Seeking Alpha

Ron Hera's  Instablog

Ron Hera, founder of Hera Research, LLC, and the principal author of the Hera Research Monthly newsletter holds a master's degree from Stanford University and is a member of Mensa and of the Ludwig von Mises Institute. A native Californian, Ron is a self described "escapee" from... More
My business:
Hera Research, LLC
  • Madmen, Gamblers, Alcoholics, the US Dollar and Gold
    If a lawless gang of madmen, gamblers and alcoholics seized control of a large company, how would you expect the business to perform? How would you expect the story to end? What if, instead of a company, they seized control of the world’s largest economy, thus, to some extent, the world financial system?

    Unsound monetary policy, reckless risk taking, and out-of-control spending are what characterize the US economy today. The proverbial madmen are central bankers, i.e., the US Federal Reserve, whose polices, inspired by Johannes Gutenberg, threaten to destroy the US dollar in the name of saving US banks from their own irresponsibility and greed. The compulsive gamblers are Wall Street investment banks, along with the largest US banks, which have gone so far as to speculate with government bailout money, having learned little from the near collapse of the world financial system in 2008. If money were liquor, the US federal government would be a band of raging alcoholics in charge of a liquor store. These are the tragic characters upon whom Americans depend for their jobs, for their college and retirement funds, for the financing of their educations, homes and business ventures, for the stability of prices and US financial markets, and for the value of their hard earned savings.

    The triangle of dysfunction has not gone without notice. Foreign purchases of US Treasury bonds are being made, essentially, under duress while demand for Treasuries remains tepid and quantitative easing by the Federal Reserve continues. The US dollar has fallen from new low to new low and the skyrocketing price of gold is sounding the alarm, but between Washington DC and Wall Street nary an ear can hear.

    The Madmen
    The incurable incapacity of a central autocracy to accurately match interest rates and the money supply to the requirements of the diverse, complex markets that make up the US economy is a fundamental flaw in US monetary policy. While the ideology may be different, central economic planning under the name of central banking produces no better result than central economic planning under the name of communism. A series of ever larger economic bubbles coupled with an ever weaker currency is ultimately little better than the economic stagnation of the former Soviet system. Low interest rates may stimulate economic activity, for example, but they may also result in high inflation, unsustainable levels of debt, and asset price bubbles.

    For every intervention in the free market, whether by government edict or monetary policy, there are unintended consequences. Government intervention in the US housing market, for example, intended to increase opportunities for home ownership among less successful members of society, played a key role in undermining lending standards. Combined with the Federal Reserve’s policy of low interest rates, which fueled speculation in real estate and mortgage backed securities, government intervention ultimately proved disastrous.

    Markets have existed since the dawn of human civilization without the blessings either of government subsidies and guarantees or of central banking. An economy is best described as an organic system rather than a machine. Interventions purporting to be the processes required to ‘operate’ the economy are at best futile if not inevitably disruptive and destructive. Like a living organism, the economy is largely self organizing and self regulating. When governments collapse, for example, currencies may fail but trade marches on. The behavior of an economy is an infinitely complex aggregate of individual human actions driven by self-interest and, while it may be characterized at different times either by rationality or by irrationality, it is self correcting (unlike interventions, which know no bounds). As a result, it is not possible for a small group of experts, no matter how intelligent or well intentioned, who have an imperfect understanding and incomplete, inevitably out-of-date information to successfully control the economy without unintended, unexpected and usually destructive consequences.

    The notion that a central authority, even one equipped with sophisticated computer models, can successfully substitute a mathematically-based view from on high for the individual judgments of millions of businesses, entrepreneurs, and consumers across countless regions and industries is not merely the height of hubris but quite simply mad. Fundamentally, it is entrepreneurs deploying private capital, not bankers or economists that create the products, services, business, and jobs that make up the economy. Whether for the sake of social welfare or for the purposes of monetary policy, intervention in the free market invariably distorts the distribution of wealth, causes a net reduction of wealth for society as a whole, and misdirects entrepreneurs into activities eventually revealed as uneconomic. Perhaps the best argument for the futility of central bank monetary policy is that of Federal Reserve Chairman Ben Shalom Bernanke, Ph.D., who said to graduates of the Boston College School of Law on May 22, 2009:

    “As an economist and policymaker, I have plenty of experience in trying to foretell the future, because policy decisions inevitably involve projections of how alternative policy choices will influence the future course of the economy. The Federal Reserve, therefore, devotes substantial resources to economic forecasting. Likewise, individual investors and businesses have strong financial incentives to try to anticipate how the economy will evolve. With so much at stake, you will not be surprised to know that, over the years, many very smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future. But the results, unfortunately, have more often than not been underwhelming. Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make.”

    Mr. Bernanke’s comments are not remarkable only for their clarity and candor, or because they are a stark admission of the failure of central bank monetary policy, but because they echo the founding principles of the Austrian school of economics. In fact, Mr. Bernanke provides excellent reasons for the repeal of the US Federal Reserve Act. Despite common misconceptions of economics as a branch of mathematics or as a hard science, economics is in fact a social science, similar to psychology. For example, when we speak of economic incentives we are referring to the manipulation of human behavior through artificial means to achieve policy objectives such as increasing consumer spending, just as pairing the sound of a bell with the introduction of dog food will produce dogs that salivate at the sound of a bell when no food is present (of course the salivation response can eventually be extinguished if no food is provided for an extended period of time).

    Psychology, it turns out, has a great deal to say about economics, investment banking, and public finance. Indeed, key psychological themes are common to all three areas of endeavor.

    The Illusion of Control
    There may be a simple explanation, rooted in human nature, for the ever larger disasters brought about by government interventions in the economy and by the institution of central banking. The illusion of control is persistence in the belief that a given outcome can be controlled when no demonstrable influence exists or where, as Mr. Bernanke stated, outcomes cannot be accurately predicted. Whether intervention is the result of central bank monetary policy or of government legislation, taxation or regulation, it is the inherent unpredictability of the outcomes of intervention that belies the philosophy of interventionism itself. Former Federal Reserve Chairman Alan Greenspan, Ph.D., grappled with this fact in the wake of the financial crisis when, in testimony before the US Congress on October 24, 2008, he said:

    “… an ideology is [...] a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not. And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact. [That there is a] flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak. … I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

    Mr. Greenspan accurately refers to the dominant economic theory, not as a science, but as an ideology that ultimately does not conform to reality. In psychological terms, an irrational belief that cannot be modified by reason or evidence is precisely the definition of the term “delusion.” Despite his having been confused for 40 years, Mr. Greenspan clearly recognized and acknowledged a limitation of his economic ideology. In retrospect, perhaps Mr. Greenspan regrets having departed from his original views. Sadly, the same cannot be said for the majority of economists, central bankers and US government officials who do not recognize, as Albert Einstein pointed out, that ”the definition of insanity is doing the same thing over and over again and expecting different results.”

    The Gamblers
    Gambling addiction and belief in the paranormal, e.g., psychokinesis, are examples of the illusion of control. When rolling dice in the casino game craps, for example, people tend to throw harder for high numbers and softer for low numbers when there is no connection between the force with which the dice are thrown and the result. Experimental subjects can even be made to believe that they can affect the outcome of a coin toss through their level of concentration. The illusion of control is a key factor in gambling addiction because it is reinforced by occasional successes and, as has been long established by behavioral psychologists, behaviors conditioned by intermittent reinforcement are the most difficult to extinguish.

    Warning signs of gambling addiction include defensiveness, secrecy, and desperation: precisely the attitudes exhibited by Wall Street bankers seeking bailouts from the US government in 2008. Like US banks transferring private losses to taxpayers, gambling addicts may hold others responsible for their financial problems and they may adamantly insist that they be trusted. Gambling addicts tend to be secretive about finances, while at the same time irrationally insisting on having control over money, just as Federal Reserve Chairman Ben Bernanke has insisted that Congressional review of the Federal Reserve’s books. i.e., to find out what financial institutions received taxpayer dollars, would compromise its vaunted independence and harm the US economy. The more gambling addicts are in debt, the more they feel the need to defend gambling and they often defend a specific theory or model that “guarantees” winning (if only they can get more money to continue gambling).

    A gambling addict’s savings and assets may mysteriously dwindle, perhaps like crumbling bank balance sheets laden with sub-prime mortgages or bank losses associated with risky financial derivatives, and there may be unexplained loans or cash advances, perhaps like the Federal Reserve’s Term Asset-Backed Loan Facility (TALF) program. Like banks jacking up credit card interest rates, gambling addicts become increasingly desperate for money to fund further gambling. The debts of gambling addicts may increase sharply, reflecting a “bet more, win more” mentality that inevitably leads to the gambler going bust. Gambling addicts seek money with increasing desperation, perhaps like former US Treasury Secretary (and former Chairman and Chief Executive Officer of Goldman Sachs) Henry M. Paulson’s dire warnings of financial Armageddon in 2008. Items easily sold or pawned for money may mysteriously disappear, perhaps like the US government’s Fort Knox gold, which is surrounded by rumors and speculation that a long sought (e.g., by the Gold Anti-Trust Action Committee) independent audit could easily dispel.

    The Alcoholics
    The original Twelve Steps published by Alcoholics Anonymous include admitting that one’s life, or in this case the US economy has become unmanageable and that a power beyond one’s self (i.e., beyond current economic theories and government policies) is necessary to restore sanity. Contrary to the views of current Goldman Sachs CEO Lloyd Blankfein, the Higher Power cannot be one’s self.  The self regulating dynamics of a free market, for example would certainly adjust US housing prices to sustainable levels and promote sound lending standards, but this has been prevented by the interventions of the Federal Reserve and US government. Not coincidentally, it was the Federal Reserve and the US government, respectively, that originally caused the inflation of housing prices and undermined lending standards.

    Breaking the grip of alcohol addiction requires a searching and fearless moral inventory, admitting the exact nature of one’s wrongs, and an unreserved willingness to change and to make amends with those who have been harmed. Sadly, neither the Federal Reserve, nor Wall Street bankers, nor the US Congress, which is committed to borrowing its way out of debt, seem likely to repent.

    The destructive behavior of alcoholics is often enabled by dysfunctional, co-dependent relationships. A dysfunctional relationship is one that creates more emotional turmoil than satisfaction, or in the case of the US economy, more destruction of wealth than creation. Warning signs of a dysfunctional relationship include, for example, addictive or obsessive attitudes, an imbalance of power, or a superiority complex on the part of one person. Co-dependency is a pattern of detrimental behavioral interactions within a dysfunctional relationship, most commonly a relationship with an alcohol or drug abuser, but equally possible in a relationship with a gambling addict. The co-dependent is a person who perpetuates the addiction or pathological condition of someone close to them in a way that impedes recovery.

    The US government appears trapped, together with the Federal Reserve and Wall Street banks, in a destructive web of dysfunctional, co-dependent relationships. The US government is addicted to the easy money created by the Federal Reserve at the expense of taxpayers who eventually suffer a loss of purchasing power. According to Mr. Greenspan’s 1966 article Gold and Economic Freedom, “deficit spending is simply a scheme for the confiscation of wealth.” Wall Street bankers depend on US government bailouts and guarantees, as well as on the Federal Reserve’s lax monetary policy, and the Federal Reserve depends directly on the US government for the legalization of its unaccountable monopoly and indirectly on the continuation of the largest US banks. While a dysfunctional triangle of co-dependency is merely descriptive, the interdependence of the Federal Reserve, the largest US banks and the US government is a fact in reality.

    Unfortunately, it is no more possible to spend one’s way to prosperity or to borrow one’s way out of debt than it is to drink one’s self sober. Nonetheless, thanks to the Federal Reserve’s 7 day per week, 24 hour per day money printing service, the US government plans to do precisely this. If creating wealth were as simple as printing money, the dominant school of economics would be led by Robert Mugabe, President of Zimbabwe, and Gideon Gono, governor of Zimbabwe's Reserve Bank (and winner of the 2009 Ig Nobel Prize in Mathematics), who share with Mr. Bernanke a love for the feel of crisp paper and for the smell of fresh ink.
     As Milton Friedman once said “The real problem with government is not the deficit.  The real problem with government is the amount of our money that it spends.”

    The wealth destroyed by the collapse of the US real estate bubble and the stock market crash of 2008 has not been and cannot be brought back by bailouts, stimulus spending or outright money printing. While averting a deflationary spiral is necessary, propping up asset prices by dropping money from a helicopter redistributes wealth and interferes with the price mechanism of the free market. Devaluing the US dollar may help to hold up asset prices but it also prevents housing prices from falling to sustainable levels while at the same time adding the risk of eventually far higher prices, or, in the worst case, hyperinflation. There is no historical example of a successfully re-inflated economic bubble. What is more important, however, is that the unintended consequences of currency debasement, i.e., the result of an inflationary monetary policy marked by near 0% interest rates, are likely to outweigh the goals of the policy even if they are achieved.

    Reducing the value of debts in real terms through currency debasement requires a commensurate loss of purchasing power, thus while housing prices may be prevented from falling further, savings will be destroyed and wages will lag behind prices once they inevitably begin to rise. Although consumer prices in the US currently lag behind the downtrend of the US Dollar Index (USDX), an inflation tax will eventually be levied. Under the name “economic stimulus”, wealth is being dissipated by the US government at an alarming rate with no sustainable benefit. US government programs like Cash for Clunkers only impact short-term economic data while, in reality, destroying wealth, increasing debt and diverting consumer spending into already bankrupt industries. At the same time, the US government is eager to increase tax revenues to offset deficit spending and it has all manner of businesses, as well as wealthy individuals in its crosshairs. German-born Presbyterian clergyman William Boetcker (1873-1962) wrote:

    “You cannot bring about prosperity by discouraging thrift. You cannot help small men by tearing down big men. You cannot strengthen the weak by weakening the strong. You cannot lift the wage-earner by pulling down the wage-payer. You cannot help the poor man by destroying the rich. You cannot keep out of trouble by spending more than your income...”

    Boetcker’s words are profound. It is not possible to repair the US economy through stimulus spending or to increase the wealth of consumers by inflating asset values via currency debasement. Supporting asset prices, thus bank balance sheets, via currency debasement, in the best case, can spread debt defaults over time, perhaps delaying the collapse of bankrupt financial institutions. However, currency debasement promises to move Americans closer to the financial status of Zimbabweans due to the destruction of the purchasing power of the US dollar. A less valuable US dollar will reduce consumer spending in real terms, and reduced consumer spending will impact businesses and, therefore, jobs.

    The US Dollar and Gold
    The price of gold indicates a lack of confidence in the US dollar and in the US economy and it reflects poorly on the credibility of the Federal Reserve and of the US government. The changing composition of central bank reserves, e.g., increasing gold holdings, is a direct effect of the currently weak US economy and US dollar, which has lost considerable value in recent months.  In contrast, gold is the only financial asset, in fact a currency that has no counterparty risk. This simple, but often overlooked fact goes a long way to explain current investment demand for gold.
                                                    Chart courtesy of StockCharts.com

    All other things being equal, strong economies offer investors superior returns and lower risk compared to weak economies, thus the currencies of stronger economies are always preferred over those of weaker ones and have a higher relative value as a function of supply and demand.  Of course, monetary inflation and monetary deflation also influence the value of a currency in terms of supply.

    In a world financial system composed entirely of fiat currencies, where no currency is redeemable in terms of hard assets, money is an abstract claim on production and the value of one national currency relative to another can only, ultimately be a reflection of the performance of the underlying economy that the currency represents (performance being inclusive of the consequences of its monetary policy), i.e., a claim on its production.  Thus, if an economy is in decline, i.e., its production is falling, its currency, over time, must also decline.  Conversely, there can be no doubt that if the US economy were exhibiting credible and significant growth, i.e., if production were increasing, the US dollar would certainly gain value, but that is not the case.     
                                                    Chart courtesy of StockCharts.com

    The fact that central banks are reducing US dollar holdings and increasing holdings of other currencies, including gold, is simply a matter of preserving the value of their reserves in the face of developments influencing the value of the US dollar, such as the burgeoning US dollar carry trade.  Having gone “all in” to save the largest banks, the Federal Reserve and US government continue to assume that the crisis can be managed, despite the fact that their policies are making the situation worse in terms of sustainable housing prices, public debt and the value of the US dollar. In the mean time, Wall Street bankers have gone back to the casino, nonchalantly cashing in their bailout chips and pocketing the gains.

    The rationale of buying time for US banks and of supporting US real estate prices seems reasonable on its face but this probably doomed policy is already proving counterproductive. Despite the patina of economic recovery sprinkled over the news media like fairy dust, small business and commercial real estate failures, as well as ongoing residential mortgage and credit card defaults, are rippling through the weak US economy, while unemployment continues to rise undermining consumer spending thus, ultimately, bank balance sheets. Setting aside the understandable reluctance of US banks to make new loans, no amount of tenuous good news, no matter how exaggerated, has been able to rekindle the frenzy of consumer borrowing that formerly characterized the US economy.

    The illusion of control is a temporary state of affairs. The triangle of dysfunction and co-dependency formed by the Federal Reserve, Wall Street banks, and the US government is like a story about a madman, a gambler and an alcoholic, where each traps the others in their respective downward spirals. The illusion of control, common to all three, is gradually bringing about a situation that will inevitably be entirely out of control, but, as with gambling addicts and alcoholics, the point where control is lost can only become apparent after the fact, just as the financial crisis of 2008 caught the vast majority of experts by surprise.

    Investors, governments and central banks around the world are seeking safety outside the US dollar, particularly in gold, as well as outside of the US stock market, e.g., in emerging economies. The more borrowed money the US government spends, the more money the Federal Reserve prints and the longer zombie banks are kept on life support, the worse the eventual condition of the US economy, the weaker the US dollar and the higher the price of everything in US dollars will ultimately be, particularly gold.

    Disclosure: Long gold
    Tags: CEF, DGL, DGP, DGZ, DZZ, GBS, GLD, IAU, USDX, US dollar, US economy, Federal Reserve, Goldman Sachs, Lloyd Blankfein, Ben Bernanke, Alan Greenspan
    Dec 01 09:37 am | Link | Comment!
  • Ganesha and the Price of Gold (Current Gold Price Is Not a Bubble)
     
    GaneshaThe fact that investors around the world are turning to gold is remarkable. Unlike a bond, stored gold offers no yield and, unlike a stock, gold provides no leverage to the performance of an enterprise. Buying gold is not an investment per se, compared, for example, to buying a gold mining stock, where a company’s financial performance is linked to its resources and production, at the same time providing leverage to the gold price. In fact, industrial applications for gold consume far less than the annual supply, thus investing in gold is fundamentally different from other commodities. According to the World Gold Council (WGC), investment demand for gold, e.g., from Exchange Traded Funds (ETFs), was up 46% in the third quarter of 2009.

    Gold is commonly viewed as an inflation hedge and, because it is the only financial asset with no counterparty risk, as a safe haven, but the spectacular rise in the gold price indicates more than caution on the part of investors. Gold hit a low of $713.50 per troy ounce on November 13, 2008 (London Bullion Market Association PM Fixing) and closed at a 52-week high of $1,115.25 on November 11, 2009, up an astounding 56.31% from its 52-week low.
     
    Chart courtesy of StockCharts.com

    Central bank gold is the proverbial elephant in the room that no one wants to talk about. With official gold holdings of 29,633.9 tonnes of gold worldwide, compared to world gold production of roughly 2,400 tonnes per year, central bank gold sales, leases and purchases, have a huge influence over the gold price. Central banks are changing their reserve asset compositions and a number of central banks, led by India and China (which has been the world’s largest gold producer since 2008), are buying gold. Evidently, the full faith and credit of the United States of America isn’t what it used to be. Faced with a weakening world reserve currency, the questionable status of the world’s largest economy, and unsustainable US government spending, central banks are rendering a quiet vote of no confidence on the US dollar.

    The US economy, the US government, US banks, and US stock markets exhibit various problems including unemployment, looming commercial real estate defaults, the US budget deficit, a massive public debt and huge unfunded liabilities, residual toxic assets on bank balance sheets, mounting mortgage defaults and credit card delinquencies, an emerging stock market bubble, etc. Unless the economic problems of the US can be addressed, the US dollar will quite probably loose its status as world reserve currency. Whether a transition to a new world reserve currency would take place in a cooperative manner, e.g., a managed retreat of the US dollar, or in a more disruptive way is unclear.

    Gold Supply and Demand in 2009
    Under ordinary economic conditions, a rising gold price might reflect, for example, increased demand, the effects of currency debasement or inflation expectations, but a sustained rise in the gold price characterized by growing global investment demand indicates something more. New York University Professor of Economics Nouriel Roubini has suggested that commodity prices reflect an emerging global asset price bubble fueled by the fast-growing US dollar carry trade. While Professor Roubini’s ”mother of all carry trades“ thesis accounts for the effects of low US interest rates driving global speculation and a decline in the US dollar, it does not specifically consider gold, which has unique supply and demand characteristics.

    Based on data provided by the WGC, Gold Fields Mineral Services Ltd. (GFMS), and the US Geological Survey, the world gold supply is expected to be approximately 2,400 tonnes in 2009. Gold demand is expected to exceed supply by roughly 1032 metric tonnes (1 metric tonne is the equivalent of 32,150.7466 troy ounces), a large shortfall equal to 43% of the gold supply.

    Assuming the average decline in industrial consumption for all of 2009, compared to 2008, will be roughly the same as that of the most recent quarter:
     
    • The jewelry industry, by far the largest industrial consumer of gold, is expected to consume roughly 1,705 tonnes of gold by the end of 2009. Jewelry demand was down 22% in the third quarter and is expected to account for only 71.04% of the 2009 gold supply.
    • The electronics industry, where consumption was down 25% in the third quarter, is expected to consume roughly 76.1 tonnes of gold by the end of 2009.
    • The field of dentistry, where consumption was down 11% in the third quarter, is expected to consume roughly 49.75 tonnes of gold by the end of 2009.
    • For all other industries, where consumption was down in the third quarter an average of 9%, total consumption is expected to reach 79.08 tonnes of gold by the end of 2009.
     
    Total industrial demand is, therefore, expected to reach 1,909.93 tonnes of gold by the end of 2009, or approximately 79.58% of the estimated 2009 gold supply.

    Although gold is not actually circulated as money, gold coins and bullion bars are in high demand and investment demand was up 46% in the third quarter. Investment demand is expected to account for roughly 1,727 tonnes of gold in 2009, an amount that exceeds the demand of any single industry.

    Outside of the electronics industry, where scrap gold recovery is high, and the field of dentistry, gold is not typically consumed destructively. As a result, unlike any other commodity, the vast majority of gold mined throughout history, estimated at 162,780 tonnes by the end of 2009, remains in existence today.

    Central Bank Gold and the US Dollar
    Despite the fact that it is not generally used as money, gold is held by central banks as a currency reserve and official central bank gold holdings amount to 29,633.9 tonnes worldwide. Official gold holdings represent roughly 18.2% of all gold ever mined and the expected 2009 gold supply is equivalent to roughly 8.1% of official gold holdings.

    Since gold no longer served an official monetary purpose after 1971, which marked the end of the Bretton Woods system, central banks began to sell and to lease gold based on their individual requirements and continued to do so until 1999. Prompted by the UK Treasury’s planned sale of 415 tonnes of gold (58.04% of UK gold reserves at the time), the Washington Agreement on Gold was established in 1999 to maintain the value of remaining central bank gold reserves by coordinating central bank gold sales. Under what is now the Central Bank Gold Agreement (CBGA), central banks have sold gold in limited quantities (400 tonnes annually between 1999 and 2004, 500 tonnes annually between 2004 and 2009, and 400 tonnes in 2009). However, official sales do not account for gold leasing.

    Central banks lease gold to earn interest thus offsetting storage costs by leveraging what had been until this year an otherwise marginalized financial asset to generate cash flow. Rather than borrowing cash at higher interest rates, gold producers, for example, may lease gold and sell it to raise cash, paying the lessor in physical gold from future production. Gold dealers may wish to lease gold in order to cover derivative positions, such as options or futures, either paying the lessor in physical gold or settling contracts in cash. In cases where leased gold is sold by a lessee into the open market, the gold supply is affected, which might affect the gold price. Although gold lease rates, which have been historically lower than interest rates, and central bank participation in gold leasing arrangements are documented by the London Bullion Market Association (LBMA) and other organizations, gold leasing remains an unregulated market. Since gold leases can be settled either in gold or in cash, it is difficult to calculate the effects of gold leasing on the supply and demand dynamics of gold or on the gold price. In any case, since 2008, central banks have reduced gold leasing at traditionally low rates, e.g., rates below 1%.

    What is more important is that central bank gold sales had begun falling short of the annual sales allotment of the CBGA in 2006, declining to an estimated 345.5 tonnes in 2008. Since 1999, the gold supply has averaged approximately 2495 tonnes per year, while central bank gold sales through 2008 averaged an estimated 394 tonnes, equivalent to 15.8% of annual supply on average. In 2009, however, central banks became net buyers of gold and some central banks began to repatriate gold reserves. China, for example, began adding gold to its reserves and India recently agreed to purchase 200 tonnes of gold from the International Monetary Fund (IMF).

    Setting aside gold leasing, central bank gold sales, having effectively added an estimated 15.8% annually to the gold supply for the past decade, can only have had a dampening effect on the gold price and as well as on gold investing. Therefore, the effect of central banks rather suddenly switching from net sellers of gold to net buyers of gold is equivalent to a reduction in the 2009 gold supply of approximately 15.8%.

    In addition to the projected 43% shortfall in the 2009 gold supply, the US dollar’s precipitous decline led to a rise in commodity prices across the board. The US Dollar Index hit a 52-week low of 74.93 on November 9, 2009, down approximately 16.39% from its 52-week high of 89.624 on March 4, 2009.
     
    Chart courtesy of StockCharts.com

    Demand for gold in 2009 is expected to exceed the supply by 43%, including a reduction in supply of approximately 15.8% due to the effective termination of central bank gold sales, while the US dollar is down approximately 16.39%. At the same time, there has been a fundamental shift in central bank policy. Eastern central banks in particular, led by India and China, are buying gold, while Western central banks have cut back gold sales and have reduced gold leasing at traditionally low rates.

    Setting a Gold Price Target
    The 16.39% decline of the US dollar tends to be reflected rather directly in commodity prices, thus the gold price, considering that the demand for gold is global, could reasonably be expected to rise approximately 16.39% from its 52-week low in 2009 based solely on the decline in the US dollar.

    The effect on the gold price of the 2009 supply shortfall of 1032 metric tonnes could be extraordinary if obvious shortages were to occur, or it might be nominal if consumers of gold were to substitute another commodity, e.g., silver. Substitution, however, seems very unlikely both in terms of industrial uses for gold and in terms of investment demand. Thus, a naive estimate of the impact of the supply shortfall on the gold price might assume that the gold price would rise no more than the shortfall in supply, i.e., by no more than 43% (inclusive of the estimated 15.8% reduction in supply due to the effective termination of central bank gold sales and setting aside entirely the subject of gold leasing).

    Combining the 16.39% decline of the US dollar and the estimated 43% shortfall in supply might suggest a gold price approximately 62.6% higher than the 52-week low of $713.50 (London PM Fix), which occurred on November 13, 2008, 1 year ago, i.e., a naive price target of 1,160.15 as of November 2009. The 52-week high of $1,115.25 on November 11, 2009 was approximately 56.31% higher than the 52-week low, thus the actual gold price at that point was lower by roughly 6.29% compared to the 52-week low than the naive price target of 1,160.15. Based on these estimates, the gold price does not seem to indicate an asset price bubble.

    Which Way is the Elephant Going?
    The proverbial elephant in the room is on the move and the room is not very big in comparison. It seems likely that Western central banks are holding off further gold sales, at least while discussions on a new world reserve currency, i.e., IMF Special Drawing Rights (SDRs), are taking place. Led by India and China, key IMF members want gold included as a component of the a world reserve currency. As long as using gold as a component of a new world reserve currency is a possibility, not only are central bank gold sales on hold but central banks will almost certainly continue to buy gold in the foreseeable future.

    There is no fundamental reason for the current gold price trend to reverse in the foreseeable future, and, despite the steep rise of the gold price in 2009, gold does not appear overvalued. It seems possible, although unlikely, that if gold were to again be marginalized in a new world reserve currency regime, as it was under the US dollar standard after 1971, central banks might again start selling and more aggressively leasing gold at some point in the distant future. In that case, the gold price would eventually fall, perhaps to some stable, lower level, once again reflecting the conflicting desires of central banks to both leverage their gold reserves and also maintain their value. However, given the global financial crisis stemming from of the US dollar’s 64-year reign as world reserve currency, it seems much more likely that central banks will guard their hoards jealously in coming decades.

    Alternatively, if a new world reserve currency were to emerge having a significant gold component, what would then be a certainly higher gold price would likely remain at a higher level indefinitely. It also remains possible that the decline of the US dollar could accelerate or that the apparent differences between Eastern and Western central banks could become more acute, in which case the gold price could rise more rapidly and the process of deploying a new world reserve currency might be accelerated as well as potentially disruptive.
     
    The Hindu deity Ganesha, widely revered as the Remover of Obstacles, is readily recognizable because he has the head of an elephant. Gold languished from 1971 until 2009 as a commodity that central banks had little better to do with than to systematically dissipate through sales and leases, while the most significant problem they thought they faced was the risk of dishoarding too much too quickly. From 1971 until 2009, central bank gold entering the market was a factor of the gold price and a risk for investors. After 38 years, the effective termination of central bank gold sales has rather abruptly removed that obstacle.

    Desiring to mitigate risks associated with the US dollar, central banks, led by India and China, have, in effect, promoted gold from its 38-year status as a non-financial commodity once again to its historical role as the premier global financial asset. This historic change in central bank policy signifies a profound break with the past and broadcasts a clear message: gold is a world-class financial asset fairly valued at more than $1,000.00 per troy ounce. With this momentous event, the words “as good as gold” again have meaning.

    An analysis of supply and demand fundamentals suggests that the current gold price does not indicate an asset price bubble, and the historic change in the status of gold by central banks implies a major revaluation not yet reflected in the gold price. As the restructuring of the global economy continues, particularly with respect to the world reserve currency, there is a clear possibility that the gold price will move up sharply from current levels.

    Tags: GBS, GLD, IAU, CEF, DGL, DGP, DGZ, DZZ, Gold, US dollar, USDX, IMF, SDR, central bank, gold lease, CBGA, LBMA, USGS, GFMS, ETF, Federal Reserve, US economy, Bretton Woods
    Nov 13 08:30 pm | Link | Comment!
  • China’s Dragons: Oil, Gold, and the US Dollar
    The end of the de facto petrodollar standard has profound and lasting implications for the US dollar, oil, and gold. The US is the epicenter of the global financial crisis and economic downturn, but the US continues to exercise disproportionate control of the oil trade and to enjoy the unique status of the US dollar as the world reserve currency. The inflationary policies of the US government and Federal Reserve have damaged the US dollar to the point that it is increasingly seen as a destabilizing force in the world economy. To make matters worse, it was principally the US that manufactured the financial derivatives that still menace the global financial system (China has opted out). There is growing recognition that the US economy is on an unsustainable course and this fact has fueled an international movement towards a new world reserve currency.
     
    China has emerged as a major player in the currency chess game and in the gold market, and China is the second largest consumer of oil. China is the largest US creditor holding $797.1 billion in US Treasury debt and a net creditor nation with reserves equal to $2.273 trillion. Nonetheless, China is leading the charge against the petrodollar standard and the US dollar’s privileged status as the world reserve currency. China is not merely seizing the opportunity presented to it by the global financial crisis but is pursuing an ongoing economic strategy that includes a larger domestic market for its own goods and services, greater influence over the global economy, a stronger yuan, and a secure energy supply.
     
    “The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy. To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.” – Sun Tzu, The Art of War, circa 610 BCE
     
    Developing and implementing a new world reserve currency is a nontrivial proposition and it will take time.  However, in practical terms, the key factor that stands in opposition to a new reserve currency is the petrodollar standard. The petrodollar standard allowed the US to print vast quantities of US dollars without high domestic price increases because steady international demand strengthened the US dollar, thus moderating prices in the US, e.g., the prices of oil and of gold. The petrodollar standard, which can be undone in a relatively short period of time, is the Achilles’ heel of the US dollar’s world reserve currency status. What is more important, however, is that ending the petrodollar standard will put massive upward pressure on prices in the US: a fact that few have recognized.
     
    While the US monetary base has roughly doubled since the start of the financial crisis in 2008, the money created to recapitalize US banks remains in the banking system and has yet to influence prices in the US (aside from the prices of inflation hedges such as gold and silver, which are in high demand). The most broad measure of the US money supply (M3), no longer officially measured, has actually declined according to Berkeley, California-based Shadow Government Statistics. Thus, the most useful monetary inflation analysis is that of Paul van Eeden, President of Cranberry Capital, Inc.  Mr. van Eeden’s Actual Money Supply (AMS) model indicates a 12-month moving average of 8.44%.
     
    Chart courtesy of Paul van Eeden
     
    The average monetary inflation rate, estimated at approximately 8% per year over the past 38 years, compounded annually, shows that the US money supply increased by roughly 1,863% since 1971. However, according to the US government, prices in the US have increased only 533% since 1971, a 1,330% differential. The number of US dollars exploded on a global basis to accommodate the growth in US dollar transactions, i.e., international trade, especially oil, and currency reserves.
     
    China is the second largest US trading partner and the primary source of the chronic US trade deficit. As trading partners, the Chinese and US economies are linked by the US dollar, but compete for oil, currently priced in and purchased with US dollars. China needs more oil and wants to buy it with Chinese yuan. By buying gold and encouraging gold ownership, the Chinese government is betting against the US dollar and positioning the yuan to become a universally accepted transaction medium. China is quietly diversifying out of US dollars, buying resources and hard assets. Ending the petrodollar standard will allow China to buy oil in yuan and make the yuan a more viable currency internationally while, at the same time, clearing the way to take on a larger role in the global economy.
     
    Currencies are being debased throughout the western world in the hope of saving banks, stimulating economic activity and restoring trade. Until the US reverses course, or until a new reserve currency is in place, gold will continue to shine. Gold investment and central bank demand will likely remain strong because gold can function as a commodity, as a currency and also, unlike the US dollar, as a store of value immune from the hazards of currency devaluation caused by monetary inflation. As the only financial asset without counterparty risk, the historical reasons for holding gold, all but forgotten during the 1990s, have never been more clear.
     
    The end of the petrodollar standard and eventually of the US dollar’s world reserve currency status combined with increased demand for oil and gold, particularly on the part of China, is a fundamental restructuring of the global economy already in progress.
     
    US Dollars, Asian Tigers
    While commodity prices, measured in US dollars appear to be rising, one of the fundamental forces behind the upward trend is the decline of the US dollar. Commodity prices are not rising as much in real terms as is suggested by their nominal prices because the US dollar is declining in value. As the US dollar falls, the prices of commodities, measured in US dollars, rise.
     
    The perfect storm for the US dollar comprises the consequences of past decades of monetary inflation punctuated by the dot-com and housing bubbles; excessive levels of debt in the US economy (hampering a US economic recovery); the poor condition of US banks whose balance sheets, still burdened with toxic assets, continue to deteriorate; an expanding Federal Reserve balance sheet that includes toxic assets; extraordinary spending by the US federal government driven by Keynesian economic policies and by what are most probably economically unworkable socialist programs; rapidly declining foreign appetite for US debt; quantitative easing (“money printing”); near 0% interest rates and a growing US dollar carry trade; not to mention the imminent end of the petrodollar standard, and the eventual end of the US dollar’s status as the world reserve currency. At the start of the global financial crisis and economic downturn, the US dollar rallied in a global flight to the then perceived safety of US dollars and US Treasury bonds. However, pressures on the US dollar have mounted and it has begun a precipitous decline.
     
    Chart courtesy of StockCharts.com
     
    What is important about the US Dollar Index (USDX) is that other currencies in the basket (the Euro, the Japanese yen, the British Pound, the Canadian dollar, the Swedish krona, and the Swiss franc) are also loosing value as a result of inflationary central bank and government policies, but not as quickly as the US dollar.
     
    The USDX was created in 1973, two years after the US dismantled the Bretton Woods system (where the value of the US dollar had been  pegged to the price of gold and other currencies were pegged to the US dollar) and one year after former US President Richard Nixon opened relations between the US and China. Today, the sleeping giant, noted by Napoleon, is wide awake, and Asian currencies are rising against the US dollar. China is issuing yuan denominated bonds and growing Asian demand for key commodities, particularly oil, can be expected to maintain upward pressure on prices measured in US dollars.
     
    The economic might of the four Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) would have been inconceivable when the USDX was created.  Today, the Group of Twenty (G-20) Finance Ministers and Central Bank Governors includes representatives from China, India, Japan, South Korea, and Indonesia, and the International Monetary Fund (IMF) includes the so-called BRIC countries (Brazil, the Russian Federation, India, and China) in addition to Japan and oil producers Saudi Arabia and Venezuela. Whether the USDX remains today an accurate or meaningful measure of US economic power from a global perspective is unlikely. In any case, US and European economies and banks are currently in quite poor condition compared to those of Asia; a fact that does not support rising currency values for western countries.
     
    China’s population of 1.333 billion, compared to roughly 308 million in the US, represents the largest emerging market in the world, and China’s already substantial consumption of resources is growing rapidly. With a population 4.3 times larger than that of the US, Chinese consumption need reach only 23% of that of the US, on a per capita basis, to equal total US consumption. Conversely, if the Chinese were to consume half as much as Americans on a per capita basis, total Chinese consumption would be more than twice that of the US. Changes in the behavior of Chinese consumers already have the potential to create disruptive shifts in commodity markets on a global basis, and China’s rising influence is only just beginning to be felt, e.g., in the gold market.
     
    The S&P Goldman Sachs Commodity Index (GSCI), which contains 24 commodities (including energy, industrial and precious metals, agriculture, and livestock), is designed to minimize the impact of events that affect individual commodities and to respond in a stable way to world economic growth.
     
    Chart courtesy of StockCharts.com
     
    Interestingly, from a technical perspective, the GSCI chart exhibits a clear inverse head and shoulders pattern followed by a breakout to the upside. Spurred by the financial crisis, China began putting its massive reserves to work in wide ranging global investments, systematically trading its US dollars for resources and other hard assets. 
     
    China’s Seven Dragons
    The five dragons of the ancient Chinese zodiac (fire, earth, metal, water, and wood) are suggestive of China’s tremendous natural resources, which include coal, iron ore, oil, natural gas, mercury, tin, tungsten, antimony, manganese, molybdenum, vanadium, magnetite, aluminum, lead, zinc, uranium, as well as the world's largest hydropower potential.
     
     
    Chart courtesy of Mint Software, Inc.
     
    Together, Asian countries account for 60% of the earth’s human population and control major portions of world resources such as corn, cotton, gold, rice, rubber, silver, water, and wheat to name only a few.
     
    If the Chinese calendar had been invented more recently it might include more specific varieties of each animal, such as a gold dragon in the metal category and an oil dragon in the earth category, thus there would be seven celestial dragons rather than five. 
     
    The Oil Dragon
    Total Asian demand for oil, lead by China’s 7,880,000 bbl/day, exceeds US consumption. In fact, the consumption of just China, Japan, and the four Asian Tigers is greater than that of the entire EU. Taken as a whole, Asian demand for oil is more significant for the price of oil than the US or the EU. The price of oil in 2009 has risen as Asian economies began to recover, despite lower US consumption. Rising Chinese demand for oil is now a fixed feature in the otherwise changing global economic landscape. A weaker US dollar and a stronger Chinese yuan serve to guarantee that China will have the oil it needs.
     
     
    Although not as hard hit by higher oil prices as less developed countries (which could be priced out of the market entirely) would be, the US economy could be crippled by high oil prices. As shown by the West Texas Intermediate Crude Oil index (WTIC), the price of oil is rising sharply.
     
    Chart courtesy of StockCharts.com
     
    Both the US and China import roughly twice as much crude oil as they produce. With a weaker dollar, US oil imports, currently roughly $400 billion annually, will represent a larger external drain on the US economy, which could prove to be disruptive. The reactionary US strategy is to increase domestic oil production and to develop alternative energy sources in order to reduce dependency on foreign oil. Unfortunately, US oil production cannot increase quickly enough or to high enough levels to ameliorate the impact of much higher oil prices. Presently, there is no alternative energy technology that can supply enough energy at a low enough cost to have a significant impact on US oil consumption in the near term. An anemic US economy combined with a weaker currency means that the US is ill equipped to absorb inevitably, much higher oil prices. 
     
    The Gold Dragon
    Oil is the most important factor of the US dollar’s value for two reasons. Since the founding of the Organization of the Petroleum Exporting Countries in the 1960s (currently Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela), oil has been priced in and sold in US dollars worldwide. Since the Bretton Woods system ended, the effect of the OPEC cartel’s price fixing actions has been to establish an implicit commodity-based value for the US dollar. In other words, after the Bretton Woods system, the value and the world reserve currency status of the US dollar was implicitly supported by oil rather than gold. Any nation accepting US dollars in trade knew what the value of US dollars was measured in oil.
     
    Once oil is no longer priced in US dollars, the US dollar, in practical terms, will no longer be the world reserve currency, i.e., US dollar transactions will decline sharply on a global basis. This conclusion has already been recognized by central banks. In the second quarter of 2009, US dollars accounted for only 37% of new central bank assets, compared with 70% in the past. Rather than US dollars, central banks favor Euros, Yen, and gold. Central banks have also become net buyers of gold or are repatriating gold reserves.
     
    Following the replacement by Iran (the third largest oil producer) of the US dollar with Euros for foreign trade in September, 2009, rumors emerged of secret talks between Arab states, China, Russia, Japan and France, allegedly regarding replacing the US dollar with a basket of currencies including the euro, Japanese yen, Chinese yuan, and gold. Talks between Russia and Iran regarding conducting oil transaction in rubles were officially acknowledged a few days later by Russian Information Agency Novosti (RIA Novosti). Neither development is at all surprising because world leaders have been calling for the replacement of the US dollar as the world reserve currency since 2008. It’s safe to say that all of the BRIC nations, especially China and Russia (the world’s 8th largest oil producer), oppose the petrodollar standard and are in favor of a new reserve currency (Brazil’s largest trading partner, formerly the US, is now China).
     
    It seems unrealistic to imagine that currencies tied to growing economies with higher production and lower levels of debt would not be preferred over those of stagnated economies. If political strength follows economic strength, the petrodollar standard will soon take its place in history alongside the defunct Bretton Woods system.
     
    Setting aside all other considerations, the price of gold would be $815 per ounce today based only on US dollar monetary inflation using Paul van Eeden’s AMS model, i.e., 30% below the spot price (approximately $1,060 US at the time of this writing). Mr. van Eeden has accounted for the increase in gold over time.
     
    Chart courtesy of StockCharts.com
     
    It is worth noting that the price of gold, when adjusted for inflation, is nowhere near its 1980 peak. The current situation is fundamentally different from the brief but acute 1980 gold price bubble. John Williams of Shadow Government Statistics maintains that the US government has understated inflation and recently said that “If the methodologies of measuring inflation in 1980 had been kept intact, gold [adjusted for inflation] would have to hit $7,150 to be the equivalent of the 1980 record,”
     
    According to data from the World Gold Council (WGC) and metals consultancy GFMS, demand for gold is currently greater than the supply by as much as 1000 tons per year.  The WGC and GFMS have correctly identified two distinct economic spheres comprising gold supply and demand. In the western economies, jewelry and industrial demand are weak, but investment demand is strong, while outside the western economies broad gold demand continues to grow. India remains the largest buyer, while gold demand in China is rising. China has been aggressively adding gold to its reserves and has not only made it legal for Chinese citizens to own gold but is encouraging gold ownership. The potential influence of increased, long-term Chinese demand on the price of gold cannot be ignored.
     
    Monetary inflation and supply and demand considerations are not the whole picture. There is a much deeper reality. For nearly four decades, gold, priced in US dollars, was implicitly linked to oil and the resulting demand for US dollars moderated the affects of monetary inflation on prices in the US. The end of the petrodollar standard and the resulting global decline in demand for US dollars will cause the price of gold to rise significantly. The value of the US dollar changed qualitatively after 1971 when it became an irredeemable pure fiat currency, no longer backed by gold; a fact that has been masked by the petrodollar standard.
     
    Higher demand for gold also reflects a growing recognition that the US dollar and other currencies currently being devalued are not reliable stores of value. In fact, the US dollar has not been a store of value at all for 38 years during which massive quantities of fiat money, including trillions of petrodollars, flooded the global economy. The weakness of the US dollar exposed by the financial crisis, i.e., its inability to function as a reliable store of value regardless of its utility as a transactional medium, points exactly to the strength of gold. The decline in international demand for US dollars, rejected as a failed store of value, indicates strong demand for gold in the foreseeable future.
     
    18th-century French philosopher and writer Voltaire once said that “paper money eventually returns to its intrinsic value - zero”. Understandably, Voltaire failed to consider a world where all money was purely transactional rather than a store of value, and where the relative values of currencies were managed in a loosely coordinated manner by central banks and governments through manipulation of the money supply, interest rates, etc. In theory, such a world could function indefinitely provided that currencies were relatively stable; provided that currencies were widely accepted and interchangeable; provided that large trade imbalances did not destabilize the system; and provided that currencies were not debased excessively, i.e., in a reckless or irresponsible manner, which would lead to a variety of economic problems. However, Voltaire’s inability to imagine such a world may be insufficient cause to dismiss his observation.
     
    It seems possible that Voltaire’s superficially antiquated understanding was precisely that “paper money” can never function in the long run as a store of value, i.e., that it will inevitably, either by accident or by design, be mismanaged, and that it will always, eventually, be rejected, thus rendering its intrinsic value clear. History certainly supports Voltaire’s view in that fiat currencies tend to perish. As recently as 1999, referring to the sale of British gold reserves, Alan Greenspan, then Chairman of the US Federal Reserve, said that “Fiat money paper in extremis is accepted by nobody. Gold is always accepted.” As the Chinese discovered in the 11th century, money has a qualitative dimension and for “paper money” that dimension is confidence. In contrast, because it is a tangible asset that required an investment of human labor and other resources to produce, the value of gold does not ultimately, in extremis, depend solely on the unreliable subjective feeling of confidence. 
     
    Xiangqi (Chinese Chess)
    There is increasing international recognition of the fact that there is no foreseeable end point to the devaluation of the US dollar. The inflationary policies of the US federal government and Federal Reserve have all but exhausted confidence in the US dollar both at home and abroad, above all as the world reserve currency. This entirely rational loss of confidence is the root cause of expanding multinational efforts to end the petrodollar standard and to eventually establish a new world reserve currency.
     
    A reversal of the escalating challenge to the petrodollar standard and the movement away from the US dollar as the world reserve currency would require oil producers and industrialized nations, including China, to rally in support of the US, but it is precisely this group (a group that includes OPEC members, the BRIC countries, members of the G-20, and voting members of the IMF), that is seeking to free itself from US dollar hegemony. Rather than attributing the petrodollar standard and the status of the US dollar as the world reserve currency to the wealth, power and influence of the US, critics assert that the wealth, power and influence of the US is illegitimate and that it is the result of undeserved privileges; privileges that have been abused at the expense of nations that do not enjoy unfair advantages and that must now be forfeited.
     
    Skeptics regarding the rise of China as a major economic power doubt that China can profit from a weaker US dollar through a stronger yuan or develop a sufficient domestic consumer market quickly enough to offset reduced exports. However, while China contributes to US consumption as an export-dependent supplier, as well as a financier, their exposure to losses resulting from a declining US dollar is limited. A stronger yuan would mean that, after a period of adjustment, China would import more goods and services and that, in real terms, wages of Chinese workers would increase, thus supporting a higher standard of living. What is more important is that a stronger yuan, implicitly backed by growing gold reserves (not to mention by a large and fully modern navy), is exactly what will guarantee China’s oil supply.
     
    The struggling US economy, burdened with excessive levels of debt, cannot support a sustained rise of the US dollar against the currencies of growing economies in Asia. Growing demand for resources, especially oil, as well as gold, contrasted with the inflationary policies of the US, will maintain the upward trajectory of commodity prices measured in US dollars indefinitely. In the near term, the end of the petrodollar standard will cause a sharp decline in the value of the US dollar and a marked increase in the prices of oil and of gold measured in US dollars.
     
    Oct 23 04:26 pm | Link | Comment!
Full index of posts »
Latest Followers
Posts by Ticker
CEF, DGL, DGP, DGZ, DZZ, GBS, GLD, IAU
Posts by Themes
Alan Greenspan, Ben Bernanke, Bretton Woods, CBGA, central bank, ETF, Federal Reserve, GFMS, Gold, gold lease, Goldman Sachs, IMF, LBMA, Lloyd Blankfein, SDR, US dollar, US economy, USDX, USGS
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.