G20 and IMF Gold: A Late April Fools' 25 comments
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April Fools' Day came a day late to the gold market this week.
"The biggest interest-rate cuts in history," said Gordon Brown, summarizing the G20 summit of world leaders at its conclusion on Thursday.
"An unprecedented fiscal expansion, injecting by next year $5 trillion into the world economy...expansionary policies as long as they are needed..."
On top of what's already been promised, the UK prime minister then announced "Additional resources of $1 trillion through the International Monetary Fund and other institutions [plus] $250 billion from Special Drawing Rights [the IMF bank reserve currency] issued to member countries...trebling the resources of the IMF with up to an additional $500 billion" on top.
What's more, Mr.Brown's and the other top 19 world leader have agreed "not 100 billion but $250 billion of trade finance...provided over the next 2 years through export credit agencies, including $50bn through the new World Bank initiatives..."
In short, "More money than ever before," as the prime minister put it.
And meantime, the Gold Price dropped $30 an ounce, dipping below $900 for only the fourth time since February.
Why? "A Reuters story released just after noon UK time highlights considerable short-term risk to the gold market" gasped UBS in an email at lunchtime.
"We had expected any conversations and statements about gold at the G20 to be limited to the proposed sale of 403.3 tonnes of gold," went on John Reade, the Swiss bank's highly respected metals analyst in London.
"But a statement from the UK Treasury Minister and [a] G20 source suggests that more than this amount may be sold to support the IMF.
"This is potentially really bad news for gold market sentiment in the near term."
Those 400-odd tonnes, already proposed for sale by the International Monetary Fund (IMF) since February 2008, had look too small by half to several African delegates ahead of the G20 summit.
Gordon Brown himself has been agitating for IMF gold sales for the last 10 years, ever since he himself ordered the Bank of England to sell half the UK's national reserves at rock-bottom prices. (The Gold Price rose 17% as those sales then took place; when the IMF Sold Gold at the end of the 1970s, "dumping" 1,600 tonnes onto the market, the price rose eight-fold regardless...)
But anyone looking for G20 fresh action – rather than just a re-hash of existing commitments – only got it in money inflation, not in proposed gold sales by the IMF.
Citing only "agreed sales of gold" – and then confirming in questions-and-answers that the pre-proposed 403 tonne sale will be the limit – "Gold of the world is now being used to help the poor of the world," said Brown.
Here's hoping the poor take their chance to squirrel away a little more of that metal on Brown's latest gold-selling success. Because with all that money headed their way – barely 9 months after crude oil hit $150 per barrel and global inflation reached 30-year highs – they might just need all the help they can get.
Disclosure: Long physical gold, not paper.
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This article has 25 comments:
Flood the market with Gold, let the price drop, buy it back at a discount, Now that is smart.
In the end, if I survive the chaos sure to follow, I'll look back at this time as one where even in the most obvious of circumstances, most people have nothing invested in the only real money out there.
It is so sad.
What is new? Nothing. What we see is desperation on the part of Obama, Brown and other "big spenders". They have no desire to reform the world economy. Instead, they love to go to the "old good times". Sorry, too bad, there is no chance for it.
As for 400T of gold, China would be more than willing to exchange monopoly-money for the real gold.
Brown's illusory G20 deal
Making available an extra $1 trillion”. Ahh, those Brown verbal tricks. What does “make available” mean? Is it guarantees, promises, statement of intent? Real spending? Not a penny of cold hard cash has been pledged by anyone. The sum is concocted by taking the IMF’s pre-existing $500bn target for its bailout fund (a target it still hasn’t met), adding another $250bn to the target. And, then, we add a $250bn fund which the IMF would create by printing its own special money.
www.spectator.co.uk/co...
We actually have no idea what they have agreed to. Brilliant.
Long GLL
government’s borrowing from the central bank should be driven by monetary policy
objectives, viz., the creation of sufficient liquidity to support an economy’s real growth,
preferably on a relatively noninflationary basis. Even if a government were to explicitly seek
to rely on the possibility of money creation to facilitate a somewhat higher level of
government expenditure, there are clear limits, given the potential impact that this would
have on inflation in the domestic economy. Given the money multipliers in most developing
countries, the scope for additional expenditure that can be financed in principle by money
creation is rarely above 1 percent of GDP, unless a clear and relatively quick supply-side
impact can be obtained from the higher level of expenditure. Except in situations where
inflation is being gradually brought down from hyperinflationary levels, it would be unusual
for the IMF to endorse a program that consciously targeted an inflation rate above 10–12
percent (Khan and Senhadji, 2000). Long experience suggests that high inflation is not
conducive to sustained rapid growth, private investment (Fischer, 1993), or distributional
equity, as the poor are most heavily taxed in an inflationary environment.
www.imf.org/external/p...
~~~~~~~~~~~~~~~~~~~~~~...
Apparently the IMF does not read its own publications.
See what Brown can do for you.
However, it will be forced down with the 400+ ton sale, to keep it down. I'm hoping ~$800 so i can pick some more up ($750, if lucky). I also disagree about PGMs. Why would you buy into them when you know demand for GM/Ford will be significantly down in the coming months? Just because Cold Fusion (Pd) is becoming reality, does not mean it will be allowed to be pursued. It was already shut down in the 80's as "junk science". It most certainly, is not.
Do you mean stocks/ETFs?
On Apr 03 02:26 PM Eric in IL wrote:
> Gold is inflated now. I think it has a significant pullback, after
> a near-term dip that I see coming, I would be buying PGM, not GLD.
>
> Long GLL
How about 1,000 tons of Gold or more? Think in terms of Half of annual World production. Will that help you think more clearly?
No problem? Someone is going to snarf it up as it hits. Yeah right, I can see the number it does on GLD and all of that Electronic Gold flitting around as 1,000 tons of the real stuff hits the Fan.
Long UGL
On Apr 03 11:35 AM nova wrote:
> Well, the Western world leaders decided to print more fiat paper
> money. WOW.
>
> What is new? Nothing. What we see is desperation on the part of Obama,
> Brown and other "big spenders". They have no desire to reform the
> world economy. Instead, they love to go to the "old good times".
> Sorry, too bad, there is no chance for it.
>
> As for 400T of gold, China would be more than willing to exchange
> monopoly-money for the real gold.
Hand, it is not only SDR's that are imaginary, it's the same gold they keep floating around pretending to sell. On each transaction to each other new funny money gets created.
As the huge iceberg of derivatives overturns more and more "money" is going to be required for bailouts. Obama has nearly worn out his bailout goodwill already so other organizations are being prepared to assist.
The good news is so much of this new "money" has to be created that gold will have to be priced much higher to appear to be backing it.
The bad news is the same crowd that fluffed the last monetary expansion is still in the queue to receive more.
On Apr 04 02:55 AM the hand wrote:
> sdr's are imaginary money and in effect quantitative easing done
> by a world body. no one will fund the sdr's - they will just issue
> them. there is imaginary money everywhere. the only ones not getting
> any is joe sixpack.
>
This is progress. The U.K. government exchanges its gold for fiat currencies. This is not monetary inflation, since no new fiat currency is created. Plus it reduces the wealth and power of the U.K. government. What's not to like?
God send that Obama and Gordon Brown talk.
The gold bubble, like every bubble before it, will collapse. It may take a year or two, but the current gold/oil price ratio is not sustainable.
Unlike stock or other investments, gold does not put your money to work, so it will drop whenever the market rallies. If you do invest in gold, it would be wise to insure your position with GLD puts.
The amount being sold will be absorbed in no time, and the price will continue going on up, so buy now while Gordie is offering it at the lowest price you'll see in a long time.
Gold is dead."
You have it backwards. In times of war and famine, food is the most expensive commodity of all. The fact that gold was used to buy it just reaffirms gold's value, which is eternal. I assure you that all the Russian rubles in the world would not have kept your grandfather from starving. You owe your life to gold.
How do you think they succeed to pay their way out? Witch money did they used? GOLD, yes it is a fact.
Gold is money, not an investment to play with. It is the best security in the world. When IMF they will sell Gold, with witch money they will be paid?
US = Hmmm! US$ will be for sure devaluated.
Maybe Chinese Money! or Euro! www.commodityonline.co... www.gold-eagle.com/gol...