Gold and silver prices surged higher today in the opening hours of trade in 2014. Gold rose 1.8% to $1,220/oz and silver surged over 3% to $20.02/oz.
Gold fell 28% in 2013, while silver recorded a 36% decline. It was gold’s first annual drop since 2000 and gold and silver’s worst performance since 1981 and 1984 respectively.
Allegations that banks are manipulating gold prices lower continue to gain credence and Bloomberg have published an article by Rosa Abrantes-Metz entitled ‘How to Keep Banks From Rigging Gold Prices’
Chinese demand may once again stem the decline in gold prices. Chinese buyers eagerly scooped up gold at bargain prices overnight after the 4% price fall. Gold volumes for the benchmark cash contract on the Shanghai Gold Exchange (SGE), China’s biggest spot bullion market, climbed to a 10 week high as lower prices led to increased buying.
Gold's sell off was again due to paper gold selling by traders and speculators as there was little increase in selling by owners of bullion. Arguably, the fed's tiny taper is bullish for gold as the Fed confirmed that ultra loose monetary policies and the unprecedented zero percent interest policies are set to continue under Janet Yellen.
The Federal Reserve's balance sheet is set to exceed a whopping $4 trillion today, prompting warnings its ultra loose monetary policies are inflating asset price bubbles and will lead to a devaluation of the dollar and signifigant inflation in the coming years.
Gold short positions are at multi year highs. Wall Street gold speculators look like they will get their greedy heads handed back to them on a plate by the Chinese Dragon .
Outflows of gold from ETF's amounted to 24.3 million ounces, nearly 700 metric tonnes, in 2013. Imports from Hong Kong to China totaled 26.6 million ounces or 754 metric tonnes through September alone. It is unknown where gold would come from to replenish these ETF holdings, if there was a sudden surge in demand in the West in the event of a new sovereign debt crisis or a Lehman Brothers style contagion event.
There are only a few UK and U.S. banks on the list of global safe banks. This should give pause for thought. Notice that many of the safest banks in the world are in Switzerland and Germany.
Given this lack of warning, depositors need to plan in advance for the day when ATMs do not work and they cannot access cash in their bank accounts. Customers could only withdraw a maximum of €300 per day from branches and ATMs, and could only carry a maximum of €3,000 while travelling out of the country
Given this lack of warning, depositors need to plan in advance for the day when ATMs do not work and they cannot access cash in their bank accounts. Customers could only withdraw a maximum of €300 per day from branches and ATMs, and could only carry a maximum of €3,000 while travelling out of the country.
The Bank of England's Tucker, who has worked with U.S regulators on the cross-border hurdles to taking down an international firm said that "U.S authorities could do it today--and I mean today". The FDIC official in charge of planning for resolutions, confirmed that the U.S system is ready to handle a big-bank collapse.
Emergency resolutions and legislation would be likely in many countries in the event of another Lehman Brothers collapse and another global credit and financial crisis.
Particularly vulnerable banks in each country are....
The FSB's first chairman was Mario Draghi, current President of the European Central Bank, while its current chairman is Mark Carney, Governor of the Bank of England. The inclusion of Financial Market Infrastructures means that large parts of the global financial system is susceptible to bail-in and could potentially be bailed-in including exchange traded funds.
Below some leading economists and financial commentators give their perspective regarding the risks of bail-ins or deposit confiscation. If you manage money in any way, your own or others,it will be prudent to heed their warnings.
It is important that one owns physical gold and not paper or electronic gold which could be subject to bail-ins. Owning a form of paper gold and derivative gold such as an exchange traded fund (ETF) in which one is an unsecured creditor of a large number of custodians, who are banks which potential could be bailed in, defeats the purpose of owning gold.
Physical Gold, held in secure conferring outright legal ownership through bailment remains the safest way to own gold.
