This is why Hugh Hendry doesn’t like Gold miners very much…

In sum, Hendry in a recent interview said he likes Gold but not the miners and he alluded to what could happen if prices get high enough: countries just keep it. This seems to be what’s going on in Egypt. As paper (fiat) money becomes more untrustworthy, countries fighting the ‘Currency War’ are loathe to let any of the shiny stuff out of their paws. China – the world’s biggest Gold miner has not let any out at all; confirmed by the complete absence of any Gold bars with Chinese markings.

2 comments on “This is why Hugh Hendry doesn’t like Gold miners very much…
  1. Vector gold… it belongs to everyone… and no one.

    http://tradewithdave.com/?p=13884

  2. roger jarema says:

    I agree mostly with Hendry’s views regarding the economy and his historical perspectives are always as interesting as ever. Definitely one of the brightest minds in the hedge fund industry.

    But I have one quibble with the argument in regards to when gold prices rise countries will confiscate them. Why is it just gold that faces the risk of confiscation and not other mined commodities? Iron ore prices rose to the stratosphere recently, but no government confiscated iron ore mines. This also happens with many other commodities… coal, oil, soybeans, tin, nickel, copper, you name it. And no government confiscated those assets. When FDR raised the gold to USD exchange from $20 to $35, were there suddenly a spike of government confiscation activities of note on private gold mines? None of note.

    Is there any government that confiscate commodity mine assets? Absolutely. Venezuela is an example, then Egypt as mentioned in this article. But there is no reason the confiscation should be confined to gold. If the government is crazy enough, all kinds of mines will be confiscated (Venezuela confiscated oil mines)… so why should he worry specifically about gold mines? Gold mines occupy large areas, just like coal mines, iron ore mines, copper mines, etc. And those mines are valuable, too. From the perspective of a crazy government… why stop with only gold? Why not just seize them all? After all, if what they want is complete control of the population, ALL strategic assets must be controlled — not just gold.

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