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A Move on Gold? Willy-Nilly Did It.
Is it possible that gold could move up in value to say $1,400 and at
the same time the relative values of the Dollar/Euro/Yen/ Sterling
would remain stable (+/- 2%)?
One month ago I would have said that would not be possible. Today it looks like a wild card that could come in.
There
is a biblical amount of liquidity available globally at a cost less
than 1/2%. In that environment gold is an increasingly attractive asset
class. Gold doesn’t pay interest, but neither do T Bills. India just
said so. We will see more of this.
Would a move up in the price of gold against the major currencies precipitate policy responses by Central Banks?
I
think it would. As much as they hate to admit it, every Central Banker
for the past forty years has watched the price of gold. It is their
ultimate barometer. The US would be the last to respond and reverse the
emergency liquidity measures. But it will be increasingly difficult to
defend QE when other reserve currencies have reversed their cheap money
policies.
The markets have called all of the policy responses for the last two years. We might not be done with that cycle yet.
Some thoughts from Mr. Bernanke from 2002 that I thought were relevant:
“Like
gold, U.S. dollars have value only to the extent that they are strictly
limited in supply. But the U.S. government has a technology, called a
printing press (or, today, its electronic equivalent), that allows it
to produce as many U.S. dollars as it wishes at essentially no cost. By
increasing the number of U.S. dollars in circulation, or even by
credibly threatening to do so, the U.S. government can also reduce the
value of a dollar in terms of goods and services, which is equivalent
to raising the prices in dollars of those goods and services. We
conclude that, under a paper-money system, a determined government can
always generate higher spending and hence positive inflation.”
“Of course, the U.S. government is not going to print money and distribute it willy-nilly.”
Note: These remarks were made in a speech titled Deflation: "Making sure “It” Doesn’t happen here”. November 21,2002. The full speech is here. The quote is from the fourth para. following the heading: Curing Deflation.
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The chatter seems to me to indicate that while India was already a custodian of IMF gold that there was a quid pro quo involved in the deal in which India may have provided some substantial physical silver inventory to cover a brewing shortage in the futures complex.
If the hedge funds, pension funds and other investment entities which are trying to take the physical off the market want to win hands down, in my opinion, they'll have to take as much physical silver off the market as possible because silver is a major lever for and against gold.
If silver starts to break away because of a large increase in physical delivery requests, it will, in my opinion put some powerful leverage into the move as gold breaks above $1100 in route to $1250 and then $1650 and beyond.
If on the other hand the cartel can keep selling silver for a period of days and weeks at higher levels it may cause a significant dampening effect and allow them enough time to regroup before the next options expiry. I hope zero hedge will eventually invite Adrian or one of the others GATA people to make a comment on this subject.
The cartel is doing everything they can to stop this rally but the shorts may soon be calling Scotty to beam them up if the smart money starts taking the physical silver off the market.
Silver is historically cheap compared to gold right now (currently 63:1) and has been for some time. My local coin dealers will trade an ounce of gold for 63 ounces of silver all day every day.
I believe the major catalyst is that more central banks and other financial entities have grown weary and distrustful of the major US derivatives players manipulation of futures and the way the limited amount of physical precious metals are leveraged largely by at most 5 broker/banks.
The Sea Change is that these financial entities want their physical gold and silver at home and not in Vaults of the very banks that constantly use their massive derivatives positions to short gold. The other Sea change is that the big miners understand the first Sea change and are going to continue to de-hedge as they realize the implications for the price.
In a sense it is the front of a grass roots central bank revolt agains the huge derivatives banks fueled by fear and a desire to keep their national treasures safely at home and not in the hands of the world's biggest risk takers in my opinion.
As Gekko points out above "...Massive price suppression over the years has built a fundamental spring into the price of Gold. It will keep going up regardless of whatever the f--k anybody says or does including the Fed...."
It has been a rough ride to $1090 and it will be going to $5000, but those who see the big picture will just keep taking physical delivery and the derivatives attacks will begin to dampen out over time. There are only a couple of Olympic size swimming pools worth of Gold ever mined and the silver market is a lot smaller. Wealth is ready to dive in.
The other thing young Bennie hasn't got his head around (poor Bennie, lots of education, very little common sense) is that if other countries ramp up their printing presses by the same degree, the relative value of the dollar will remain constant (I realize this is a simplification of what's actually going on, but not far off!) - so the benefit of davaluing the dollar by printing is negated by the relative devaluations of other currencies (look at the UK and its own Quantitative Easing, aka creating money out of nothing).
DavidC
Bennie doesn't care so much about the relative value of the dollar (in terms of the end goal of his policies).
He is not trying to devalue the dollar relative to other currencies (in a neo-merchantilist sort of way).
Ben is devaluing the dollar relative to real assets and relative to the nominal debt load. He wants to cause inflation by raising prices in nominal terms by depreciating the dollar. Everybody else doing it just helps the process along.
this is called "Beggar thy Neighbor"
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/638977...
The Fed is buggering us!
Downhill willie will save us.
http://www.youtube.com/watch?v=rn8zWrDWRuI
has anyone heard an "expert" make this connection? someone has had to, why does this point seem to be in hiding?
It isn't in hiding, really. There is a movement afoot for a single world currency (or basket). That would take a lot of the guesswork out of money supply and interest rate questions. The next issue will then be how to monitor the aggregate money supply with a high degree of accuracy (take counterfeiting etc., out of the equation). This probably will trigger a move to a cashless society, where all transactions (except barter) are performed electronically. Sounds like Big Brother, but people are talking about it who are probably sane:
http://www.independent.co.uk/news/business/news/cashless-society-by-2012...
That is what I'd like to know too. Everyone claims "it doesn't matter, since everyone is doing it." So everyone is reducing their citizens' savings to zero bit by bit?
no, this is only "helter-skelter"
it won't be willy-nilly until actual helicopters and dump trucks are involved.
Helicopters too small
http://fsupgrade.com/images/an225_cf18.jpg
What did you do with Sergey? FREE SERGEY
GG, agree with you totally. Especially, now Mr. Obama is losing control on all fronts. This will make gold going much higher.
Didn't the US government once outlaw personal gold trading?
Yes, personal gold trading was outlawed by the gold reserve act of 1934.
http://en.wikipedia.org/wiki/Gold_Reserve_Act
Gold was allowed for commercial uses and was relatively cheap during the years after WWII.
However the dollar was backed by silver and dollars were silver certificates, exchangeable for coin until Kennedy administration. Silver certificates circulated freely until the mid 60's. (I have only 2 now - proves they existed.) The Kennedy era inflation stimulus, done discretely, was(I assume) to forestall an expected recession some 20 years after the close of WWII.
The in 1974 under Ford administration with congress changed the policy on gold. We, of course, had the late 70s' gold bubble until supply caught up with demand.
The real money? Others posting to this board would be much better prepared than I to comment.
Umm expected recession? The recession of 1960 was pretty serious.
Kennedy also had the novel idea of government borrowing money directly without the Fed's involvement. Then got shot in the head a couple of months later and LBJ decided to borrow it the "correct way".
No mystery, LBJ (Masonic VP just like Lincoln's VP that had to resign due to the assassin contacting him the day of the show - ironically most people don't know that Reagan's shooter was a personal friend of the Bush family as well aligned with oil interests). Film of Jack Ruby just recently released stated it was LBJ, his mistress has gone on record with the same statement, JFK's bodyguard moved away from the vehicle and signaled just before he was shot (shown on film), and yes banking interest involvement as usual - Lincoln also wanted to issue bonds directly from the Treasury, that was stopped by John Wilkes Booth.
Just thought I would solve the mystery for those that did not get the memo!
you could own up to $1,000 in gold (executive order 6102). more than that was punishable with up to 10 years in prison (no one ever actually was hit with this)
Thank you GG, at least SOMEBODY GET's IT!
Massive price suppression over the years has built a fundamental spring into the price of Gold. It will keep going up regardless of whatever the f--k anybody says or does including the Fed.
The big "tah-dah" reveal in the magic act showing the vault is empty is when the shit hits the fan. It's like three card Monte: it comes down to when you actually turn over the cards. Price suppression carrys on until we get a chain reaction of buyers who want physical delivery, not just slips of paper or lights on a computer screen. Until then, the bullshit conjurers can trade pretend gold as much as pretend dollars to keep the hoax alive. Not sure they've spun their last illusion yet, but I hope so.
Wrong: We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
A determined government can always generate higher prices! How can money printing increase spending? Spending is exchange of real goods!
Can't believe Bernie doesn't even get these simple facts
For any keeping score, the M1 multiplier says jippie is right and Ben is wrong. Worst reading EVER.
Suck that fedheads!
http://research.stlouisfed.org/fred2/series/MULT
@Jippie
+1
Which is why it is a job-loss recovery. Higher prices but less spending.
Namke von Federlein
One of these days, once he is put in his straight jacket and hauled off to the loony bin, Ben will realize that depressions are a natural cyclical part of capitalistic systems.
It was not willy nilly. It was directed specifically at the big banks.
TO ANSWER YOUR ? WILL THE OTHER FIAT CURRENCIES REMAIN STABLE.
THE ANSWER IS NO, IF THEY ARE FIAT AND BACKED BY CONFIDENCE THEY TOO WILL FALL AS DOMINOES IN THE CHAIN REACTION. THE DOLLAR IS MERELY THE HEAD OF THE CLASS AND THE FIRST TO RECEIVE IT'S PUNISHMENT. THE CENTRAL BANKS ARE ALL AWARE OF THIS AND ARE CAUGHT IN A CORNER. CAUGHT IN THE PLANET'S BIGGEST GOLD SHORT SQUEEZE, HAVING TO TURN OVER PHYSICAL GOLD RATHER THAN BE EXPOSED FOR FRACTIONAL RESERVE, NAKED SELLING GOLD, THEY DO NOT HAVE. THEY WILL AT SOME POINT HAVE TO EXPLODE THE GOLD BULLION MARKET AND BE FOUND OUT AS "GREATER GOOD" CRIMINALS OR START COVERING SHORTS IN A HAIRY, SNORTING, HOOF POUNDING, GOLDEN BULL RUN.
THE G20 WILL BE MEETING THIS WEEKEND AND YOU CAN BET THE RANCH THEY ARE ALL TRYING TO BRAIN STORM THEIR WAY OUT OF THIS TAR BABY THEY HAVE MADE. STAY TUNED AND WATCH AS FRANKENSTEIN'S MONSTER DESTROYS HIS CREATORS.
"MONEY IS THE GOD OF THIS WORLD, AND ROTHSCHILD IS HIS PROPHET"
BENJAMIN DISRAELI 1856
Wow
Seems appropriate.
+1