Gold: Analysis of the Acceleration
November 5, 2009 12:12 pm
First, this morning, David Rosenberg put out an interesting update. He was looking at the recent purchase by India of gold from the IMF. Is it meant as a currency alternative or a way to keep down gold or????
Take a look at the discussion below and the video that follows…
We are still contemplating the massive gold purchase by the Reserve Bank of India — the largest in at least 30 years that took up half of what the IMF intends to sell. Look for China to come in next.
But here is the reality. All India did was bring gold to a 6% share of its total FX reserves from 4%. Fifteen years ago, that representation was closer to 20%. China has increased its gold holdings by 76% over the past six years but they are a mere 1.9% of the aggregate 2.2 trillion of reserves and Russia’s gold holdings is just under 5%. This is not the 1990s when Bob Rubin was running a hard U.S. dollar policy, U.S. fiscal deficits were vanishing and gold production was on the rise. Today’s world is exactly the opposite. Policymakers beginning in the 1990s wanted disinflation and got it. Now they want inflation — it will take years, maybe a decade, but it will come. For the near-term, we are still optimistic on Treasury securities but be forewarned that this view has an expiry date that is earlier than the peak we are likely to see in gold.
It is very clear that central banks are behaving in a way that would suggest that gold is now again being considered a currency within the global monetary system. As we said before, it is all about relative scarcity and a well-defined supply curve —
Click HERE or the video below