Goldbugs are taking a bit of a beating lately from the likes of Alan Kohler and Michael Pascoe - the SMH has the latest installment - Gold drops 25%!. I suspect they have been driven mad by reading The Daily Reckoning too often (or perhaps by being harrassed by its adherents) with its endless pumping of the value of gold (long term price trends to the contrary).

Yes, that's correct. Despite all the headlines about gold closing at a record high over the weekend, it's actually down 25 per cent. All the yellow metal has done lately is recover a touch to be back where it was in November last year.

So much for the rampant gold bugs wetting themselves about chart levels and such, never mind the overtime being worked in the mini-industry that exists around promoting gold.

Alan Kohler at the Business Spectator has a look at the soaring gold ("the commodity of craziness") price and notes that its only worth what everyone thinks its worth (just like every other tradeable asset really) - Gold fever looks incurable.

It’s worth remembering that gold has broken through $US1000 an ounce again (actually it fell back to $994 this morning, but close enough) because of speculation about what might happen to the financially inconvenienced United States, rather than actual demand and supply of the stuff in question.

That’s not to say gold won’t keep rising, or that the price won’t be underpinned by investment demand – it will. But underlying demand is weak and getting weaker, and supply is on the rise – big time.

Whenever the gold price reaches these sort of levels people lose their enthusiasm for draping it around the necks and adorning their fingers with it, and gold miners start buying extra trucks and digging new declines to that orebody they’ve been eyeing off for a while.

Demand in India, the world’s biggest jewellery market, fell 31 per cent in the second quarter and in Turkey, the second biggest market, it fell 54 per cent.

Gold is the commodity of craziness. Gold miners, even those wearing suits in the city, are all possessed by the ghosts of wild-eyed, bearded prospectors from the gold rushes of the 1850s; gold investors are that unique breed of incurable optimists who don’t want to be paid any income on their capital; and big gold bling wearers are possessed by Mesopotamian princes and princesses. ...

The London Telegraph yesterday quoted Chinese officials as being “dismayed” by the prospects for the US dollar because of its policy of financing the deficit by printing money, and the United Nations Conference on Trade and Development (UNCTAD) has urged the creation of a new world reserve currency system replacing the dollar with a basket of several currencies.

These things do not mean China is about to dump US dollars – it can’t – or that the world is suddenly going to drop the greenback as the key reserve currency (UNCTAD is not that influential). But the trend is clear.

This has some gold analysts calling $US2000 an ounce on the price over the next few years. But while there’s no doubt the gold will continue to be underpinned by the demise of the dollar, it is not a currency. I can’t go into JB Hi-Fi with a lump of it and buy a TV.

Central banks around the world own about 26,000 tonnes of it, which represents 8.5 per cent of total reserves, but it’s not legal tender. It’s just a commodity they got stuck with because it used to be a currency a long time ago and will never be again.

So gold is also the commodity of confusion: is it an investment safe haven or just a commodity? Answer: it’s whatever everyone thinks it is, and right now it’s a haven.

Normally I think of biogas when it comes to turning sewage into something useful, but in Japan its literally a goldmine - Sewage yields more gold than top mines. What these folks are eating is beyond me.

Resource-poor Japan just discovered a new source of mineral wealth -- sewage.

A sewage treatment facility in central Japan has recorded a higher gold yield from sludge than can be found at some of the world's best mines. An official in Nagano prefecture, northwest of Tokyo, said the high percentage of gold found at the Suwa facility was probably due to the large number of precision equipment manufacturers in the vicinity that use the yellow metal. The facility recently recorded finding 1,890 grammes of gold per tonne of ash from incinerated sludge.

That is a far higher gold content than Japan's Hishikari Mine, one of the world's top gold mines, owned by Sumitomo Metal Mining Co Ltd, which contains 20-40 grammes of the precious metal per tonne of ore.

One for the gold bugs - The Australian reports that the Perth mint has been overwhelmed with demand for gold - Mint suspends orders amid rush to buy bullion (via Cryptogon).

FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush. With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.

As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

Perth Mint sales and marketing director Ron Currie said the unprecedented demand had forced the Mint to cease orders until January, with staff working seven days a week, 24-hour days, over three shifts to meet orders.

He said Europe was leading the demand, with Russia, Ukraine, Middle East and US all buying — making up 80 per cent of its sales. One European client purchased 30,000 ounces for $33 million.

“We have never seen this before and are working right at capacity. And we are seeing it from clients in the shop buying one ounce, right up to 30,000 ounces from overseas clients,” Mr Currie said.

I'm definitely not a gold bug, so I'm even more concerned than Cryptogon about people trying to avoid falling prices of everything by sticking their money into gold en-masse (assuming its actually true) - People Line Up to Buy Gold in Britain. Its worth remembering the long term return on gold over decades is woeful - look at what happened to people who bought in last time it was around the US$900 mark.

I’m concerned to be reading “selling the house to buy” gold stories…

I hope people are taking a “Big Picture” view of the situation. And I say that as a BullionVault client and affiliate.

Many eggs. Many baskets.

Now, with caveats out of the way, if any more than a fraction of a fraction of a percent of people actually start moving their life’s savings into physical gold, as this story suggests is happening—and I have no idea if this is just dealers spraying bullshit around to drum up business—there is nowhere near enough physical gold to meet demand at these prices.

I hate writing these things. It puts me in the company of the snake handling gold bugs, from the newsletter industrial complex, who have been wrong for decades. But this isn’t about me, and it’s not about the snake handling gold bugs. This is about grannies and housewives and pissed off executives and scared shitless workers from many different walks of life saying, “F*@# this, I’m buying gold and I don’t care what happens to the price because it can’t go to zero like my confetti paper promises to pay. Take your banks, your stock market, your government bailouts and insert it! Give me gold.”

People buying the gold ETFs is one thing, but lining up to buy tens or hundreds of thousands of dollars/pounds worth of physical gold at a time…

We are definitely moving into a different phase.

Via: Telegraph:

Savers have been queuing in the street to buy gold bars and coins, as they search for a safe place to invest their money.

London’s two leading bullion dealers, ATS Bullion and Baird & Co, have reported a rush of interest from savers, many of whom have hundreds of thousands of pounds worth of savings they want to convert into the precious metal.

At least two customers have invested the entire proceeds from selling their houses into gold, each buying up more than £500,000-worth of gold bars, according to one dealer.