Friday, Oct 06, 2006

Why the recent fall in Gold prices?

Telegraph: Bank of France blamed for gold sell off

More fishy goings-on in the markets. This being the Torygraph, the French are blamed.
Worth a read though....

Posted by needle @ 12:13 AM (604 views)
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9 Comments

1. harold said...

Why the recent fall in Gold prices?

In a word - manipulation.

It won't last, long-term it's still a bull market.

Friday, October 6, 2006 09:37AM Report Comment
 

2. The Capitalist said...

Just bought more gold today. LXYOR GBS listed on LSE.

Gold is the only refuge when faith-based currencies are reduced to toilet paper by inflation...Putin is no fool - Russia now fourth biggest holder of gold. Think the unthinkable - could the Rouble replace the Dollar as the global currency?

Friday, October 6, 2006 09:48AM Report Comment
 

3. Monty said...

Three words - supply and demand. :-)

"Barclays Capital said Europe's banks had sold an extra 100 tonnes from reserves in a rush to meet a quota deadline on September 26, but had done so by selling through forward contracts that disguised the effect."

I'd be interested to know more about the quota and why it exists. Can the ECB dictate the size of members' reserves? Given that the Euro is yet another fiat currency and not backed by reserves, what's the point? I think I can appreciate the rationale in having gold reserves (duh!) but not why the ECB would impose quotas.

Friday, October 6, 2006 10:49AM Report Comment
 

4. monty said...

Three words - supply and demand. :-)
"Barclays Capital said Europe's banks had sold an extra 100 tonnes from reserves in a rush to meet a quota deadline on September 26, but had done so by selling through forward contracts that disguised the effect."

I'd be interested to know more about the quota and why it exists. Can the ECB dictate the size of members' reserves? Given that the Euro is yet another fiat currency and not backed by reserves, what's the point? I think I can appreciate the rationale in having the reserves (duh!) but not why the ECB would impose quotas.

Friday, October 6, 2006 10:54AM Report Comment
 

5. Nightflight said...

My take on this, as a HPC watcher who has invested heavily in the gold unit trusts, - the gold price will remain suppressed by the oil price until the November congressional elections are over. It has been said that the declared American oil stock levels have artificially included the Department Of Defence stocks to suppress the price and note also how soft they are on Iran at the moment.
As soon as the elections are over its showtime - oil price back up, inflationary pressures, Fed unable to raise interest rates without crashing economy, declining dollar, gold skyrockets. This investment is not for the feint hearted though, the daily swings so panic inducing most people wont go there - and given the chance prefer some nice sensible bricks and cement, but if you want to get in now is very much the time to strike.

Friday, October 6, 2006 11:04AM Report Comment
 

6. Ticktock said...

monty,

The 'Washington agreement' restricts the amount of gold that can be sold by central banks to 500t per year, I believe until 2009. In theory, this was to limit heavy central bank selling that has historically surpressed the spot price.

However, another way to look at it, is that cenral banks are being forced to sell at least 500t per year (by the biggest holders and buyers of gold i.e US/ IMF) in order to hide the true level of global inflation, and to reduce the non-dollar economic power of 'client states'.

The French do not have the political capital to sell gold at US request, so have been doing it slyly in the futures market

The US has been able to exchange their increasingly worthless paper notes, for the bullion of Central Banks. Gordon Brown sold 50% of our gold at rock bottom prices (in fact the low point of the market is now known as 'the Brown bottom') He did however make it clear that he would not be selling any more, and seemed rather cross at being made to sell what he did. In retalliation, Gordon suggested that the IMF revalue its gold reserves to market levels and use the accounting proffit to releave third world debt. (anyone who knows a little about the US/IMF/Investment Bank gold 'swaps' & 'leases' etc. will know what Gordon was really threatening with this idea, and why the US Fed might have blushed at the prospect.)

Interestingly, the Germans have simply refused to play ball and exchange their Gold for yankee paper (I think that Germany has the third or fouth highest reserves) and this has really pieved both the US, and the US's client Merkel Government, but fair play to them I say. That Gold in their vaults is their only chance of any economic/political freedom in the future.

What a shame that the BOE didnt have the same sort of spirit.

Friday, October 6, 2006 01:09PM Report Comment
 

7. autopilotengage said...

I suppose it makes sense, France no longer need to hold such high reserves to back a currency which they are only 1 of many users of. The ECB has no power or the money for that effect to aquire the necessary reserves from member states to back the currency, so instead they ensure that the gold reserves are fairly proportionally distributed between members. I would guess that member states would have no real incentive to hold gold if no quotas were in effect, or perhaps even trade externally using gold were the currency to suffer a fall. In the US, the gold reserves are obviously held at a federal level, maybe this is the eventual aim?

Friday, October 6, 2006 02:30PM Report Comment
 

8. harold said...

Nightflight
There is widespread support for this view on the web, for example:
http://www.financialsense.com/editorials/casey/2006/1006.html

TT
"The 'Washington agreement' restricts the amount of gold that can be sold by central banks to 500t per year"
Seems they might be fiddling it:
http://www.resourceinvestor.com/pebble.asp?relid=24530

Saturday, October 7, 2006 08:58AM Report Comment
 

9. japanese uncle said...

Any speculation and thought on this issue is futile unless you know the truth about the mechanism that determines or rather decides the prices of gold and diamond. Again the House of XXXXXXXXXX is very busy here. Samuel Montagu, Maccata & Goldsmith, Hambros Bank are the key parties to the decision all under the control of the House.

Sometimes I wonder, teaching economics as general science is useless, but teaching the history of the House, could give you all the insights needed to comprehend and envisage the economic phenomena under the sun.


Saturday, October 7, 2006 02:38PM Report Comment
 

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