To me there seems to be so many conflicting storylines when it comes to gold and the US$
* The dollar should plummet as the US economy goes into a tailspin, the Fed is forced to lower rates, the US sees deflation, the trade deficit becomes unmanageable, and foreign bankers and investors switch out of dollars and into Euros, gold, etc. Gold priced in US$ skyrockets.
* The dollar should rise as the world economy goes into a tailspin, and foreign banks and private investors do a classic flight to safety and into the arms of the US dollar, while the Fed tightens again due to inflation. Gold priced in US$ is pressured, gold demand for commercial use weakens
Here's an interesting presentation from the gold bull who runs Bullion Vault, a company here in London where you can buy physical gold bars and keep them in their vault for safe storage.
Yes, I'm thinking of gold again. And I moved a big chunk of change last week into Euros, after these comments by Peter Costello, Australia's treasurer, who pleaded with Asian bankers to "telegraph" their move out of dollars so as not to crash the market.
Treasurer Peter Costello has called on East Asia's central bankers to "telegraph" their intentions to diversify out of American investments and ensure an orderly adjustment.
Central banks in China, Japan, Taiwan, South Korea and Hong Kong have channeled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down American interest rates.
Mr Costello said "the strategy had changed" and Chinese central bankers were now looking for alternative investments.
"Of course you can have an orderly adjustment," he told reporters. "And what I would recommend is that these matters be telegraphed well in advance. I think we should begin preparing ourselves for it."
October 29, 2006
Posted by blogger at 10/29/2006