Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Gold and Silver - Good Times Ahead

Commodities / Gold & Silver Nov 14, 2007 - 01:31 AM GMT

By: Roland_Watson

Commodities There have certainly been a few things locally and globally that point to good times ahead for gold and silver.


The first was from that tried and tested source of financial news - my wife. She rarely if ever mentions precious metals unless they are wrapped around her fingers, wrists and neck in an ornate and beautiful fashion. But this time it was different. One of her wealthier associates had been talking to her financial adviser who was recommending she diversify some money out of property into gold and silver. If my wife never again said anything about precious metals investment, this would have been enough.

This told me two things. Firstly, the public is cottoning on to this gold-silver thing. In other words, we are approaching the endgame for this particular gold-silver bull phase. When gold and silver begins to be discussed by people who never mentioned it before, we are on the verge of a blow-off.

Secondly, she was recommended to lighten up on property. We have seen investment money first chase the stock market up to the year 2000. When that went sour, the hot money began to diversify into property until recently. Now that is going sour so where does the fiat money go? You don't need a PhD to see where a lot of money is going to flow towards in the months ahead. As the gold-silver bull gains speed, people who did not care for gold before and will not care afterwards will be jumping onto the " next big thing " and creating a positive feedback loop for a frenzy of momentum trading.

So far, so good. Meanwhile I read that various governments are not too keen on dollar refugees parking their cash in their currencies and forcing them up on the international exchanges. The formula is well known; a more expensive currency makes exports more expensive and hence distorts the trade balance.

As a result, various capital controls are in force or being devised rather than going for devaluation at this point (i.e. we like the value our currency is at, go and bother another currency). Well, that is bullish for gold and silver too because there is no Central Bank for gold and silver to deter investors. You can park your dollars in gold and silver without too many obstacles in your way.

On the subject of central banks, did you know that while selling gold to manage its price at sensitive times (i.e. not all the time) these guys may be buying it back on the quiet to reload their guns? At least that is the implication of a document cited by GATA from the Reserve Bank of Australia. The document is at http://www.rba.gov.au/PublicationsAndResearch/RBAAnnualReports/2003/Pdf/operations_financial_markets.pdf

I quote from two parts:

"Foreign currency reserve assets and gold are held primarily to support intervention in the foreign exchange market."

That is the part GATA quotes. There is another ignored quote before it and my emphasis is in italics.

"There is a range of operations that the RBA undertakes in the foreign exchange market on its own account. The most noticeable, though least frequent, outright transactions are those intended to influence the exchange rate - "intervention" in common parlance. In these cases, the RBA buys or sells the Australian dollar in exchange for US dollars, with a view to affecting not only the currency's short-term price but also expectations about its likely course over the longer run. Such transactions are typically infrequent, but in fairly substantial amounts, and may be accompanied by statements making explicit the RBA's views. Their impact on the domestic money market is fully offset, so that they have no impact on domestic monetary conditions.

The RBA also undertakes transactions to restore its reserve position after periods of intervention have occurred. Such transactions are typically consistent over a period of time, but in small amounts. While they probably, at the margin, have some impact on the exchange rate, they are undertaken in ways designed to minimise such effects. Their intention is to take advantage of a more favourable exchange rate to re-position the RBA's portfolio."

This raises an interesting question for those who believe central bank gold reserves are vastly understated. If gold is treated like foreign currencies in a government's strategy when they sell it then why not when they buy back? If a government buys back foreign currencies in a quiet, piecemeal fashion in order to reload, then why not gold as well? If you accept the first quote then why reject the implication of the second? You cannot pick and choose your quotes.

That sounds like a valid question to me. Not that it matters, gold and silver are in bull markets whether central banks have the gold or not.

By Roland Watson
http://silveranalyst.blogspot.com

Further analysis of the SLI indicator and more can be obtained by going to our silver blog at http://silveranalyst.blogspot.com where readers can obtain the first issue of The Silver Analyst free and learn about subscription details. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk .

Roland Watson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules