Wikinvest Wire

ScotiaMocatta: gold trends to "snowball"

Wednesday, December 10, 2008

From Mineweb comes news of a report by ScotiaMocatta, the global bullion banking division of the Bank of Nova Scotia, about the gold market.

In its December Metals Matters report, ScotiaMocatta suggests that global financial problems "seem so deep rooted that demand for gold as a safe haven is expected to escalate."
...
ScotiaMocatta's analysis revealed that gold lease rates have been soaring and "likely to put an end to the gold carry trade, at least for a while. With interest rates falling, the profit margin on gold carry trades has diminished significantly. This means that as former carry traders come to the end of their term, gold will be withdrawn from the system and returned to central banks."

"As carry trades are closed the pressure on the spot market will switch from selling pressure to buying pressure," they advised.

If people lose faith in the financial system and their currencies, ScotiaMocatta forecasts "the growing trend in wanting some gold as a store of wealth may start to snowball."
It's probably fair to say that a lot of people have already lost faith in both the financial system and paper money. Add to this the fact that winter begins next week (snow is forecast in these parts over the weekend) and you have a surefire recipe for snowballs.

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