Central banks and their holdings of gold have been widely discussed. Below is an article exploring the subject in depth. From Voxeu.
On 7 August 2009, the European Central Bank released the followingJoint Statement on Gold:
“In the interest of clarifying their intentions with respect to their gold holdings the undersigned institutions make the following statement: Gold remains an important element of global monetary reserves. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2009, immediately after the end of the previous agreement. Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes. The signatories recognise the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceilings. This agreement will be reviewed after five years.”
As the new savior of the World, Apple, is about to save the economy, here is a neat little summary of the decade leading up to the mess that started in 2007. From the revived The Baffler. “A résumé filled with grievous errors in the period 1996–2006 is not only a non-problem for further advances in the world of consensus; it is something of a prerequisite. Our intellectual powers that be not only forgive the mistakes; they require them.”
In the twelve hapless years of the present millennium, we have looked on as three great bubbles of consensus vanity have inflated and burst, each with consequences more dire than the last.
First there was the “New Economy,” a millennial fever dream predicated on the twin ideas of a people’s stock market and an eternal silicon prosperity; it collapsed eventually under the weight of its own fatuousness.
Second was the war in Iraq, an endeavor whose launch depended for its success on the turpitude of virtually every class of elite in Washington, particularly the tough-minded men of the media; an enterprise that destroyed the country it aimed to save and that helped to bankrupt our nation as well.
And then, Wall Street blew up the global economy. Empowered by bank deregulation and regulatory capture, Wall Street enlisted those tough-minded men of the media again to sell the world on the idea that financial innovations were making the global economy more stable by the minute. Central banks puffed an asset bubble like the world had never seen before, even if every journalist worth his byline was obliged to deny its existence until it was too late.
After the last 12 months of craziness traders can be forgiven if they’ve become inured to moves in precious metals. To those who swore off semi-precious silver last summer it’s time to rue the day: Silver has rather quietly staged a more than 20% rally since the beginning of 2012.
According to Michael Purves, chief market strategist at BGC Financial, silver is apt to warrant more attention. “Silver is a poor man’s gold and it’s also very volatile,” he says. “I think a lot of that volatility will be skewed to the upside”.
And by “upside,” he means a move to all time nominal highs. The semi-precious is “setting up for something more powerful; we could see $50 later this year,” he states.
Remember geopolitical risks? Investors have once again started thinking of those green shoots and normality, especially since Greece is fixed. With vol trading at rather depressed levels while the markets have enjoyed quite a bull ride, with declining volumes, it is appropriate reconsidering what could be around the corner. Forget about the calm summer coming up, and be prepared for the five storms that will mark the summer of 2012. From GEAB No63 below.
In its January 2012 issue, LEAP/E2020 signalled the current year as that of the world geopolitical swing. The first quarter 2012 has, to a large extent, started to establish that an era was in fact coming to an end with, in particular, the Russian and Chinese decisions to block any Western attempt at interference in Syria (1); their stated desire, associated with India (2) especially, to ignore or circumvent the oil embargo fixed by the United States and the EU (3) against Iran; the increasing tensions in relations between the United States and Israel (4); the acceleration of the policy of diversification out of the US Dollar led by China (5) and the BRICS (but also by Japan and Euroland (6)); the premise of change in Euroland’s political strategy at the time of the French electoral campaign (7); and the intensification of actions and statements fuelling the rising strength of trans-bloc commercial wars (8). In March 2012, we are far from March 2011 and the “hustling” of the UN by the USA/UK/France trio to attack Libya. March 2011 was still the unipolar world of after 1989. March 2012 is already the post-crisis multipolar world hesitating between confrontations and partnerships.
The markets started this year with the risk on trade. Silver and Gold dominated the bull run, tightly followed by some equity markets such as the Indian Sensex. It has been a climb of the famous wall of worry, but still, it is a great bull continuing to dominate, or? Both the precious metals have turned much lower compared to the high levels we saw earlier this year. Ok, no problem, the equity rally is still doing well. Yes, it is, at least the DAX is the new “leader”, but the emerging leader, Sensex, has not taken out new highs. On the contrary, the market is downsome 6% from the highs we saw in mid February. If Silver, Gold and the Sensex showed the risk on trade until mid February, maybe the relative underperformance of the risk on trade is showing weakness ahead?