Gold Is "Fairly Expensive," Could Fall to $800 If Fed Moves, Midas Fund Manager Says

Fear is an effective tool.

Global liquidity is tightening a little bit and that's usually bad for a hard asset such as gold," says Thomas Winmill, manager of the Midas Fund. "If we see fiscal disciple [and] monetary discipline in the U.S., I would say we might see gold go back to its marginal cost of production, which is about $800 per ounce," nearly 30% below current levels.

Global liquidity is tightening? A few weeks ago the world was talking about continued stimulus efforts to support the fragile global recovery. Then China, likely talking down that which they want the most, taps on the brakes at little to create uncertainly. Like pavlovian dogs, the hard asset bears come charging out of hibernation.

How easily we forget that direct (impossible to trace) bids for the last treasury auction jumped sharply.

Rick Klingman, managing director at BNP Paribas, said: "It is unusual to see such a spike in the direct bid and I would imagine it is one big bidder. There is no way we will find out who it is, not now, or ever."

I would not be shocked to learn that the initials behind those bids were B.B. It's called debt monetization, and is hardly an indication of global liquidity tightening.

But that's how it works, fear creates commentary. Gold is and will alway be protrayed as barberous relic during corrections, because it works to shakeout those that cannot control their fear.

Source: finance.yahoo.com/tech-ticker/
Source: ft.com