Gold

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Iron
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The banking liquidity crisis would make be sceptical of gold, as it may mean that financial institutions are more interested in selling gold to free up liquidity than in buying more gold.

Jeff
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superfrank
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Ferru123 wrote:The banking liquidity crisis would make be sceptical of gold, as it may mean that financial institutions are more interested in selling gold to free up liquidity than in buying more gold.

Jeff
they haven't got any gold.
Iron
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Are you sure? I'd be surprised if the investment arms of retail banks don't hold lots of gold reserves.

The central banks certainly do, and IMHO it's quite possible lots of those reserves will be liquidated this year to fund bail-outs: http://en.wikipedia.org/wiki/Gold_reserve

Jeff
superfrank wrote: they haven't got any gold.
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superfrank
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investment banks trade gold futures but there's no evidence they are long atm. many have turned bearish on some technical rubbish but the fundamentals are stronger than ever.

non-western central banks are buying gold because they know that a dollar collapse is possibility and that don't want all their hard work invested in worthless paper should the worst case happen. they will keep buying as the debts of the west continue to expand and as they dilute their currencies with money printing. only a sea change in western policy (reflation) to the debt crisis would change the fundamentals and the chance of that is slim to none.
Iron
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The ECB needs hundreds of billions of dollars for future bail-outs. It will borrow some of the money, but there will still be a huge shortfall. Selling gold and printing money are just about the only solutions I can think of for raising the kind of money they'll need (and we all know what Frau Merkel thinks of the printing money option! :lol: ).

Jeff
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superfrank
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the ECB are now printing (expanding their balance sheet), but doing it in a different way to the FED and BoE. lending trillions to private banks at 1% so they can buy sovereign debt at higher yields is effectively the same as buying bonds directly. the ECB doesn't have the money to lend, they've just created it out of thin air (why do you think the Euro has crashed in the last few weeks? printing money = diluted currency).
Iron
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The ECB has 420 billion euros worth of gold - see http://af.reuters.com/article/metalsNew ... 1H20111213.

Rather than print all the money they need for bailouts (something that might well trigger a financial meltdown!), the ECB might sell some of that gold.

Jeff
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superfrank
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Ferru123 wrote:Rather than print all the money they need for bailouts (something that might well trigger a financial meltdown!), the ECB might sell some of that gold.
no chance Germany would allow that to happen. Portugal and Greece still have gold but haven't sold any or been forced to.
Iron
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Germany might find themselves between a rock and a hard place, forced to choose between options they find unacceptable.

Let's say that Italy needs a bailout(and as their 10 year bonds are still around 7%, that looks increasingly likely). Germany can either:

A. Let Italy default, and cause the collapse of the Euro and possibly the global financial system

OR

B. Print money and/or sell gold

Jeff
superfrank wrote: no chance Germany would allow that to happen. Portugal and Greece still have gold but haven't sold any or been forced to.
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superfrank
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even if they sold all their gold and gave it to the PIIGS it would be throwing good money after bad and wouldn't make a fundamental difference. what would you rather have in your vault, gold (proven as a store of real wealth for 6,000 years) or the bonds of bankrupt countries with no hopes of growth (while in the euro)?
Iron
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If Germany were to let Italy go under, and a global financial meltdown were to ensure, Germany's gold reserves might not be worth very much anyway.

And you could argue that a nation's gold reserves are a small price to pay to prevent a financial apocalypse. I think that, like the Americans in 2008, they'd take the medicine with clenched fists, as the alternative could mean anarchy on the streets...

Jeff
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superfrank
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Ferru123 wrote:If Germany were to let Italy go under, and a global financial meltdown were to ensure, Germany's gold reserves might not be worth very much anyway.
eh?!!!

where are the rich going want to put their money in the event the system blows up?
Iron
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You're assuming that there will even be rich people post-apocalypse...

I don't think anyone has a clue what would happen in the event of a major world economy defaulting in the current circumstances. Maybe gold would soar in value. Or maybe it would become almost worthless. Who knows?

These are interesting times...

Jeff
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CaerMyrddin
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I reckon it would probably soar, although you have to ask yourself, in a post-apocalypse scenario, would you like to eat gold?

:lol:
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superfrank
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