Update:
I’m adding my comment at the top here after watching this puzzling day. Gold shot up to new highs over $1040 (and not just in the US but elsewhere). Is this the bull break-out the bugs have been waiting for? Maybe. Central bankers and officials from the Gulf states came out to pooh-pooh the story, but it couldn’t be put back in the box.
My puzzlement is this: If gold is soaring because of this “revelation” of the dollar’s death – then why did the dollar itself sink only modestly (at least, as I write).
I note also that the stock market recovered some of its ground. That might have something to do with the Australian Reserve Bank announcing a tighter policy, quite unexpectedly, and in apparent belief that the recovery is real, never mind Joseph Stiglitz, George Soros, Marc Faber, Jim Rogers, and other no-longer-strange bedfellows who think the opposite.
V-shaped, U-shaped, Square-root shaped, or corkscrewed, the recovery isn’t your grandfather’s recovery, that’s for sure. And someone is trying to make a silk purse out of this sow’s ear. That skepticism leads me to wonder whether this very convenient rumor, which coincides with the IMF meeting in Istanbul, might be a certain kind of saber rattling in anticipation of negotiations – except that these very public meetings are never where anything substantial takes place any way. (So says Simon Johnson in a recent blog post). But the IMF is selling gold, we know, and we know also that it wants to make sure it doesn’t hit the markets too hard when it does. Could this little upswing be helpful toward that end? Probably. Could this rumor – widely denounced as insubstantial – have something to do with that? Perhaps.
In the news, the Independent’s Robert Fisk reports on the coming fall of the petro-dollar:
“In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.”
http://www.reuters.com/article/newsOne/idUSTRE59507620091006
But, regardless of this, dollar from 2002-2007 lost over 40% of its value. From 84-02, 35%. Deteriorating purchasing power of dollar is continue to be policy of the FED. I am hoping Wall-Mart is going to be out of business.
I used to like Fisk, for long time he has become something like Chris Amanpour from CNN. Wondering who is Fisk working for?
It’s interesting you ask that question. I don’t know whether I’d go so far.
But this did feel like a bit of rumor mongering, that maybe Fiske unwittingly participated in.
The move out of the dollar is well-known and why this particular breath of wind had to be blow up its skirts right now is curious – the IMF meets today, perhaps that’s why.
The Central banks all denounced it, which means nothing – that’s what they all do.
I wonder if this has more to do with keep prices high for the IMF gold sales?
I used to think rising rates would sink the gold price, so much for that thinking, so far.
I don’t like reading Jon Nadler, but this article seems about right:
Buy The Rumour, Buy The Fact
Polled trading sources cited an amalgam of “rumour-based US dollar weakness” and Australia’s surprise hike in interest rates, as the prime catalysts for the now historic spike in prices that followed yesterday’s already robust move in values.
Kitco Metals has devised a new index -the Kitco Gold Index
http://www.kitco.com/ind/nadler/oct062009A.html
What do you think of this new index?
Some thoughts I found interesting & relevant:
“…baby boomers are changing their behaviors based on changing needs. And increasingly they will need to take more out of the stock market than they are putting in, which is already part of what the Fed is fighting via its monetization practices. Unfortunately however, unless the Fed plans on monetizing the entire stock market (or perhaps because they are trying now), at some point these practices will get out of their control, and something will snap, whether it be bonds or stocks, and prices will head dramatically lower. Of course in the meantime, which looks to be in the context of just the next few weeks, prices could continue to squeeze / grid / shoot higher in manic fashion, putting the finishing touches (sentiment / technical) on the present counter-trend rallies in equities / re-inflation attempt on the part of our price managing / self-serving bureaucracy.
…barring a technological breakthrough that empowers man’s ability to exploit the natural world more efficiently moving forward (peak oil will not permit this), any further economic growth will solely be the result of monetary inflation, which of course is borrowing from the future. Some would argue China has unlimited demand, and is outside of such considerations, however this brand of dangerous thinking is poppycock, reserved for the bureaucrats, bankers, and brokers…”
http://financialsense.com/fsu/editorials/petch/2009/1005.html
“Everyone needs a strong dollar,” French Finance Minister Christine Lagarde told reporters in Gothenburg, Sweden, today as she met European Union counterparts. “We’ll have a chance to discuss this in the coming days.”
http://financialsense.com/fsu/editorials/cherniawski/2009/1002.html
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