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Thread: Gold: What is non-monetary gold?

  1. #1
    Join Date
    Oct 2008

    Gold: What is non-monetary gold?

    Jim Sinclair’s CommentaryCIGA Mike G. shares his research with us on the new items in the trade balance, non-monetary gold.

    Dear Jim,

    “Non-monetary Gold” is a new term for me. After reading the first two pages of the attached, I now understand this classification. Seems like more nonsense to me. Here’s an excerpt for those who like me didn’t understand the meaning of your comment. Now I do.

    “The Issue

    5. The underlying concern in this debate has been to address the perceived distortion of physical trade statistics due to the inclusion of all bullion market transactions undertaken between resident and non-resident counterparties. In the words of Issues Paper 27A, “Inclusion of all gold transactions between residents and non-residents as imports and exports of goods would seriously distort the economic accounts of those countries with large international markets in gold” such as Japan and the United Kingdom.16. As a solution to that problem, there was a proposal for the creation of a new financial instrument classification – Financial Gold – similar in nature to the current SNA concept of Monetary Gold but broader in its scope. Physical gold would then be classified as:

    • Commodity Gold if it were held for industrial use or as a valuable;
    • Non Monetary Financial Gold, if held by financial institutions and/or bullion traders for market making purposes; and
    • Monetary Gold (a subset of Financial Gold) if held by Central Banks as a reserve asset.

    Such a delineation would then regard interdealer trading as transactions in financial assets – not purchases and sales of goods – such that bilateral trading positions could
    then be netted, and resident/non resident business recorded as net financial transactions, that is as financing entries, rather than as trade in goods within the balance of payments.”

    Link to article…

    CIGA Mike

  2. #2
    Non-monetary gold covers exports and imports of all gold not held as reserve assets (monetary gold) by the authorities. Non-monetary gold is treated as any other commodity and, when feasible, is subdivided into gold held as a store of value and other (industrial) gold.

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