IMF: Gold Is Scarce “Safe Asset” And “Growing Shortage of Safe Assets”

Tyler Durden's picture

From GoldCore

IMF: Gold Is Scarce “Safe Asset” And “Growing Shortage of Safe Assets”

Gold’s London AM fix this morning was USD 1,655.50, EUR 1,261.33, and GBP 1,039.04 per ounce. Yesterday's AM fix was USD 1,654.00, EUR 1,261.63 and GBP 1,040.25 per ounce.

Silver is trading at $31.56/oz, €24.01/oz and £19.78/oz. Platinum is trading at $1,583.75/oz, palladium at $637.50/oz and rhodium at $1,350/oz. 


Cross Currency Table – (Bloomberg)

Gold fell $0.90 or 0.05% in New York yesterday and closed at $1,658.10/oz. Gold has been trading sideways in Asian trading and remains in a tight range in Europe this morning near $1,656.07/oz. 

Gold remains supported this morning as the ECB signalled that it would intervene in the debt markets on worries about Spain and the risk of contagion in the Eurozone.  ECB board member Benoit Coeure said “the European Central Bank still has its bond-buying programme as an option”.  

Investors are also still concerned about other peripheral Eurozone economies like Italy and how they might affect the core Eurozone nations.  Italy saw its 1 year borrowing costs rise for the first time since November during its sale of short term bills yesterday, ahead of a 3 year bond auction later today.

The number two official at the US Fed, Yellen, said overnight that due to high unemployment facing the economy, the Fed has left the door open to further Fed action including QE.

Further QE and the continuation of ultra loose monetary policies will be positive for gold.

IMF: Gold Is Scarce “Safe Asset” And “Rising Demand for Safe Assets” 
Further confirmation of gold’s continuing but gradual renaissance as a safe haven asset was given by the IMF yesterday who warned that a “growing shortage of safe assets” poses a threat to “global financial stability.” 

The IMF identified $74.4 trillion of potentially safe assets today, including gold, investment grade government and corporate debt, and covered bonds.


Dow Jones Industrial Average Index in Gold USD 

Sovereign debt crises are reducing the number of governments that investors trust to issue "risk-free" bonds just as new financial regulations are increasing demand for safe securities from banks.

Importantly, the IMF’s latest Global Financial Stability Report’s introduction finds that 

"In the future there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets.” 

“Both the lack of political will to reshape fiscal policies at times of rising concern over debt sustainability and an overly rapid reduction of fiscal deficits limit governments’ capacity to produce assets with low credit risk.”

The IMF has warned regarding illiquidity in “safe haven” markets. Gold remains one of the most liquid markets in the world and the illiquidity in bond markets would see increased safe haven demand for gold. 

The IMF is warning regarding deteriorating public finances. As many governments see themselves being downgraded - safe haven bonds may become less safe.

This bodes well for gold in the coming years and should see gold again be seen as a leading if not the ultimate safe haven asset.

Gold To Reach $2,000/oz Within Year On QE, Inflation and Spain -  GFMS 
Gold may climb to a record above $2,000 an ounce within the year as concerns about sovereign debts and inflation lead to safe haven and inflation hedging demand from investors, Thomson Reuters GFMS said.

While the near term may be “challenging” because of concern about demand in the top physical markets, especially India, the possibility of further quantitative easing will likely support gold.

The price floor may be at or below $1,650 an ounce, according to the report.


Gold 2 Year Chart- (Bloomberg)

“While short-term downside risks remain in place for the gold price, the economic and financial background continues to point to higher prices,” GFMS said. “It is too soon to dismiss the possibility of further quantitative easing in either the United States or Europe, and the Chinese government may yet ease its monetary policy.”

Global gold demand rose 0.6 percent last year as a jump in central-bank buying offset a decline in fabrication, GFMS said. Central banks boosted net purchases almost six fold to 455 tons last year, and may buy about 100 tons each quarter in 2012 as emerging countries maintain a similar rate of purchases and sales from Europe remain “tiny,” according to the report. 

Total investment fell 10 percent to 1,605 tons last year, with bar demand climbing 37 percent to a record 1,209 tons, GFMS said.

China’s jewelry fabrication may rise to a new high in 2012 after jumping 15 percent to a record 496 tons, according to GFMS. Growth in China will be driven by the country’s economic expansion, while exports will remain “moribund” due to a weak global economy.

It is important to note that GFMS have been quite bearish on gold in the long term in recent years. 

Any positive outlook has usually been short term in nature and tempered by warning that the price would “peak” in a year or two or the near term. There is the risk that they are again conservative and overly cautious.

South African Production Plummets Again 
On the supply side, South African gold production continues to plummet. South African gold production fell 11.5% in February from a year earlier, Juan-Pierre Terblanche, a spokesman for Statistics South Africa told Bloomberg today.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS
Gold 'to Hit $2000' on Spain Fears – The Telegraph

Gold Could Climb to $2,000 Within A Year – The Financial Times

Gold treads water; euro zone caution remains‎ - Reuters

Physical gold demand strong: GFMS - MarketWatch

IMF: Growing shortage of safe assets such as Gold – The Financial Times

Gold could peak in 2013 after 12-year bull run: GFMS - Reuters

COMMENTARY
China Buying Gold? - MarketWatch

Europe's banks beached as ECB stimulus runs dry – The Telegraph

How Serious are China and India About Their Gold? – Fox Business

Buying The Dips In Gold Has Been The Right Move For A Decade - Forbes

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spiral_eyes's picture

counterparty risk, bitches.

Oh regional Indian's picture

AzNom, good to see your article carried a weekend or so ago. Good stuff.

As for Gold. When the IMF is saying it's good for you, can it really be good for you? Think about it, bugz.

The reality and the presented reality are so far apart that even erudite folks cannot cross the brige, the Ruby-con! ;-)

ori

/unedited-stream-of-consciousness/

spiral_eyes's picture

Sup Ori.

Off topic, but I think ZH readers would do well to check out your article on garlic. 

Garlic is a wonder drug you can grow at home for tough times.

http://aadivaahan.wordpress.com/2012/03/29/candida-albicans-and-a-health-challenge-for-everyone/

Yardfarmer's picture

225 bunches of Grandma Concetta Cibona's Heirloom Rainbow Italian garlic growing in southern Colorado high plains. Bless you Concetta. meanwhile, seems like a lot of Big Brothers out there got an eye on your gold these days. IMF'ers.Central Gangsters.US Gubmint.Goldman. I seem to have forgotten where I planted that Au. hmmmmmmm....

DosZap's picture

Off topic, but I think ZH readers would do well to check out your article on garlic.

Garlic is a wonder drug you can grow at home for tough times.

Great stuff, IF you do not want any human contact affter consumption.

TheGardener's picture

Garlic works well against unwanted paternity, you`r right Dos !

Best consumed with prodigious amounts of red wine, that
should keep the doctor away.

Up here in my hills I need to leave it in the ground for a
second year or I only harvest as much as I put in. Dry sunny place will do, even in rough climate.

P.S. this article with all those delicious yeasts and fungi
reminds me of my vegetarian ex-girlfriend, never forget that
smell.So make sure you have plenty of good red meat with
your garlic and wine :-)

Born Patriot's picture

What about the counterparty risk of foreigners overrunning this great country?? Nobody wants to talk about this ... Except for Ron Paul.

spiral_eyes's picture

What the fuck has counterparty risk got to do with immigration? 

Born Patriot's picture

A HELL of a lot actually. If America does business with an immigrant, we are taking a RISK. This risk is the totall destruction of our great country through multiculturalism. You need to listen to Ron Paul buddy.

Gazooks's picture

nation of immigrants, asswipe

Comay Mierda's picture

Born Patriot = another CIA blog provocateur troll

and he's not even funny

LowProfile's picture

Well...  I say...

          TROLOLOLOLO

trembo slice's picture

I think you need to listen to Ron Paul.

The Beam's picture

America has been about "bring us your tired, your poor, and your weak; and we will make something out of them". My grandfather's family faced discrimination during the mass influx of Irish immigrants for the same reason. They took crap jobs, jobs nobody wanted. The Japanese and Vietnamese? SAME THING. Difference is they came here to become Americans. They did bring their culture with them though.

I support immigrants. I DON'T support illegal immigrants. I support people wanting to come over (even for a little bit  to work) as long as they respect this country. I DON'T support idiots bringing their flag and thinking they are going to take over the country.

Multiculturalism is one of the things that makes us great. Ultimately though you should, at the end of the day,  be what you believe in. If you want to be here, you don't have to forget your culture, but you American FIRST and FOREMOST.

Born Patriot, the simplistic nature of your opinion does not do this issue justice and actually detracts from our side of the argument.

Ace Ventura's picture

Dude, I'm with you on the evils of multiculturalist voodoo, but you need to consider if you're directing your thread-hijacking remarks at immigrants in general, or specifically at ILLEGAL immigrants. There is a titanic world of difference.

 

Astraea's picture

I do not like immigration arranged and used to destroy societies and culltures - yet I believe that it is absolutely wrong to restrict the movement of people.     They should be able to go anywhere on this Earth, freely.     I think passports are not much more than a century old - and they annoy me!     I would like to be able to drop in anywhere, anytime!

 

Ace Ventura's picture

I tend to agree with your feelings on restricting the free movement of people. However, that freedom must equally extend to soveriegn cultures seeking to retain their identity. To the point that, should such a society feel their way of life threatened by excess immigration, they should be free to adjust their immigration policies accordingly.

What I do NOT agree with is the notion of ringing a truly free sovereign nation with an actual wall. If immigration policy is enforced, and better yet, the bait used to attract illegal immigration is removed....there is no need for a wall. Unless, of course, the REAL goal is to keep people IN.

 

El Oregonian's picture

Ah, excuse me, My family's roots go back to 1586 here so drop the B/S. We're all patriots here who love liberty.

Au Shucks's picture

Cock smoke deceiver propagandist establishment shill paid troll agent provocateur.

MeelionDollerBogus's picture

America's mostly immigrants anyhow.

If you don't do business with immigrants you have a higher risk. You lose the gene pool diversity, you lose economic diversity, you lose cultural diversity and you lose external assets (investing) brought to America. Well, if that's how you want it...

last I heard Ron Paul wasn't in any way against multi-culturalism. Canada does it & it's going overy very well there.

Zero Govt's picture

Ron Paul sings a good tune but hasn't amounted to anything (i'm sorry to say)

you can't expect the truth to rise to the top in a human sewer called Govt

cranky-old-geezer's picture

 

 

The IMF identified $74.4 trillion of potentially safe assets today, including gold, investment grade government and corporate debt, and covered bonds.

Gold is the only one of these asset classes with no counterparty risk, assuming it's physical gold in your possession.

Everything else is a paper promise to pay some other form of paper at some point in the future.   They are not assets. 

A promise to pay an asset is not an asset.  A promise to pay some other form of paper is certainly not an asset. 

A promise to pay some amount of a paper currency is a pure joke.  There's no way to tell how much that paper curency will be worth at maturity.

This is the underlying problem in the financial system.   Everybody considers a promise to pay some asset as an asset, but promises are worthless, as everyone is discovering, so these promises put on balance sheets as assets are continually losing value.  

A great example is Greek bonds, which are promises to pay euros.  Greece is constantly breaking those promises, so Greek bonds are constantly losing value.

Most of the "assets" in the financial system are nothing but promises to pay some asset in the future, and much of those future "assets" to be paid are fiat currencies which can lose a lot of value between now and maturity.

A great example is US treasuries, which are promises to pay dollars.  But the dollar has lost 40% of it's value in the past 4 years.

In summary, most of the "assets" in the financial system are nothing but promises, and promises are worthless.

Physical gold has no promises attached to it, hence no counterparty risk.  It's a true asset.   The only true asset on IMF's list mentioned in the article.

Hedgetard55's picture

+55

 

You are right, geez. Only gold (PMs in general) is a "safe asset" today, all the rest can be printed to oblivion as they are priced in fiat.

cranky-old-geezer's picture

 

 

Followup:

A promise to pay an asset should never be considered an asset, because the asset to be paid in the future is presently carried on someone else's balance sheet as an asset.

Booking the promise to pay as an asset means the object asset is being carried on two different balance sheets as an asset.

Showing an asset on two different balance sheets at the same time is fraud.  Showing a promise to pay on your balance sheet as an asset is accounting fraud, because the object asset is being carried on someone else's balance sheet.

Yet this is how the entire financial system operates.  A given asset is shown on multiple balance sheets.  It's called "rehypothecation", showing an asset on multiple balance sheets at the same time.

Yes, the entire financial system operates by accounting fraud.  Strip all the rehypothecated assets out of balance sheets, and the entire system would implode.

GetZeeGold's picture

 

 

Ctrl+P GOLD

 

Wait....it's not working.

 

Colombian Gringo's picture

Imagine that, an asset that is not someone else's liability. No wonder the Central Banksters hate Gold in Public, but keep it in private for their masters.

youngman's picture

Actually how much are they going to sell this year to the Chinese...oops..I mean to the public.....???  Or have they stopped selling now that it is an asset and the USA will just give them as much paper as they want

JustObserving's picture

It would have been $2000 today sans the manipulation.

The Beam's picture

I am okay with the manipulation right now. Gives us more time to get more and educate other to do so too.

alfred b.'s picture

 

   that old song about giving us more time to buy has gone on long enough over the past 6 or 7 years, and many of the early investors are entitled to huge profits at this time.   If you're offering more free time to the parasites, enablers and financial terrorists rigging these markets to retire from their post or exclude themselves from the responsibility and/or find ways to stick a patch on the scam and/or take it underground or perhaps transfer the scheme to the far east, you'll be granting them a big favor.   One never knows, so we must keep their feet to the fire now!   Enough with giving the crooks more time...it's illogical!

 

 

Au Shucks's picture

+100

YES!!  I've been saying exactly this for 2+ years.. I am so freakin' tired of that played out, lame ass excuse of a rational that evertime I see it now I automatically assume the person is either a troll or an idiot.  there simply is no other explanation.  If one hasn't accumulated as much as they can already, why are they typing such an idiotic remark rather than liquidating everything they can, maxing out whatever resources they can to buy RIGHT THIS SECOND?

 

Thank you

The Beam's picture

Okay, on a PERSONAL note it allows MYSELF an opportunity to get MORE. Does that work? I am being semi-selfish!

Yes we deserve the profits and I have been accumulating  for years myself. So I totally understand and agree.

They are going to run the full gambit though. So I can either complain about the manipulation or add positions knowing it WILL COME (the bubble  bursting in the paper contracts).

CME and NYMEX are taking longer and longer to fill their contracts (on many of the commodities)

I don't think it takes the tumble until derivative crisis gets to Asia (after crushing the various European nations). I am going out on a limb and say hit Hong Kong first. At that times you will start to see a shift from "everything vs the US$" to "everything vs commodities".

This is when I think the QEs stop doing the designed plan of propping paper markets.

Just my opinion. Now is 2012 that year? I don't think so. So am I going to complain till it happens? No. I want to see the optimism personally.

Just my opinion.

LongSoupLine's picture

Shortage of safe assets??

 

Uhh, hello?...everyone knows AAPL is the reserve currency!

 

(yes it's sarc...)

GetZeeGold's picture

 

(yes it's sarc...)

 

Apparently at least one person doesn't know what sarc means.....wait....there could be more.

 

 

oddjob's picture

If you have to tell the reader it is sarcastic, then its not.

<sarc on>

disabledvet's picture

Sounds even better for the soft commodities actually. And at the risk of repeating myself "arable land." sounds like a downgrade of all us humans is in the works as well...

zilverreiger's picture

is this a PM sell signal?

Central Wanker's picture

Yes, someone desperately wants your safe assets

Gazooks's picture

Intrusive Manipulation and Fraud, lay odds in it

GetZeeGold's picture

 

 

Would of had to have bought it first.

 

Long-John-Silver's picture

South African Production Plummets Again

 

It's a good thing Blythe Masters can print all the Gold and Silver we need. /SARC

JPMorgan's picture

In tanglable assets we trust.

 

apberusdisvet's picture

$2000 is the low end; the psychopaths are just getting started  in their agenda of mass destruction of all fiat.  In other news,  the Rothschild vaults are expanding.