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Don't fear the IMF gold sales
Friday, April 03, 2009
Well, it looks like the IMF may finally unload that 403 tonnes of gold they've been talking about selling for the last couple years. It should raise a whopping $12 billion which, honestly, sounds like a drop in the bucket compared to the trillions that have been spent trying to fix the financial mess we are all in.
China may end up buying the whole thing. If I were them, I certainly would.
They've got about $2 trillion in U.S. dollar denominated assets about which they have become increasingly skeptical regarding its long-term value. Why not spend about half of one percent of their reserves on something that has intrinsic value?
It would be like having $1,000 and trying to decide if you should spend six dollars. That's about as close as you can get to a "no-brainer" in the world of central banking.
12 comments:
If you read the two following very recent articles
http://news.goldseek.com/GoldSeek/1238360122.php
http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default
You will get a taste of what sort of behind the scenes manipulations (or "interventions") are going on in gold. Logic would point to making the dollar and other world currencies seem solid as the motivation, not so much motivated by profiting via controlled manipulation of PM's (but of course the facilitating banks getting to take a stab at, normally illegal, profiteering via manipulation is a nice fringe benefit for their service to the Gov't.)
The point is China is not stupid. They know the $ is about to fail, or at least has substantial potential to fail. They hold a lot of $ and hence don't want to the $ to fail because they will be the #1 looser. However, they have very little gold to provide the customary safety cushion. So, I am certain that part of Obama's meet china first yesterday (or was it Wednesday) pre G20 talks was to discuss "cutting them off a little gold"...
"now!" before they get too nervous and hedge in other more disruptive ways.
So I think the perception here is wrong (or in the wrong direction):
I strongly suspect not that the IMF needs to sell some gold, and by the way China would like to buy it if it is available... more so I am quite sure it was China (behind closed doors) saying "we are getting nervous so cut us in on the world gold supply now damn it or else", and this is how they figured out how to make a believable excuse for doing it in a way that would avoid disrupting the open markets and setting off alarm bells which of course at these volumes would start gold prices *likely* soaring and a number of the global currencies, primarily the $, tumbling.
I am sure there is absolutely *NOTHING* coincidental or pleasant here.
That's some good analysis Anon.
It's pretty interesting that the total value of all the gold in existence in the entire world, currently, is around $4 trillion in US dollars. That is well under half of what the Fed has already created or pledged in US currency in the name of helping "save" the economy from this latest bubble they created. The US national debt, even excluding unfunded future obligations, is nearing 3x that, even before the enormous wasteful spending debacle which is this year's budget.
Kinda an interesting perspective...
Note that if ever USD crashes, all other paper currencies crash as well in tandem. I don't think China's leaders are foolish enough to buy out all this gold even if they could. If China does it ever, it adds to credibility of gold and China's own currency will be dumped alongwith the rest. It should be the public that should monetize gold and not governments. And it appears at least now that public don't have any savings to buy and hoard gold. Stubborn India now exporting gold is clear indicator. Or perhaps there is some trend change happening in India and Indians now prefer to invest in stocks & RE rather than gold.
I like how some dimwits say, "We can never go back to a gold standard because there isn't enough gold". There IS enough gold, today's gold price is just waaaaay too low.....
Surely the Chinese see the writing on the wall. They should buy all of the gold they can over the next six months with their U.S. dollars.
That's a trade I am doing myself.
Anon 1:48pm
I made post #1. If you check something like Google News, neither of these stories (as compelling as they are) have been picked up by what the world at large considers to be "the news" (the pre filtered spoonfed establishment aprooved sort.) I assure you no meaningful # of people will ever hear of these stories.
For the same reason I assure you if China does buy all this gold (and I am certain their name is on it already) you can rest assured that "the news" will *never* report it, and "the world" will never know it happened.
Houston.... this is not a problem! :^)
On the other hand, I believe China buying gold indicates a top in gold price. There is no other event left (once this happens) that gold investors to look towards. As gold needs to be traded to local currency, expect to see massive liquidation of paper gold if gold market believes that China bought IMF gold.
I love how you keep up with this stuff for us. Puts it all in perspective.
Speaking of tangible things to buy, do you or any reader know of good things to buy in daily life (that are significant in price, not stocking up on toothpaste) that may soon be going way up in price as dollars deteriorate? I'm thinking now might be a good time to buy a new car after all, assuming you need one. Beats waiting 3 years then paying $184,000 for that Camry.
Also, will bank stocks actually rise from all this craziness nominally?
Anon 4:02pm
A top only until the USD tanks then
there will be a panic and a complete reassesment of all assets for their "realness" or "fakeness"... physical gold's realness will take it to a new level. Then the confiscation will begin. "They" will never allow a
real currency to exist. Currency manipulation is the Govt's biggest leash on its people. You must stay in debt for them to profit from you via interest payments on debt and they must be able to apply a shadow tax system through money printing (inflation.)
This will be the 70's x10! Anyone remember the 70's? How about the crime, unemployment, and the fun energy shortage w/ long lines at the gas station!!!
Bruno T:
Stock up on ulcer meds. There will likely be a major surge in stress related ulcers.
LOL :)
"http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default"
This article is nothing a pack of lies. IF Deutsche Bank were massively short gold futures, they did not have "a desperate need for gold bullion" on March 31 (they would have the entire month of April to either deliver bullion or cover their short positions). Also, only gold stored in the Comex warehouse may used for delivery against a short contract. Deutsche Bank could not have immediately delivered ECB gold unless it were already stored there, and I sincerely doubt that the ECB has chosen that location as a repository for their gold!
Your answer does not address the following questions:
1. Why did the ECB sell gold?
2. What is the reason for any central banks to be selling gold?
3. Why sell gold, when they can just print more paper?
4. Gold is a hard asset as compared to paper money--why reduce the hard asset held?
5. Why get rid of good money and replace with bad money?
6. Does anything last forever?
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