Posted on 11/26/2009 8:33:41 AM PST by TigerLikesRooster
China, gold, and the civilization shift
By Ambrose Evans-Pritchard Economics Last updated: November 26th, 2009
Stephen Jen from the hedge fund Blue Gold Capital has a warning for those who think that gold has risen far too high, is necessarily in a speculative bubble, and must soon come clattering back down.
Mr Jen is an expert on sovereign wealth funds from his days at Morgan Stanley. The gold story — essentially — is that the rising economic powers of Asia, the Middle East, and the commodity bloc are rejecting Western fiat currencies. China, India, and Russia have all been buying gold on a large scale over recent months.
Why should that stop when the AAA club of sovereign debtors is pushing towards the danger threshold of 100pc of GDP? These new players account for almost all the accumulation of foreign currency reserves worldwide over the last five years, so what they do matters enormously.
After crunching the numbers, Mr Jen found that the share of gold in their reserves is just 2.2pc compared to 38pc for the Old World (perhaps we should just call them the deadbeats from now on). They would have to buy $115bn of gold at current prices to raise their bullion to just 5pc of total reserves, and $700bn to reach just half western levels.
The killer-term here is at current prices since any such move in the tiny global market for gold would send prices into the stratosphere.
(Excerpt) Read more at blogs.telegraph.co.uk ...
Ping!
We heard from a lot of ‘experts’ about housing was never going to go down. Here’s one:
Anyway, say what they want, gold really cannot go down because it’s price depends on TWO things and only two things:
1) How much currency has been printed (in other words, the REAL value of currency).
2) How strongly people feel the need to protect against bad days. In the 1990s gold was low...and why not, we were at the “end of history” as some goofball coined, meaning that the Cold War was over and we were in for people forever. Oh well.
Right now, money is being printed in droves around the world (hence the high price of oil with economies in near-depression), and people are a bit nervous. But just wait until Obama starts being tested (like Taiwan, for example)...then watch gold.
I am trying to be hopeful about the future of this country, but there are really bad signs.
“I am trying to be hopeful about the future of this country, but there are really bad signs.”
I hear you. I’m afraid it’s going to take a lot more than ‘hope’.
Have a blessed Thanksgiving, anyway....time to get that turkey in the oven!
Original source is worth reading along with the comments
Wrote it last Friday.
This cannot be true about the gold ETFs. Can it? Not that I trust them but...He's thinking about the gold futures mkt I think. Same as the oil futures markets trade a lot more oil than exists at the monent
Further, a recent study showed statistically that the am price fix was consistently 1% down on the pm fix. Therefore buying in the morning and selling in the afternoon would net you 2% on each trade. What’s that if its not price fixing? (I’ll try to find the link and post back)
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