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Thread: GOLD PRIMER 1: RELATIONSHIP BETWEEN GOLD & THE USD

   
   
       
  1. #21
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    Re: GOLD PRIMER 1: GOLD as a canary on the health of the USD

    Alice Schroeder gives a good explanation on the historical relationship between gold and financial crises. Gold Tells You U.S. Bubble Hasn’t Popped Yet.

    While Rolfe Winkler explains that "Gold Bugs" are using gold as a a haven against sudden currency depreciation which can trigger mega-inflation.

    Currency is like any financial innovation, an obligation secured by assets. When the obligation is perceived to have increased far beyond the level justifiable by the assets, which in this case make up a country’s economy, a bubble has formed.

    And when creditor nations refuse to continue financing the US deficit which is now running at 12%, she can experience a sudden stop as described for the Latin American countries here . Rolfe asks rhetorically: Why Gold, If Deflation Is the Threat?

    Under this environment, holding cash or saving it in a bank can be risky. That explains why more and more people are buying gold as a hedge against paper currency and profligate Central Bankers.
    py

  2. #22
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    Re: GOLD PRIMER 1: Gold vs. Paper Money

    Gold vs. Paper Money

    Von Lars Schall
    Sonntag, 4. Oktober 2009

    Egon von Greyerz, Managing Partner of Matterhorn Asset Management AG in Switzerland, is known for his clear cut analysis on worldwide financial developments. His message: “The Dark Years Are Here.” In an exclusive interview for MMnews, Mr. von Greyerz reflects on hyperinflation, the end of the “US empire” and his expectations related to the gold market.

    Egon von Greyerz is the Founder and Managing Partner of Matterhorn Asset Management AG in Zurich (--->matterhornassetmanagement.com). Matterhorn and its gold investment division GoldSwitzerland are part of the Aquila Group, which is the largest independent asset management group in Switzerland. Mr. von Greyerz, born and educated in Sweden, started his career as a banker in Geneva, lived and worked for 17 years in London and has been actively involved with financial investment activities including Mergers and Acquisitions and Asset allocation consultancy since the 1990’s. Every month, he publishes a Gold Market and World Economy Newsletter at Matterhorn’s website to share his views on current developments. GoldSwitzerland’s website is: --->www.goldswitzerland.com.

    Mr. von Greyerz, recently I did an interview with investment manager Marshall Auerback and asked him about his position on hyperinflation in the United States.[1] You have read his answer to that question. What are your thoughts on his arguments related to this topic – and why do you have a fundamental different opinion than Mr. Auerback?

    Virtually without exception, hyperinflation arises as a result of a collapse of the currency. It does not stem from demand pull or costs running out of control.

    The prerequisites for hyperinflation are a deflationary or non-inflationary recession/depression leading to major government deficits. ....
    py

  3. #23
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    Re: GOLD PRIMER 1: The USD has replaced the Yen as the Carry Trade Currency

    The New Definition Of The Dollar

    Posted: Oct 03 2009 By: Jim Sinclair

    My Dear Friends,

    It is very important that the new definition of what the US currency is now be fully understood.

    The US dollar is now under the pressure of the Carry Trade as well as all other factors.

    The cost of US dollar simplified is a means between the Libor rate and the shorter term US treasury rates. The size of available funds is quite enormous according to your financial status. As an example, what limit would there be for a Goldman Sachs or JP Morgan?

    The operation increases the amount of dollars in transactional supply. Transactional funds are funds in the marketplace versus (as an example) funds being hoarded by US banks now.

    The Carry Trade is initiated and then covered by borrowing and shorting the US dollar to guard against downside risk of the basic long.

    Carry operations are generally not short term in their outlook.

    By borrowing the currency of carry and shorting it the risk is contained by buying the higher yielding currency instrument. If that currency risk is covered, a classic transaction is made.

    The Carry Trade is in many cases far from classic, and are used to fund higher risk transactions.

    Either way it puts supply into the US dollar transactional market and defined, active and strong trade interest to hold down the value of the carry currency, now the US dollar.

    The Carry Trade generally puts a multi-year and extremely bearish factor on the currency selected by the carry traders as the carry currency.

    A waning of Green shoots and the growing transparency of MOPE as illusionary encourages the Carry Trade. This nullifies the propaganda that a lower equity market or slow business recover to no business recovery is good for the dollar as a flight to safety.

    I am sorry to say, but a US depression would be Christmas for a dollar Carry Trader.

    The US dollar controls the price of gold, so therefore the more pressure on the downside of the US dollar, the more upside pressure on gold.

    Since the Carry Trade is usually far from classic and seeks to fund higher risk transactions than the classic form, the inviting conclusion is the Carry Trade will now be long gold.

    The count of days will not be far off the mark, if off the mark at all.

    One thing is for certain: The US dollar is very far from a SAFEHAVEN under its new definition as the Carry Currency of choice..

    Gold is going to $1224, $1650 and then on to Alf’s numbers.

    Respectfully yours,
    Jim

    More.
    py

  4. #24
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    Re: GOLD PRIMER 1: Why gold has shot up to USD 1037/oz

    This may explain why gold price shot up briefly to USD 1037/oz today - the Arabs may drop the USD as the currency to pay for oil and adopt a basket of currencies that may include gold.

    The demise of the dollar

    In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

    By Robert Fisk

    Tuesday, 6 October 2009

    In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

    Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

    The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years. The Independent Business.
    py

  5. #25
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    Re: GOLD PRIMER 1: RELATIONSHIP BETWEEN GOLD & THE USD

    and its now 1039...however no one has come out to officially confirm the "rumour" yet...

  6. #26
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    Re: GOLD PRIMER 1: RELATIONSHIP BETWEEN GOLD & THE USD

    The denials will start taking place now. Price will drop. Then buy. This IS IT. (maybe)


  7. #27
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    Re: GOLD PRIMER 1: Will the Dollar get an “Arab oil shock”?

    Will the Dollar get an “Arab oil shock”?

    By F. William Engdahl, 7 October 2009

    Arab oil producing nations and the some world’s largest oil consumers including China and Japan are reliably reported to be secretly planning a long-term exit from pricing their oil trade in dollars. If true, it would spell the death knell for the dollar as world reserve currency and for the USA as global economic power.

    Ever since Washington tore up the Bretton Woods treaty in August 1971 and went onto a “dollar paper reserve system” instead of a dollar backed by gold, the United States, as the world’s most powerful military power, has been able to dictate financial terms to the world. Nations like Japan and later China, dependent on US export markets, would dutifully invest their trade surplus dollars into US Government debt, in effect financing wars such as Iraq or Afghanistan they opposed. They saw no choice. Arab oil producing countries, under US military pressure, were forced to sell oil only in dollars, a direct prop to the dollar when the US economy was in terminal decline. That may be rapidly about to come to an end.

    According to a leaked report from Arab Gulf oil producers, there have been a series of secret meetings in recent months between the major Arab oil producers, including Saudi Arabia, and reportedly also Russia, together with the leading oil consumer countries including two of the three largest oil import countries—China and Japan.

    Their project is to quietly create the basis to end a 65-year long “iron rule” of selling oil only in US dollars. As I document in my book, Mit der Ölwaffe zur Weltmacht (Kopp Verlag), following the 400% oil price shock of 1973, which was deliberately blamed by US media on “greedy Arab Shiekhs,” the US Treasury made a secret trip to Riyadh to tell the Saudis in blunt terms that if they wanted US military defense against potential Israeli attack, that OPEC must privately agree never to sell oil in currencies other than the US dollar. That “petrodollar” system allowed the US to run staggering trade deficits and remain the world reserve currency, the heart of its ability to dominate and control world financial markets until the crisis of the sub-prime real estate securitization in August 2007.

    The participants in the project reportedly envision using a basket of currencies reflecting producer-consumer trade relations, one backed by gold as a solid backbone. It would not initially be a new currency as some have surmised, but rather an arrangement that would eliminate the risks of pricing oil sales in fluctuating and likely depreciating dollars.

    Iran announced recently that in the future it would sell its oil for euros not dollars. According to these reports, the basket of currencies would include a mix of yen, euros, Chinese yuan, gold. Brazil would reportedly join as both a producer and consumer country.

    The secret plan was first reported by respected Middle East correspondent, Robert Fisk, in the UK Independent. Fisk claims to have confirmed existence of the plan from Arab as well as Hong Kong Chinese sources. I have confirmed from very senior and well-informed Gulf sources that the talks are in fact real. The oil producing countries have been fed up for years about having to price their oil in dollars or face US reprisals. They are steadily losing as the dollar depreciates against other currencies and against gold. Following the US declaration of the War on Terror by the Bush Administration after September 11, 2001 most leading Arab oil producing countries privately saw US policy as being aggressively aimed at them. The un-justifiable US invasion and occupation of Iraq in 2003 merely confirmed that as well as subsequent US threats against Iran.

    Initially various governments involved in the leaked plan have publicly denied vehemently such a plan. That in no way invalidates that such moves are afoot. They are well aware that the United States as a wounded tiger can be far more dangerous. The leak of the plans in the world media, whether every detail reported by Fisk is true or not, feeds what is an inevitable decline in the dollar as a reliable reserve currency for world commerce.

    What is not clear is what the potential response of Germany and France, the two pivot powers within the EU will be. If they decide to cast their lot with oil producing and consuming countries, they open their doors to vast new trade and investment potentials from the countries of Eurasia. If they cringe from that and decide to remain with the British Pound and US dollar, they will inevitably sink along as the dollar Titanic sinks.

    With that decline of the US dollar goes the lessening of the political power of the United States as sole economic and financial superpower. We face very turbulent waters ahead and gold not surprisingly is gaining in this uncertainty.
    py

  8. #28
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    Re: GOLD PRIMER 1: Central Banks getting out of the USD.

    Quote Originally Posted by pywong
    Will the Dollar get an “Arab oil shock”?
    12 October 2009
    Central Banks More Aggressively Reducing US Dollar Exposure In Their Reserve Portfolios

    “Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it,” said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. “It looks like they are really backing away from the dollar.” jessescrossroadscafe.
    py

  9. #29
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    Re: GOLD PRIMER 1: GOLD & THE USD - Counter-party risk

    Soon, this word will be on everybody's lips - Counter-party Risk.

    Listen to James Turk on where gold is headed.

    http://www.youtube.com/watch?v=ewP6H3-0JOw
    py

  10. #30
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    Re: GOLD PRIMER 1: GOLD & THE USD - Counter-party risk

    from TA point of view, gold is very expensive already. RSI is approach 70. Its time to sell.
    Just like previous Mar 08,POG was USD1021/oz the RSI is 70+ then go whack down all to USD790+

    http://stockcharts.com/h-sc/ui?s=SLV...d=p47677454673
    http://stockcharts.com/h-sc/ui?s=IAU...d=p47677454673

    But from Fundamental point of view, gold is set to raise due to USD printing press. etc..

    So I also very confuse on what to do?
    If one sell, what to do with the fiat $$$ we have?
    If dun sell, then the precious metal just sit there doing nothing. Quite unhealthy if there is no movement.

    Quote Originally Posted by pywong
    Soon, this word will be on everybody's lips - Counter-party Risk.

    Listen to James Turk on where gold is headed.

    http://www.youtube.com/watch?v=ewP6H3-0JOw

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