Chart shows supply of money shrank over last one year (in red) On one U.S. exchange alone, the December Gold contract is financed with roughly $12 billion of borrowed money, margin debt. Those are borrowings that require winnings, and losses cannot be tolerated. Any rally, even of a short-term nature, in the value of the U.S. dollar will send those borrowers of all those billions scurrying for the door.
Neither politicians nor central bankers are going to develop financial religion, and that is certainly true of the failing Obama Regime. Keynesianism continues to dominate both economic thinking and policy. No greater intellectual failure exists than Keynesianism, but it continues as the dominant economic ideology.
Keynesianism has demonstrated neither an ability to foresee the economic future nor the ability to serve as a tool for successfully managing the economy. Gold has served as a successful defender of wealth from the disastrous Keynesian policies of the past decade, and will continue to do so. However, do not let one be trampled by the momentum traders as they rush into the room.
By Ned W Schmidt CFA, CEBS
MyView
- remember what I said, physical gold & financial asset gold (let me call it fantasy gold) is two different world.
- the value of fantasy gold traded at times are more than 10 times the value of physical gold on the earth surface
- fantasy gold i.e. Dec gold contract is financed by USD12 billion borrowings, any small rally in US dollar will send those borrowers scurrying to the door
- physical gold demands for jeweries had dropped over the last 20 years (70% gold produced are used for jeweries)
- so, when US dollar rally, what will happen - gold will drop, crude oil will drop, share market will drop, commodities will drop (almost most asset class will drop together)
No comments:
Post a Comment