Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19
The Unknown Tech Stock Transforming The Internet - 10th Sep 19
More Wall Street Propaganda - 10th Sep 19
Stock Market Price Structure Still Suggests We Are Within Volatile Rotation - 9th Sep 19
Stock Market Still Treading Water - 9th Sep 19
Buying Pullbacks in Silver & Gold - 9th Sep 19
Government Spending - The High Price of a "Free Lunch" - 9th Sep 19
Don't Worry About a Recession - 9th Sep 19
Large Drop in Stocks, Big Rally in Gold and Silver - 9th Sep 19
US Stock Market Hasn’t Cleared The Storm Yet - 8th Sep 19
Precious Metals Were Ripe for a Pullback - 8th Sep 19
Market Chart Patterns to Spot High-Confidence Trading Opportunities in a "Pinch"! - 8th Sep 19
Five Feet High And Rising - Stock Market Bulls False Sense of Security - 8th Sep 19

Market Oracle FREE Newsletter

The No1 Tech Stock for 2019

ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme"

Commodities / Gold and Silver 2014 Nov 18, 2014 - 06:12 PM GMT

By: GoldCore

Commodities

Concerns about deflation, recession and a return to the Eurozone debt crisis, may see the ECB follow Japan and print money to buy assets including shares, exchange traded funds and physical gold.

Counter intuitively, gold prices fell on the quite bullish news. In marked contrast to the sharp falls gold saw on the mere rumour of small Cyprus selling their miniscule gold reserves. Such odd trading leads to continuing concerns that the precious metals markets are still being manipulated.


Over the last couple of months, the ECB has launched several measures to revive the lacklustre euro zone economy. Mersch said the bank should let these steps take effect first before considering more action.

If more action was needed, the ECB's hands wouldn't be tied as it could theoretically purchase government bonds or other assets such as gold, shares, or exchange traded funds (ETFs).

But he said the bank was not determined to buy up assets come what may and should consider its actions carefully. He warned about the negative side effects were the central bank to start buying up government debt, urging political leaders instead to reform their economies to boost growth.

"Easing of monetary policy cannot work effectively when the European economy is structurally not in good shape," Mersch said in a speech at an annual banking conference in Frankfurt.

There appears to be an ongoing tussle between the ultra dovish such as ECB President, Mario Draghi and the slightly less dovish members of the ECB.

Mario Draghi has explicitly cited government bond buying as a policy tool officials could use to further stimulate the economy should the outlook worsen again.

“Unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds,” the ECB president said in Brussels yesterday in answer to a question during his quarterly testimony to lawmakers at the European Parliament.

Draghi and the uber doves appear determined to ignore the failure of QE in both the U.S. and Japan.

The architect of Japan's radical economic policies - ‘Abenomics’ - Koichi Hamada has described the recent bond buying binge by the Japanese central bank as a ponzi scheme: 

“In a Ponzi game you exhaust the lenders eventually, and of course Japanese taxpayers may revolt. But otherwise there are always new taxpayers, so this is a feasible Ponzi game, though I'm not saying it's good.”

Japan's GDP tanked an incredible 7.4% last quarter and social tensions are rife. Like in the U.S., the primary beneficiaries of Japan's ultra-loose monetary policies have been speculators, investors and the ultra-rich - the Nikkei has been booming - or bubbling.

Meanwhile, Japan has hit the panic button with President Abe directing his cabinet to formulate policies such as printing up "gift certificates" for the poor to "support personal consumption directly."

Against this backdrop Yves Mersch, from the ECB's executive board, made an astounding observation regarding Abenomics:

"I’m not so sure it has worked, considering that this morning we saw that Japan has officially slid into recession again."

In a speech in Frankfurt, Mr. Mersch made a suggestion which may be seen as an acceptable compromise by Germany with regard to monetary expansion to stoke inflation. 

He said "Theoretically the ECB could purchase other assets such as gold, shares, ETFs to fulfill its promise of adopting further unconventional measures to counter a longer period of low inflation."

Germany have been resolutely opposed to monetary expansion through the purchase of debt, but asset backed money printing may be regarded as more palatable.

The suggestion that gold would be used, even in a limited way, to back the Euro is encouraging. Western central banks public utterance regarding gold is usually negative. 

Physical gold supply remains extremely tight. Gold is currently in backwardation meaning that the price on the futures market is lower than the spot price today. 

If holders of physical gold bullion sold it today they could profit by buying a forward contract which would guarantee them the same volume of gold but at a lower price in the future, avoiding storage costs in the interim period and using the proceeds of the sale to invest until that later date. 

Investors are not taking advantage of this opportunity probably because some are concerned that there will not be physical gold available at the lower price which may cause the counterparty to the trade to default.

It appears as though the trepidation of gold investors may sometime come to an end. That the ECB would even consider buying gold in QE may come to be seen as an important moment. 

If the Swiss people vote to pass the gold initiative at the end of this month it is likely that the ECB will feel pressure to enter the market sooner than they may have expected. 

As the currency wars continue it may be that other western central banks will feel compelled to enter the gold market to protect their currencies from speculative attack and devaluation. 

We advise owners of gold to ensure they own gold in allocated and segregated accounts and to sit tight - their patience will again be rewarded.

Get Breaking News and Updates on the Gold Market Here

MARKET UPDATE
Today’s AM fix was USD 1,202.00, EUR 959.68 and GBP 767.81 per ounce.
Yesterday’s AM fix was USD 1,187.00, EUR 950.36 and GBP 759.49 per ounce.

Gold fell $14.30 or 0.36% to $1,186.40/oz yesterday. Silver slipped $0.14 or 0.86% to $16.16/oz.

Gold in EUR - YTD, 2014  (Thomson Reuters) 

Today, gold jumped to a two week high at $1,202 per ounce as a weakening dollar and concerns about the global economy led to safe haven demand. Silver climbed 1.2% to $16.34 an ounce.
Gold climbed as markets digested the important news that the European Central Bank may purchase assets including gold bullion to counter low inflation.

ECB President Mario Draghi said yesterday that unconventional measures may include the purchase of a variety of assets to stimulate the economy. The central bank could theoretically buy sovereign debt, gold, exchange-traded funds, and even real estate to counter a longer period of low inflation, Executive Board member Yves Mersch said yesterday (see above).

Gold in USD - January 1986 to November 19, 2014  (Thomson Reuters) 

The largest gold backed ETF, SPDR Gold Trust, saw holdings rise 0.33% to 723.01 tonnes on Monday, the first increase since November 3. The fund’s 10th anniversary is tomorrow and its holdings are at a 6 year low as ‘weak hand’ investors sell and gold flows East. 

India's central bank is rumoured to announce new restrictions on gold imports tomorrow, a finance ministry source noted to the media.
In the world’s largest consumer China, local prices remain at a premium of $2-$3 an ounce, as buying increased on firmer prices. 

S&P 500 – Jan, 1986 to November 19, 2014 (Thomson Reuters) 

Stock markets continue their constant march higher. The Stoxx Europe 600 was up 0.6% after Germany’s ZEW institute stated that although the economic environment remains fragile, the recent eurozone growth figures suggest a degree of stabilization. 

U.S. stocks eked out slight gains, with the S&P 500 recording a 42nd record close of the year, as comments by European Central Bank President Mario Draghi helped offset data that unexpectedly showed Japan's economy in a recession.

This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W www.goldcore.com

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore 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