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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Square_Dealings who wrote (31478)4/30/2005 7:56:07 PM
From: mishedlo  Read Replies (2) of 110194
 
the only way gold will go up is if the Arabs start valuing oil in gold, or a basket of currencies other than the U.S. dollar imo.

Why do people keep saying this?
It is silly.

It does not make a DAMN bit of difference what oil is priced in. NONE. Currency conversion from any currency to any other curremcy takes less than a second. This just has to be one of the silliest ideas out there but I am not blaming you as all the financial sites broadcast this nonsense.

Other than Yap Island stones who cares what something is priced in? Why?

What DOES matter is where countries hold their reserves. If Saudi Arabia started buying gold with their reserves, yes gold will soar. If they hold more reserves in Euros then the US$ might drop, but just because oil is priced in Euros, YEN, or the Pound does not stop them from instantaneosly converting back to US$ and holding US$ reserves.

For that matter, SA could take their US$ now and convert them to gold or Euros or the pound or swiss franks if the wanted to.
It could be done in less than a second.

Given all the above, who cares what anything is priced in? There is NOTHING stopping Saudi Arabia or any oil producer from selling dollars and holding gold or Euros. Likewise if oil was priced in Euros there would be nothing stopping them from holding reserves in US$. If they did not want to hold US$ reserves then they would not, and it would not matter what the F oil was priced in. It is really that simple.

Mish
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