The US reserves are gold, and are around 198 billion at current
prices, if they have any of the gold left, that is (not lent
out at ridiculously low lease rates). Thus, if US CB decides
to do what other CBs do in currency crises, sell reserves,
this would put enormous pressure on gold price, unless all
that gold is readily bought by some CBs holding worthless
dollars. There is always this unknown variable with gold,
CB selling, which caps gold price. So far only European CBs
sold their gold, with 500 tonnes a year cap. US does not
have a cap, but it might not have any gold left, just the
IOUs from the bullion banks in the vault. We never
know. They can sell the IOUs to other CBs, but gold
won't care.
The problem I see with this is that US manages US dollar
through interest rates, and given recent action, the plan
now is to devalue the dollar to avoid recession and to cure
trade deficit situation some, so it seems highly unlikely they
will sell gold. CBs are known to emerge and cap the gold
price with some selling (much less than 8000 tonnes) when
it rallies too much, though. Dollar devaluation is a one-way
street?
That said, G7 is deemed to be very important for the direction
of the currencies, and it is happening this weekend. Dollar
dropped on increased chances of October cut only. If the
Fed does not cut in October, dollar should rally some. Should
is the word. -g- |
