Gold prices jumped to their highest level in nearly four months overnight as investors shrugged off worries about higher US interest rates and shifted focus to problems in Europe's bank sector.
The most actively traded contract, for August delivery, was recently up $US17.20, or 1.3 per cent, at $US1,341.50 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices had marched higher on Wednesday, after the US Federal Reserve announced it would end its bond-buying program by October, but reiterated its commitment to keeping interest rates low for an extended period.
"That in itself shows that they're committed to a low-rate environment for the time being, and it's very supportive of gold," said Bob Haberkorn, a senior commodities broker with RJO Futures.
Gold yields zero, and has an easier time competing for investor attention with interest-bearing investments like Treasury bonds when interest rates are low.
On Thursday, gold futures extended those gains to touch an intraday high of $US1,346.80 an ounce, the highest traded price since March 19.
Some investors also stocked up on gold to guard against emerging financial problems at a major Portuguese lender. Espirito Santo International, parent company of Portugal's Banco Espirito Santo, missed payments on short-term debt, investors learned Thursday.
"It's a major bank and it raises worries about other potential issues at other banks in Europe," said Frank McGhee, head of precious metals with Integrated Brokerage Services in Chicago.
Gold often attracts investors during periods of political or financial stress, as some buy the precious metal as an alternative to currency, while others view it as a better store of value than other assets.
Silver prices followed gold's lead, with the September-delivery contract climbing US47.7c, or 2.3 per cent, to $US21.545 a troy ounce on the Comex.
Some investors buy silver as a cheaper alternative to gold, as other precious metals are considered currency alternatives and stores of value.
Portugal has the 15th-largest gold reserves in the world at about 380 tonnes. It also makes up 84% of their total forex reserves.
Gold bugs need to think about what a credible rumour that Portugal will sell down gold reserves in order to bail out their banking sector might do the gold price. Think about what happened when there was a perceived possibility that Cyprus might sell its 14 tonnes.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Portugal has the 15th-largest gold reserves in the world at about 380 tonnes. It also makes up 84% of their total forex reserves.
Gold bugs need to think about what a credible rumour that Portugal will sell down gold reserves in order to bail out their banking sector might do the gold price. Think about what happened when there was a perceived possibility that Cyprus might sell its 14 tonnes.
What makes you think there's anything to sell? Generally government gold reserves are on loan to the market. Hence for Portugal to sell gold would simply mean selling the bullion bank iou's to somebody. But no new repository of physical would enter the market.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
What makes you think there's anything to sell? Generally government gold reserves are on loan to the market. Hence for Portugal to sell gold would simply mean selling the bullion bank iou's to somebody. But no new repository of physical would enter the market.
Assuming this is true, which I actually doubt, in what way is it different from other forex reserves? Do you think central banks have piles of USD sitting in their vaults? Of course they don't. They hold dollar-denominated bonds.
One thing that is for sure is that the gold price dipped very sharply on rumours that Cyprus would be selling its gold hoard. Regardless of the truth of the situation, a similar rumour about Portugal would decimate the market.
By your argument, central bank buying has no impact on the distribution of physical gold. This is at odds with what I hear from the gold spruikers.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Portugal has the 15th-largest gold reserves in the world at about 380 tonnes. It also makes up 84% of their total forex reserves.
Gold bugs need to think about what a credible rumour that Portugal will sell down gold reserves in order to bail out their banking sector might do the gold price. Think about what happened when there was a perceived possibility that Cyprus might sell its 14 tonnes.
If they do sell some gold and prices dip. true goldbugs will buy more.. Goldbugs never sell remember..
Over time prices will recover and move up...
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
Assuming this is true, which I actually doubt, in what way is it different from other forex reserves? Do you think central banks have piles of USD sitting in their vaults? Of course they don't. They hold dollar-denominated bonds.
One thing that is for sure is that the gold price dipped very sharply on rumours that Cyprus would be selling its gold hoard. Regardless of the truth of the situation, a similar rumour about Portugal would decimate the market.
By your argument, central bank buying has no impact on the distribution of physical gold. This is at odds with what I hear from the gold spruikers.
You don't seem to get it. Their gold reserves are gold owed to them down a chain of central banks, bullion banks and major jewelers. They don't have few a few hundred tonnes of gold sitting in a cupboard. It's being used in other ways.
For starters they have to lodge gold to 15% of the value of their Euro issue with ECB.
Quote:
By your argument, central bank buying has no impact on the distribution of physical gold. This is at odds with what I hear from the gold spruikers.
It really depends on them hoarding or dis-hoarding physical gold. Sometimes in history they have had stockpiles of physical gold. The FED is rumored to have held 13,500 tonnes in the early 1990's. This was either leased to the market or sold by participating nations from the mid 90's onwards to keep interest rates lower than the market demanded. They had built up the stockpile in the 1980's by the reverse principle of rates higher than the market demanded.
Of course Central Banks have an enormous impact. But to drive down the gold price in the long term they need to have real gold sitting under the desk to dump on the market, OR raise rates!
However they don't just do this, historically they'd gone the other way and hoarded physical gold by either calling in leases or direct buying. This drives the price of gold up beyond what the real market is prepared to pay.
They can play the paper gold market, but effects there are short term.
Currently the FED has gold sitting on it books anywhere up to 20,000 tonnes, but a Senate audit only found 400 tonnes physical in the vaults. The rest is out on rotating leases. The central bank gold is for the most part hanging off women or hoarded in goldbugs safes. Getting this gold back into the vaults would require a stiff gold price way above its true market value (TMV I put at around 1600 USD with zirp rates), to the tune of $3,000 plus.
The Germans asking for their gold back from the FED were told to come back in 2019.
The great dis-hoarding of gold occurred from 1995 to 2005. The central banks are in general empty of physical gold. Driving gold up above its real value is the only hand the central banks can play right now.
Personally I hope they do nothing. Gold sitting around at true market value threatens to become the new monetary standard and precisely what the central banks fear.
As for purchases by Chinese and Russian central banks, that mostly ends up as new bling in very short order.
If you want my prediction we are seeing a steady rise in gold price and current prices will become history unless the ZIRP is abandoned.
Quote:
Do you think central banks have piles of USD sitting in their vaults?
The FED does, but it only counts when it is put into circulation. They have a few hundred billion worth of currency that is not active.
Quote:
in what way is it different from other forex reserves
Demands on paper money can be accommodated via the printing press.....you can't do that with gold!
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
As a side note but still on topic about the shiny stuff. I am reading a book at the moment that claims that as late as 1500 all the gold in Europe would have fitted within a two meter cube.
As a side note but still on topic about the shiny stuff. I am reading a book at the moment that claims that as late as 1500 all the gold in Europe would have fitted within a two meter cube.
That'll be close to the truth. It's believed during the Roman Empire they were only mining 9 tonnes of gold per year and about 200 tonnes of silver. From what I can figure even as late as Napoleon all the above ground in Europe amounted to 5,000 tonnes at best.
On per world captia, gold and just about everything else in the world was rarer in the past. Today about at least 150 kg of steel is being produced annually per world captia, but during Roman times only about 1.5 kg of iron was being produced per inhabitant of the Empire.
In the early the 19th century it's believed there was about 11 grams of gold per world capita. With the spate of gold discovery in the latter 19th this rose the 22 grams per world capita. This latter ratio has remained much the same since 1900.
This rather stable ratio between world population and the gold stockpile is one of the key ingredients in the monetary status of gold. For example around 1900 in Australia a weeks basic wage was worth half and ounce, and today the figure is much the same.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
You don't seem to get it. Their gold reserves are gold owed to them down a chain of central banks, bullion banks and major jewelers. They don't have few a few hundred tonnes of gold sitting in a cupboard. It's being used in other ways.
For starters they have to lodge gold to 15% of the value of their Euro issue with ECB.
It really depends on them hoarding or dis-hoarding physical gold. Sometimes in history they have had stockpiles of physical gold. The FED is rumored to have held 13,500 tonnes in the early 1990's. This was either leased to the market or sold by participating nations from the mid 90's onwards to keep interest rates lower than the market demanded. They had built up the stockpile in the 1980's by the reverse principle of rates higher than the market demanded.
Of course Central Banks have an enormous impact. But to drive down the gold price in the long term they need to have real gold sitting under the desk to dump on the market, OR raise rates!
However they don't just do this, historically they'd gone the other way and hoarded physical gold by either calling in leases or direct buying. This drives the price of gold up beyond what the real market is prepared to pay.
They can play the paper gold market, but effects there are short term.
Currently the FED has gold sitting on it books anywhere up to 20,000 tonnes, but a Senate audit only found 400 tonnes physical in the vaults. The rest is out on rotating leases. The central bank gold is for the most part hanging off women or hoarded in goldbugs safes. Getting this gold back into the vaults would require a stiff gold price way above its true market value (TMV I put at around 1600 USD with zirp rates), to the tune of $3,000 plus.
The Germans asking for their gold back from the FED were told to come back in 2019.
The great dis-hoarding of gold occurred from 1995 to 2005. The central banks are in general empty of physical gold. Driving gold up above its real value is the only hand the central banks can play right now.
Personally I hope they do nothing. Gold sitting around at true market value threatens to become the new monetary standard and precisely what the central banks fear.
As for purchases by Chinese and Russian central banks, that mostly ends up as new bling in very short order.
If you want my prediction we are seeing a steady rise in gold price and current prices will become history unless the ZIRP is abandoned.
The FED does, but it only counts when it is put into circulation. They have a few hundred billion worth of currency that is not active.
This argument is completely specious.
First of all, if you take it to its conclusion, it says that Central bank activity has little to no effect on the price of gold, which is patently not the case.
Second, you are arguing that Portugal selling its gold would have little effect because it would not entail the movement of any physiacl gold - the transaction is all on paper. When I buy shares, I don't get a physical piece of the company either, but the transaction will impact the price. If I buy a house, I do not expect the house to move. All that happens is a change in the owner on the Torrens title. The house could even be leased out! But the paper transaction still has its impact on the price.
Quote:
Demands on paper money can be accommodated via the printing press.....you can't do that with gold!
Other than Germany printing USD during the war, I don't think there are any cases of governments printing FOREX.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
As a side note but still on topic about the shiny stuff. I am reading a book at the moment that claims that as late as 1500 all the gold in Europe would have fitted within a two meter cube.
Today it would be lucky to fill a two story house. It's no wonder they had to remove it from circulation as currency. There simply wasn't enough on the planet to satisfy the needs of the oil age. But that age is ending now, and the age of perpetual poverty is drawing down.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
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