Jim:
Interesting points. As a one-time journalist, I know how easy it is to forecast Doom. It makes for the best headlines. What does not make a good headline is: "Gold will come back again... and it will fall again... and it will come back..."
As for the central banks, I believe there are several factors involved. The Australians were looking for a quick boost to their cash balance, realized they had made a mistake in announcing it, tried to offer a rational-sounding reason for their move, then tried to apologize and say they didn't mean it. By then, it was too late. Meanwhile, the story is heard around the world -- despite the fact that the announcement affected the price of gold so much that they dramatically deflated the value of the rest of their reserves.
The European situation is, of course, confused by the EEC issue, where countries are trying to properly position themselves for a common currency. You don't want to be too strong and be pegged too high as a base. You also don't want to be seen doing nothing when other banks are acting. (When was the last time you heard the Swiss banks say ANYTHING publicly? What is the sound of short-selling?)
All of this is further confused by the way that money moves around the world today. For central bankers, this has become a real problem. They need something to peg their currency to and, IMO, because the question of value has been raised elsewhere, they are reacting, not wanting to be the last to move. I believe this is going to be relatively short-lived. The machinery, the bureaucracy, seem to me to be too big to generate a new concensus.
Which takes me back to your first point: gold is special to people. Herein lies so much of its value.
I could be wrong... again, but this is what I believe.
Greg |
