The influence on the Gold Price of Official Gold Buying

Indeed most forecasts will be wrong on the lower side. Why?


Because the signals being given on 'Official' fronts are that times are here where global cooperation on the monetary front will dissipate leaving tensions and pressure that will hurt exchange rates and currency values in unpredictable but crisis making ways. Gold will really become the safe-haven it has been in history again. China and U.S. currency tensions are but the start of this.

Repeat of last week's commentary: - President Obama is about to go to China where he will face their leaders. What does he want and expect? He wants China to let its currency rise [this won't happen]. He wants friendly cooperation between the nations. But very much to the point he then says that, "if we don't solve some of these problems, then I think both economically and politically it will put enormous strains on the relationship." They didn't solve those that affect gold!

A look at the two very different national interests shows that there cannot be cooperation on these issues. Political pressure therefore has to rise in the days ahead. Bear in mind that the battlefields are not on land but in the banking and currency worlds, where all economic exchanges happen. So here is where the influences on the gold price will be most keenly felt.

Already the U.S. has seen a decimation of its manufacturing base, a feature that President Obama realizes. In recognizing this he has said, "It is particularly important for us when it comes to Asia as a whole to recognize that in the absence of a more robust export strategy it is going to be hard for us to rebuild our manufacturing base and employment base in this country,"

Take this to a global view, where last year the G-20 expressed a desire to find global cooperation of monetary and economic issues and what do we now see? Central banks and government intentions are now subsiding, and coordinated activity among member states is being replaced by more unilateral, nationalistic decision making by individual countries. As gold is now a 'tacit' currency, gold is benefitting as the prospects for collective action on currencies is included. Now, as we have expressed before, the overriding objective of nearly all members is to maintain some level of currency competitiveness all of which makes a weaker U.S. $ likely and benefits gold. With national interests becoming more selfish as the pressures grow, political tension between East and West must grow. In this way we are moving towards 'extreme times'. This is when gold becomes money and the possessor of that gold is empowered.

Such tensions are as significant as the change from summer to winter. Investors who recognize this first will be the biggest beneficiaries.

More Announcements to come from the I.M.F.

After the buying by Mauritius, there remains 201.3 tonnes to go. China remains the favorite, but who else is anybody's guess. So we wait and see.
One pertinent observation is that it is the emerging East that is most keen to buy gold. This is because in those cultures gold has been and always will be, money. The U.S. $ doesn't strike a chord like gold does. Gold has no government, currencies do.
As each announcement is made, it rings another vote of confidence in the metal as a form of money. If the I.M.F. doesn't want this to happen, it would do well to save the balance of the announcements until all the gold is sold and make one announcement and hope its effect will blow away quickly. Alternatively, as they should be maximizing the proceeds of the sales, they do well to stagger the announcements and sales to raise the price up?