The emperor is naked but nobody wants to admit it, out loud at least, for fear of the whole charade falling apart. The problem is that anything priced in USD's is going to rise regardless of the intrinsic supply demand fundamentals, due to USD debasement. The evidence is in - the Fed 'loans' foreign CB's USD's for the purchase of US bonds, the insiders club that makes bond auctions appear better than they are?What he said about US monetary policy and gold – this bit on the record – would appear to validate the long-held belief of gold bugs that China has fundamentally lost confidence in the US dollar and is going to shift to a partial gold standard through reserve accumulation.
He played down other metals such as copper, saying that they could not double as a proxy currency or store of wealth.
“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market,” he said.
In other words, China is buying the dips, and will continue to do so as a systematic policy. His comment captures exactly what observation of gold price action suggests is happening. Every time it looks as if the bullion market is going to buckle, some big force steps in from the unknown.
Investors long-suspected that it was China. We later discovered that Beijing had in fact doubled its gold reserves to 1054 tonnes. Fait accompli first. Announcement long after.
Standing back, you can see that the steady rise in gold over the last eight years to $994 an ounce last week – outperforming US equities fourfold, even with reinvested dividends – has roughly tracked the emergence of China as a superpower in foreign reserve holdings (now $2 trillion).
Posted: Sep 10 2009 By: Dan Norcini Post Edited: September 10, 2009 at 2:30 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Judging from some of the emails I have been receiving, the feds and their gold capping efforts have already unsettled many of gold’s friends. Please note – the bullion banks can attempt to stuff the price of gold back below $1,000 but without a strong rally in the US Dollar, they are spitting in the wind as the fundamentals are arrayed against them.
I am reminded of an old movie named Beau Geste, in which the defenders of a fort are reduced to stuffing the bodies of their fallen soldiers into the ports in order to convince their enemies that the fort is still well manned and ably defended, where the truth was that their situation was dire indeed. Bluff and bravado are what the bullion banks rely on. If longs will not run all their efforts will go for naught.
Gold is not going to be held down by these crafty schemers indefinitely due to the simple fact that the Forex markets are far too large for any one entity to give a sustained push to a currency in a direction that is contrary to the supply/demand factors affecting that particular currency. Economics 101 has not been suspended just because the feds and their crony pals at Goldman and Morgan would wish it otherwise. The world is awash in Dollars and the supply is only going to continue to increase. Even if demand were to remain constant (which it will not), that is insufficient to absorb the excess supply meaning that price must fall. As the Dollar falls, gold will continue higher, capping efforts of the feds notwithstanding. Honest money is yet going to rule the day unless one can change human nature with a mere sweep of the hand. Investors worldwide, and governments worldwide, are slowly but surely coming to grips with what US spending profligacy is doing to its currency and are voting with their feet.
Technically, gold has been able to attract buyers above $980. The longer it can hold near that level, the better the chances become that $1,000 will give way.
Also, the strong rally in the HUI is very encouraging as it has fought avid buying above the 400 level, which was the former high and now seems to be serving as strong technical support. That is promising for the bullish cause and is no doubt serving to unnerve some of the weaker shorts.
What is interesting IMO is that i think this is the first time POG has held at this level for so long...5 days if we close above 990 this morning....5 days of consolidation at around the 1K mark is pretty impressive.
Ive been watching gold for prob 3 years...and ive never seen it told like it is now...DOW and POG running together...Blue sky's ahead?
Any other thoughts around
Thanks for the comments above Ageo and Uncle. Yes I am a bit non-plussed, the suspicion and doubt we have is, I suppose, that wall of worry, not helped of course by a very negative business press in realation to the value of gold as an investment alternative. A thought that has occurred is the vehemence against gold two days running in our Melbourne Age newspaper. Maybe they are the ones feeling insecure. Again, "the wall of worry"
The rest of the week promises to be intersting as the last five have had consistent up consolidations then up again, on the steps so far, this week is due for the next 10 to 15$ up.
Time will tell
Did you read the piece on RNG explod?
That read like a ramp and yet Michael Pascoe gave gold a pasting in his piece.
And now gold up dow down, as always unpredictable, in fact oil and dollar down together, and aussie gold up too.
gold is now beginning its new life alone.
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