Ken: Your statements of the growing importance of gold in our world financial picture (replies 33479 and 33480) are on the mark.
If we are to believe the multiplier effect of these gold carry trade loans at 100x then 8,000 uncovered gold tons funds an astronomical $7.5 TRILLION in paper around the world! Compare that with an estimate of the world's wealth ($100-200 Trillion). I don't think the multiplier figure is quite that high, but it may very well be ballpark.
The central banks are fighting a losing battle with market forces which will eventually overwhelm them, as during the London Gold Pool of the 60's and US Treasury Auctions of the 70's.
Those invested in the gold markets must have a long-term horizon, because the central banks have a large hoard and good staying power. They began with 35,000 tons and are now down some 8-10,000 tons, leaving today as little as 25,000, barely 1/5th of the world's total.
The shorts must cover at some point, at which time there will be a rocket rally the likes of which the world has yet to see.
The US gold stash may eventually enter the fray, depending on perceptions of vulnerability in financial markets and the willingness of Congress to allow it. If that does happen we can be nearly certain the last major player has capitulated and the end is near for large-scale tinkering...
Bob |
