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Re: Gold’s near future

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  • Mon, Apr 06, 2009 - 01:58pm

    #177
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Re: Gold’s near future

Want to know why gold is going down? Lucky for all of us they print the "explanation" up right there for everyone to see (from today’s CBSMW site):

NEW YORK (MarketWatch) — Gold futures fell Monday for a third straight session, wiping out their yearly gains, as continuing optimism that world leaders are taking collective actions to tackle the global downturn further reduced demand for safe assets, such as gold.

The weakness in gold prices is "a sure sign risk appetite has increased further following the actions of various governments and central banks as well as the combined efforts of the G20 nations last week," said James Moore, a precious metals analyst at TheBullionDesk.com

I actually think this is a very good explanation except it leaves out the fact that the sellers of the gold are not "investors" displaying confidence in the G20. Instead it is various central banks and the IMF helping to create a positive impression of confidence around the meetings.

The price of gold is a signaling mechanism and is routinely used by central banks and their proxies to convey support for various policies.

So is it "a sure sign that risk appetite has increased" or could it possibly be "a sure sign that the central banks and the G20 are seeking to portray their recent actions in a positive light"?

For anyone following the gold market for any length of time, the question is purely rhetorical.

The good news is that this means that the central banks are subsidizing a lower purchase price for gold for any who wish to get it. It is a gift.