Who Is Selling Gold?

October 21, 2008 | By | 2 Replies More

Think of this blog as spoken thoughts or only rambles, but I can’t help wondering why the gold price just refuses to obey the many fundamental reasons for starting its ascent to $1000 and higher.

Somebody is selling gold I thought. Before I dropped off to sleep my mind wandered along the some of the many pathways that have opened up since the credit crisis became a reality to us all  The IMF floated into focus.

Could it be that the IMF, realising that their resources were going to come under considerable strain as country after country came with their begging bowls outstretched, is selling lots of gold?

 

Iceland and now Pakistan are in line for a bail out as they are facing bankruptcy and the IMF has to find the cash. If memory serves me correctly they announced plans, before the crisis became evident, to increase their cash reserves by selling some of their bullion in order to put the money raised into assets that generated an income. 

It seems therefore logical that they should be selling more of their vast gold reserves to meet the anticipated calls for aid from distressed economies.

Could this then be the reason why spot gold is stubbornly remaining within a band of $50 either side of $800 an ounce?

Then there is the question of funds and other financial institutions need for liquidity to meet withdrawals and redemptions.

 

  • Is this still likely to be gathering pace fuelled by increasing panic or is the worst over?
  • Have margin calls have been met, credit lines have been reduced to the lenders acceptable standards and are the banks now playing ball with one another?
  • Has the recognition dawned that there really are some great, once in a lifetime investment opportunities to take immediate advantage of?

 

Then there is the biggest question of all – does your government have the ability to restore confidence in your country’s economy and, as a consequence, your standard of living?

My last lingering thought before sleep returned to gold.

As I tossed and turned trying to reason the effects of the continuing injections of cash announced on a daily basis by both developed and emerging countries I could come up with no other answer than worldwide inflation for the necessities of life.

The cost of food, utilities, energy etc. to increase substantially while the cost of cars, TVs, mobile phones, computers and assorted luxuries will, at best stagnate. Just like Japan has suffered from both inflation and stagflation for over ten years.

I fell to sleep, untroubled by nightmares previously brought on by the rapidly declining value of my portfolio, although weighted towards the hard hit precious metals and miners sector.

I was content in the knowledge that the eventual price of my gold, silver and miners would insulate me from the effects of galloping inflation.

When I awoke to read of yet another day of market turmoil my complacency began to evaporate. Can anybody truly feel confident of the market direction in the next twenty-four hours, let alone weeks, months or years?

What would happen to gold if the US turned to selling large amounts of its huge bullion hoard to raise the cash for its ever-increasing massive debt?

What if China flooded the market with its colossal holdings of dollars? Is panic still driving the markets and if so for how long?

It could be nightmares tonight!

 

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Category: Review

Comments (2)

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  1. David says:

    John,

    I expect a lot of your thoughts are very close to the truth of what is going on, not least the problems that hedge funds have been facing. Another pressure upon spot prices of gold is the US dollar which needs to turn back down again for gold to take off. Don’t ask me why the dollar, of all currencies, has been rallying. It seems extraordinary to me.

    David.

  2. TRADOR says:

    Hi,
    Well will go down and will be stable as possible.
    It’s what expext US government.
    Actually Morgan and HSBC control 99% of futures contracts on gold($85.2 billion and $27.5 billion)
    Market are totally manipulated.
    As you know government are printing money virtually to help these institutions.

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