The Banks Don’t Want You To Own Gold

28 Aug

The Banks Don’t Want You To Own Gold

We get it!

Of course, banks don’t like gold.  Burger King doesn’t like McDonald’s.  Ford doesn’t like Mercedes.  

Similarly, banks see gold as a competitor.  

We get that.  They have seen their clients walk in to pull out money and head straight to the gold desk.

That’s why it’s amusing to watch Bank of America fall all over itself trying to explain why gold is rising, even though it doesn’t really want its customers to own gold.   A recent piece by BofA analysts makes the obvious admission that central bank monetary policies, with all their interest rate machinations, currency manipulation, and money printing scams – “quantitative failure” says BofA– “make gold an attractive asset.”

So we have been saying.

The bank warns of a stock market sell-off, thanks to ultra-easy monetary policies that have floated equities to unsustainable levels, prevented needed corrections and even kept “zombie companies” alive.

But the key observation, at least in our view, is that the inevitable stock market sell-off will prompt central banks to increase liquidity operations (money printing) even further.  So “a sell-off,” says BofA, “may prompt central banks to ease more aggressively, making gold an even more attractive asset to hold.”

So we have been saying.

We don’t have too much sympathy for the banks, especially those that remain afloat today thanks to taxpayer bailouts.  BofA got more than $150 billion in bailouts and guarantees from unwilling American taxpayers.

And then there is Wells Fargo…

Wells Fargo is another major bank that has stood silently by and profited while the Federal Reserve engineered one bubble after another.  And then when the bubble popped, it, too, got a bailout from the taxpayers.  Theirs amounted to $25 billion.

Wells Fargo, no doubt kicking and screaming, has now conceded that “we do believe that gold has a place in a well-diversified portfolio”

“The reason is that gold can become a good alternative to bonds when their yields are negative…Investors now pay to invest in German government debt. On the other hand, gold is not tied to a particular government … this eliminates the risk that a government may act irresponsibly …”

So we have been saying.  And in the face of reality, with gold racing to catch up with years of foolhardy monetary policy, the banks can hardly say otherwise.