Translate

Search This Blog

Search Tool




Nov 11, 2009

GATA DISPATCHES

'Everybody knows U.S. gold reserves are leased and shorted'

A Rock-Solid Case for Gold Reserves
By Fabrice Taylor
The Globe and Mail, Toronto
Wednesday, November 11, 2009
http://www.theglobeandmail.com/globe-investor/investment-ideas/features/...
There's one mention of the word gold in the Bank of Canada's latest annual report. There are no mentions of bullion.
Canadians once owned 30 million ounces. Now we own none, preferring to back our currency with rock-solid things such as U.S. dollars and other pieces of paper worth something only as long as we all agree they're worth something.
Meanwhile, India is buying gold. So are other countries, especially those not in the sphere of U.S. influence. Latvia and Honduras, have more than we have, which isn't saying much, but seems to emphasize the point.
Things are getting better for the Indians. Time was if they wanted to buy, say, a barrel of oil they had to make a bunch of T-shirts and trade them offshore for dollars or some other exchangeable currency. No one wanted rupees, so they couldn't just print a bunch of them to buy oil. They had to work for it. This system imposed a certain discipline on them. Look at them now.
Americans, in contrast, have had it good for a long time because they own the reserve currency so when they want to consume they can just create dollars in one way or another. They don't necessarily have to work for it.
When the U.S. dollar was linked to gold, at US$35 an ounce, they had to be rigorous. If they printed more money they had to buy more gold, making it hard to be reckless. But they abandoned that peg 40 or so years ago. You can start to understand, then, why it is U.S. policy, however unofficially or quietly, to deprecate gold and tout the dollar. It's a huge advantage to be the reserve currency.
It's also a huge problem if you consume with vengeance and produce relatively less. And look at them now.
Meanwhile, there's Canada. We're pretty cocky. Our banks didn't blow up. We have commodities. Our dollar is strong. Who cares about gold? Who needs it?
Not so fast. Our dollar is strong against the greenback, which is sinking fast. It's not exactly a contender against other currencies. And it's speculators who are driving the loonie higher, not intrinsic value. Ontario is practically broke. Even Alberta is running U.S.-style deficits on a per capita basis. We don't invent a Google, Microsoft, Pfizer, or IBM every few years. The U.S. looks like a better bet than Canada by some yardsticks, although again, that's not saying much.
Investors follow certain basic rules when it comes to their money. They diversify, they prepare for the unexpected, they see inflation as the enemy. Why not central banks? Gold diversifies in that it's a hard asset whose price is set by supply and demand; it's not an obligation of some government whose value is theoretical.
It also maintains its value while paper currencies only lose theirs over time because of inflation. And you can't touch it for security when things really get bad, such as when currencies fail, which happens more often than we realize. Many of us keep gold bars or coins in the safe or under the mattress just in case, or wish we did. Why not a central bank? Unforeseen calamities happen, as we learned.
As for the argument that U.S. dollars are backed by the biggest gold reserves in the world, so holding them in reserve is relatively safe, that's rubbish. True, the U.S. has a lot of gold, 8,100 tonnes of it officially, or 77 per cent of its reserves. But it's well known in bullion circles that a lot or most of it has been lent out to banks and whatnot that sell it short, depressing its value.
And anyway, even if it is all there and not lent, all that gold is worth only about a tiny fraction of the U.S.'s rapidly growing debt. So holding U.S. dollars in reserve isn't exactly comforting.
It may be that the only reason for our central bank not to have gold in its vaults is because our American friends don't like us supporting bullion even though the mining industry employs a lot of people and produces big payrolls.
When it comes to managing a currency, we can find better role models.
-----
Fabrice Taylor is a chartered financial analyst and a financial columnist for The Globe and Mail.

* * *

Join GATA here:
Vancouver Resource Investment Conference
Sunday and Monday, January 17 and 18, 2010
Hyatt and Fairmont Conference Hotels
Vancouver, British Columbia, Canada
http://www.cambridgeconferences.com/index.php/vancouver-resource-investm...

* * *
Support GATA by purchasing a colorful GATA T-shirt:
http://gata.org/tshirts
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
http://www.cartserver.com/sc/cart.cgi
Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:
http://www.goldrush21.com/
* * *
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
http://www.gata.org
To contribute to GATA, please visit:

http://www.gata.org/node/16

What´s Gold Next Stop

We have recieved a great video ,about the updating on the gold market by Adam Hewison. Do not miss this video made with experience, and insight of Adam: Do not miss it....?


Fernando Guzman Cavero
FGC BOLSA - FGC FINANCIAL MARKETS

After hitting our first upside target of $1,110 two days ago, gold prices backed off but still managed to close at their best levels today for a new record high close in New York basis the spot gold.
The question now is, what’s going to happen to gold after it hit our first target level?
http://www.ino.com/info/478/CD3233/&dp=0&l=0&campaignid=3The main trend continues to be positive and I believe that any pullback in this market should be met with good support. It is possible that we could see a pullback of $20-$25 which would not change the overall positive trend of the market which we see continuing until the end of the year.
As readers of this blog know, we have an upside target zone of $1,250-$1,300 an ounce for gold. While that target zone is still in place, we believe that the huge “energy field” that we’ve discussed in our earlier gold videos is capable of pushing this market higher.
In this new video I explain some of the areas that I’m looking at and also some of the places where you can place tight stops to lock in profits.
http://www.ino.com/info/478/CD3233/&dp=0&l=0&campaignid=3As always the videos are free to watch and there is no need to register. I would love to hear your views on gold in our Trader’s Blog comment section.

All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub