This week's action in gold has NOTHING to do with Cyprus & the Euro Zone. Those clowns only have 13.9 metric tons to begin with - which is a drop in the bucket !!!
The macro backdrop is as follows. Gold has been appreciating in Yen terms, steadily, for the past 8 years. It's the one currency where Gold has increased in value NONSTOP. Now, suddenly, the Yen has dropped in value from 80 to the dollar to 100 to the dollar, and UBS has predicted 120 to the dollar by the end of 2014 (a pretty safe prediction in my opinion, the yen has hit 120 repeatedly at peak under-valuation since about 1993, over and over and over again.)
So either Japanese investors are selling their gold for a nice profit, now that the yen has lost value, or ...
Maybe the carry-traders, this time around, borrowed in yen at 0% interest, and bought gold. Now Japan is saying, "Guess what carry-trader-idiot-sans? We'll be charging you 2% REAL INTEREST REAL SOON !" Meanwhile, the Yen is 20% cheaper. If I were holding an asset (gold) that has traded sideways for 20 months, I'D SELL and take my profits from going short the yen! And I'd do it all at once!
If the Yen falls from 100 to 120 to the dollar, as predicted by UBS, thats a further decline to 83.3% of its value, and gold @ $1500 falls to ... $1250, not too different than the Goldman Sachs prediction of $1270 - BECAUSE THEY ARE PROBABLY ONE OF THE CARRY TRADERS THEMSELVES !!!
Anyway, this has NOTHING to do with Cyprus and the Euro Zone. Oh they may have started the snowball rolling, but the ski-slope where the snowball began, was completely owned by Japan! |
