- Joined
- May 17, 2005
- Messages
- 12,256
- Reaction score
- 2,693
I like to watch gold. I've been watching it for quite some time now tickling the underside of $1000 USD for a while now. Sure, it has popped up above 1000 briefly a few times a while back but nothing amazing.
However, at the beginning of this month it went boom. It's been up as high as $1020 and some and I wondered what could be the cause for it to surge all of a sudden like that.
The I read that on September 3rd, Hong Kong asked for its gold back.
So where had this gold been? Well, since Hong Kong was a British colony its gold had been in London but now that Hong Kong is Chinese, China wants the gold where it can see it.
It's not a huge amount, and it may be a symptom rather than a cause of the rise but it very definitely speaks of a distrust of the London gold repositories.
Why would gold repositories not be considered safe? Well, the gold holders don't necessarily have the gold in hand at any time. Sometimes they lend out the gold to others who can sell the gold and make investments on the profits. See gold carry trade.
So, the gold gets lent at a low interest rate and the gold gets sold. The vault makes an income (and perhaps doesn't even need a vault - more cost savings), the investor has some play money - and when the lease comes due he buys the gold back to settle up.
This selling keeps the price suppressed a little but also means there's a bit more gold "on paper" than there is in reality - which also keeps the price down a little). But when a gold storage has to cover a withdrawal and the gold is lent - they have to go shopping. Depending on how tight the supply is that can push the ask up for those hoping to take advantage of someones bad luck.
So gold has stuck above $1000 USD for a couple of weeks - and that's bad for the dollar because it makes it look weak (well, it IS weak, but it hates to look that way). Well, a couple of days ago the IMF came to the rescue. Under the excuse of trying to create a fund to make loans to troubled economies the IMF has decided to sell 403 tonnes of the yellow stuff.
Come Monday morning, with the rumours of the IMF spigot opening gold dipped back below $1000... but only for a while. Right now it's back up to $1004. Seems like China would love to get rid of some of its dollar reserves. China is ready to buy a chunk of that IMF gold issue, maybe quite a lot.
However, at the beginning of this month it went boom. It's been up as high as $1020 and some and I wondered what could be the cause for it to surge all of a sudden like that.
The I read that on September 3rd, Hong Kong asked for its gold back.
So where had this gold been? Well, since Hong Kong was a British colony its gold had been in London but now that Hong Kong is Chinese, China wants the gold where it can see it.
It's not a huge amount, and it may be a symptom rather than a cause of the rise but it very definitely speaks of a distrust of the London gold repositories.
Why would gold repositories not be considered safe? Well, the gold holders don't necessarily have the gold in hand at any time. Sometimes they lend out the gold to others who can sell the gold and make investments on the profits. See gold carry trade.
So, the gold gets lent at a low interest rate and the gold gets sold. The vault makes an income (and perhaps doesn't even need a vault - more cost savings), the investor has some play money - and when the lease comes due he buys the gold back to settle up.
This selling keeps the price suppressed a little but also means there's a bit more gold "on paper" than there is in reality - which also keeps the price down a little). But when a gold storage has to cover a withdrawal and the gold is lent - they have to go shopping. Depending on how tight the supply is that can push the ask up for those hoping to take advantage of someones bad luck.
So gold has stuck above $1000 USD for a couple of weeks - and that's bad for the dollar because it makes it look weak (well, it IS weak, but it hates to look that way). Well, a couple of days ago the IMF came to the rescue. Under the excuse of trying to create a fund to make loans to troubled economies the IMF has decided to sell 403 tonnes of the yellow stuff.
Come Monday morning, with the rumours of the IMF spigot opening gold dipped back below $1000... but only for a while. Right now it's back up to $1004. Seems like China would love to get rid of some of its dollar reserves. China is ready to buy a chunk of that IMF gold issue, maybe quite a lot.
