well, that's the spirit...like i've said before, it really is difficult to predict what the less-than-transparent gold market will do. as for the role of vested interests in this, there is of course the majority of gold owners who would probably be favorably disposed toward a higher price. i say majority, because at least one owner of a sizeable stash, namely the US treasury, is obviously not interested.
the short position has by all accounts even grown larger of late. at least that's what the increase in the gold derivative positions of the major bullion banks suggests. so in order to keep the market down, they sold even more paper gold...a strategy that is fated to back-fire eventually. someone will probably one day get ideas about attacking that massive short position. it's after all impossible to cover physically.
with many producers bringing their forward selling strategies to an end (obviously it's an exercise in futility to sell something forward at $275 an ounce when it costs at least $350 per ounce to replace) one of the outs the shorts had is gone.
the argument regarding CB gold loans goes like this: the borrowers have anywhere from 2 - 5 years to repay the loans. so far, they could make arrangements with major producers to take delivery at some point in the future at a certain price. no longer. what does it matter to a gold borrower now that he knows there's gold in the ground that may be available for delivery in three years time, when the whole plan the carry is based on goes sour via suddenly rising prices? if that happens, there will simply be a scramble to buy to avoid huge paper losses. the point being that there are no bail-out guarantees. obviously a bail-out has been arranged in the wake of the last price spike. but it required to fall back on rather exotic sources of help, notably the Reserve Bank of Kuwait. what many people don't realize is that there is less and less gold available from CB sources...many CB's have simply lent most or in some cases all of their gold out already. they can only pray that they will actually get it all back....it is often difficult to collect debts from bankrupt counter-parties.
one thing is pretty clear to me after studying all the available information: a sort of bearish bubble has been built. it has left many players in more or less untenable positions, because as soon as one of them breaks ranks and tries to cover, the bubble bursts.
lest we forget, in inflation adjusted terms, the PoG is right back at the point from which it began its ascent in the 70's.
conclusion, in the end it won't matter what the involved parties 'want' to happen. that's like saying playing with fire is not dangerous because nobody 'wants' the barn to burn down. |
