Tuesday, September 8, 2009

International Flight to Gold ?

Will the world run to the safety of gold to replace the dollar as the chief form of international reserves, before the U.S. can force SDRs, its chosen alternative to the dollar, on the world? It might just be happening now.

A friend sends along this comment from Adrian Douglas:

I have recently described what is going on in the physical market to be the equivalent of a "run on the Bank of the Gold Cartel." There are many factors that are leading to that conclusion and here are just a few:

-- China is a confirmed large buyer of gold, along with Russia.

-- Germany has apparently asked for its sovereign gold stored in New York to be returned.

-- Hong Kong is repatriating its sovereign gold from London and will be the repository for gold to back the Shanghai Futures Exchange.

-- Greenlight Capital sold $500 million of the GLD exchange-traded fund and bought physical bullion.-- The European Central Bank gold sales have dried up to almost nothing.

-- AnglogoldAshanti has reduced its hedges to less than one year of production.

-- Central banks are net buyers of gold for the first time in more than 20 years.

-- China has declared its right to default on commodity derivatives.

-- China is encouraging its citizens to buy gold and silver.

-- The contango on silver and gold has almost disappeared.

-- Gold and silver movements from the COMEX warehouses are inconsistent with the delivery notices.

-- Mine supply of gold continues to contract


  1. Wenzel,

    I hinted at a similar idea in our recent comments discussion on an earlier post of yours.

    I also just blogged about this a bit more in response to Gary North on the Five Flations, here: http://thejungleiseverywhere.blogspot.com/2009/09/northflation.html

  2. Robert, I went to Adrian's website to find the full article, but because have internet-onset ADD, got diverted to another article with this included in the body:

    "John Williams at shadowstats.com reports that his reconstructed M3 is only growing at a rate of 6% annualized. I however question the accuracy of the input data. I don’t think that all the actual monetary injections are being reported, which
    is probably one reason the FED does not want to be audited. Neil Barofsky, Inspector General of the TARP, recently testified before Congress that the total credit lines of the 50 or so stimulus programs totaled 23.7 Trillion dollars. A Treasury spokesman countered with a statement that only 2T$ had so far been spent. Where does that 2T$ appear in the M3 data? It doesn’t! If government officials have the capacity to access 23.7T$ of credit who will bet me that they will not spend it? Clearly money is being pumped into the system which is bypassing the reporting system."

    (Full article is here)

    He goes on to predict that the S&P is headed north (far, far North) and will nominally never again visit its March 2009 low.

    Can you comment on his thoughts? Thanks... Steve

  3. http://bluelori.blogspot.com/2009/09/peter-schiff-on-china-dumping-dollar.html

  4. Dollar Tumbles

    The greenback's weakness came against a backdrop marked by a push higher in equities and improving economic data abroad -- as well as renewed questions about the role of the dollar as the world's premier reserve currency.