawerk, Wicksell, and the English Currency School to develop his circulation-credit theory of the trade cycle. In the present article I'll focus on Mises's intriguing proposal for returning a country to a gold-backed currency. (This proposal is in the last section of the book, consisting of material written after World War II.) Returning to Gold: The Problems Before quoting Mises's proposal, let me set up the problem. The classical-liberal goal of "sound money" tied currencies to the precious metals. Just as a constitution was intended to restrain the arbitrary exercise of government power, the gold standard (or some other commodity standard) strictly limited the ability of a government to engage in inflation. The advocates of sound money had seen all too well the destructive consequences of the runaway printing press. Now, purists can rightfully argue that no government scheme involving money will end well. It is certainly true that the optimal arrangement returns money and banking completely to the private sector, where there isn't even such a thing as a national currency, just as we don't have "national" computers or novels. But there is such a qualitative difference between the classical gold standard of the late 19th century and the fiat-currency regimes of the late 20th century that many modern Austrian economists and libertarians urge the return to gold as a temporary solution. Given that the government is currently meddling with money and banking, returning to a gold standard is a very sensible move according to many Austrians. Unfortunately, even though the proponents of sound money can all agree that FDR's actions in 1933 and Richard Nixon's actions in 1971 were despicable, they can't all agree on the best way to reverse those catastrophes. For example, suppose the government does indeed link the US dollar back to gold. What price should it use? The current market price? The Bretton Woods-era price of $35 per ounce? The pre-Roosevelt price of $20.67 an ounce? To illustrate some of the problems, consider my own proposal from earlier this year. I suggested that Bernanke (and other Fed policymakers) could "go back on gold" immediately by switching from targeting the federal-funds rate to targeting the price of gold. I recommended that as the Fed's holdings of Treasury debt and other assets matured, it should replace them with physical gold. (This would reassure investors that the Fed would be able to maintain the peg.) When it came to the crucial question of what price to set as the target, I decided quite arbitrarily on $2,000 per ounce. My reasoning went like this: When the Fed begins buying massive amounts of gold, the market value of gold relative to other goods and services will rise because there is a huge new buyer in the market for gold. Consequently, if the Fed locked in the current market price (which was around $1,400 when I first wrote the article), it would require price deflation for most other goods and services. Not wanting to repeat the mistake of the British government when it went back to gold in 1925 at the pre–World War I parity — and thereby caused wrenching adjustment problems in British labor markets — I thought it wise for Bernanke to set the gold target price well above the market price on the day of the announcement. That way, the brunt of the adjustment (when the value of gold relative to everything else had to rise) would occur with just the price of gold rising (up to $2,000 per ounce). "As we'll see, Mises's own proposal — written more than a half a century ago — is far superior to mine." Needless to say, there are a few problems with my idea. The most obvious one is that I just picked $2,000 out of the air. Another problem was that there was no definite proportion of gold backing the outstanding quantity of dollars; I was simply recommending that Bernanke & Co. buy or sell assets in order to maintain the target price of gold. As we'll see, Mises's own proposal — written more than a half a century ago — is far superior to mine. Mises's Proposal to Link a Fiat Currency Back to Gold In chapter 23, "The Return to Sound Money," Mises lays out his plan to return a fictitious country (Ruritania), with its currency (the rur), to the gold standard. The reader must remember that when Mises wrote this, the US dollar was still redeemable for gold at the rate of $35 per ounce. In the interest of accuracy, I have retained his original wording below, but in our times we can drop the references to the dollar and just focus on tying the rur back to gold: From the point of view of monetary technique the stabilization of a national currency's exchange ratio as against foreign, less-inflated currencies or against gold is a simple matter. The preliminary step is to abstain from any further increase in the quantity of domestic currency. This will at the outset stop the further rise in foreign-exchange rates and the price of gold. After some oscillations a somewhat stable exchange rate will appear, the height of which depends on the purchasing-power parity. At this rate it no longer makes any difference whether one buys or sells against currency A or currency B. But this stability cannot last indefinitely. While an increase in the production of gold or an increase in the issuance of dollars continues abroad, Ruritania now has a currency the quantity of which is rigidly limited. Under these conditions there can no longer prevail full correspondence between the movements of commodity prices on the Ruritanian markets and those on foreign markets. If prices in terms of gold or dollars are rising, those in terms of rurs will lag behind them or even drop. This means that the purchasing-power parity is changing. A tendency will emerge toward an enhancement of the price of the rur as expressed in gold or dollars. When this trend becomes manifest, the propitious moment for the completion of the monetary reform has arrived. The exchange rate that prevails on the market at this juncture is to be promulgated as the new legal parity between the rur and either gold or the dollar. Unconditional convertibility at this legal rate of every paper rur against gold or dollars and vice versa is henceforward to be the fundamental principle. The reform thus consists of two measures. The first is to end inflation by setting an insurmountable barrier to any further increase in the supply of domestic money. The second is to prevent the relative deflation that the first measure will, after a certain time, bring about in terms of other currencies the supply of which is not rigidly limited in the same way. As soon as the second step has been taken, any amount of rurs can be converted into gold or dollars without any delay and any amount of gold or dollars into rurs. The agency, whatever its appellation may be, that the reform law entrusts with the performance of these exchange operations needs for technical reasons a certain small reserve of gold or dollars. But its main concern is, at least in the initial stage of its functioning, how to provide the rurs necessary for the exchange of gold or foreign currency against rurs. To enable the agency to perform this task, it has to be entitled to issue additional rurs against a full — 100 percent — coverage by gold or foreign exchange bought from the public. In this brief passage Mises offers a proposal that avoids the problems we discussed in the previous section. There is no arbitrary selection of a gold price; Mises lets the market do that. Recall that I had initially thought that pegging the existing market price of gold might lead to trouble because the extra demand to acquire gold by the central bank (or the government's treasury) would cause the relative price of gold to rise. However, under Mises's proposal the government isn't entering the market to bid gold away from others. Rather, the government initially makes no effort to bulk up on its gold holdings. Instead, it passively accepts gold deposits from outsiders who wish to obtain newly issued currency (in exchange for gold) at the official peg. But what about the gold backing of the currency? The reason I had thought the central bank needed to change the composition of its assets from bonds into gold was to reassure investors that the new peg would indeed be maintained. Here too Mises has an elegant answer: from the moment the new policy goes into effect, any new issue of currency must be backed 100 percent by gold held by the monetary authority. It is true that the total quantity of money will not be backed 100 percent by gold in the government's vaults, but nonetheless investors would know that from the date of the reform, all additions were fully backed. This is a very nonarbitrary and sensible approach, yielding two desirable outcomes. First, the government wouldn't need to absorb a large fraction of the stock of gold from the private sector early on. Second, as the quantity of domestic currency expanded over time, a larger and larger fraction of the currency would be backed by gold. Conclusion When it comes to "second-best" policy recommendations in a world of government intervention, we can never find perfection (by definition). But if we are going to have the government providing a monopoly of domestic currency, Ludwig von Mises's proposal for a return to a gold standard is theoretically elegant and eminently practical.     Robert P. Murphy Essay originally published at Mises.org  here. With permission

Gold: Not Just for Nutjobs

	by Zoe Tustain - Bullion Vault Published : August 13th, 2011
	Squirreling away a gold reserve no longer seems nuts… THERE ARE some who seem to think only western speculators buy gold – either that or paranoid conspiracy theorists preparing for Armageddon. This couldn't be further from the truth. In fact, China and India alone account for more than half of the world's gold demand, while central banks – not exactly known for being gung ho – are increasingly using their reserves to buy gold. In fact, the world's central banks bought more gold in the first half of this year than they did in the whole of 2010, according to figures published by the World Gold Council. Away from the debt-laden economies of Europe and the US, both advanced and developing nations have added to their official gold bullion reserves: · South Korea almost tripled its gold reserves by buying 25 tonnes of gold in the last two months. · The Bank of Thailand bought 30 tonnes of the metal over the same period. · Mexico bought over $4 billion worth of Gold (about 90 tonnes) in the first quarter of 2011. And it's not just central banks. All across the world, private individuals are choosing to store more of their wealth as gold. Take India. The world's largest gold market last year spent a staggering 2.5% of its GDP on gold. Four years ago the figure was only 1.5%. The implication is clear – as India's economy grows, Indians are putting a bigger slice of their income into gold. In economic terms, Indians' marginal propensity to buy gold – the share of additional income allocated to the metal – has gone up. In 2006, Indians on average spent around $1.40 of every extra $100 they earned on gold. By 2010, this had jumped to over $7. We find the same story in China – source of the world's second-largest private gold bullion demand. In 2010, the percentage of GDP spent on gold in China was a mere 0.4%, a figure dwarfed not only by India, but also neighboring Vietnam – where the equivalent of 3.1% of GDP was used to buy gold in 2010. But if we look at China's marginal propensity to buy gold we see the same sort of growth. Four years ago, for every extra $100 of income in China, less than one third of a Dollar went on gold. By last year it had jumped to $1 – lagging behind India, but still a remarkable rate of growth. Individuals in these emerging powerhouses have increasing confidence in gold and are willing to invest more of their money in it. "Paper money is increasingly worthless and they are worried about inflation" explains Shi Heqing, an analyst at state-backed metals consultancy Antaike in Beijing. Hardly surprising – China's consumer price inflation rose to 6.5% in July – up from 3.3% a year earlier. But why are people choosing to buy gold? Of all things, why an industrially useless piece of shiny metal? Because, in a sense, it's uselessness is what makes it so valuable. Because it has no industrial use – and because, unlike paper money, it cannot be produced from thin air via "quantitative easing" – its stock is stable over time. Thanks to these properties, gold has proven itself as a store of value over thousands of years. And with returns elsewhere so difficult to attain – thanks to low interest rates and stock market weakness – investors are now more interested in preserving capital than chasing return. So it is not a random choice that has led so many to buy gold. They're choosing gold because it works. They may be squirreling away a winter reserve, but these days, that's not nuts.