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Gold/Mining/Energy : Gold Price Monitor
GDXJ 124.080.0%Feb 2 4:00 PM EST
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To: Hawkmoon who wrote (37060)7/12/1999 11:27:00 PM
From: Rarebird  Read Replies (1) of 116958
 
Gold As Currency:

It seems that the Gold Bears are most threatened by ( and take quite seriously ) the MONETARY VALUE of Gold. This is why many Perma Bears openly talk about demonetarizing Gold. It is impossible and they know it but they've managed to convince many Gold Bugs, who have capitulated. Greenspam said that if the POG rose enough to threaten the economy he would intervene to encourage more leasing. What he meant was that if the POG went above $1,000 per ounce and it was causing foreign governments to shun the U.S. Dollar, thus causing it to plunge to multi-year lows, then he would act. This has nothing to do with the current situation, which is just the reverse.
Most certainly the paybacks from central bank leasing will eventually be greater than new central bank leasing, which will put upward rather downward pressure on the gold market. Remember that all these loans must be paid back eventually in GOLD. Once the price rises there will be a sharp drop in new leasing, since the risk in a gold loan is having to repay in a higher price. The only reason people are borrowing gold to begin with is that you can get a 2% interest rate instead of, say, 7% from a bank. If gold rises more than 5% than this differential makes gold less favorable to borrow than fiat money. What most Gold Bugs don't understand is that Gold leasing pays homage to the great Value of GOLD AS CURRENCY.
The " next cycle " is not Bullish; it is Bearish.
As a final comment, notice how popular the yen carry trade was before it abruptly ended. Far more than the Gold Carry Trade.
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