Simply a must read on gold prices , with respect to the Telegraph article on why Gordon Brown sold the bottom in Gold. Courtesy Jessie.
Although this is nothing new, as I and several others have reported this several times in the past, with a very nice documentary on it having been done by Max Keiser, this is still a very important article for two reasons.
First, it lays out rather nicely the gold panic of 1999 and Brown’s Bottom, which is the low in the price of gold achieved by the dumping of 400 tons of gold into the world market at an artificially low price by the British government.
This was done apparently to bail out a bullion bank or two who were enormously and irretrievably caught short of gold by the carry trade.
Second, it provide a good description of the gold carry trade. When gold is leased out by a central bank, the bullion bank takes possession of it and sells it into the market, and invests the proceeds. At the end of the lease period, the bullion bank buys the gold bank in the open market and returns it to the central bank.
Although the gold likely never changes physical location in this process, the claim or title to the gold does change hands, although that change in claim may not be adequately reflected in the public records.
Although the author does not mention it here, there is some thought that the ‘sale’ of the centra l bank gold at private auction is in reality a paper transaction between the central bank and the bullion banks who are short leased gold from the bank, and are unable to return it without causing a price disruption in the world market.
Guest post by Lance Roberts.
“Chance has put in our way a most singular and whimsical problem, and its solution is its own reward.” – Sherlock Holmes
Very much like Sherlock Holmes, analysts everywhere are analyzing each and every data point relating to housing hoping that it is “the” conclusive bit of evidence that proves the long awaited housing recovery has arrived. The recent spate of housing numbers, while improved over recent months, have bolstered those calls that the bottom is “in” and a“recovery” has begun. The mystery of the “elusive recovery” continues.
We have been very vocal that while we may have indeed seen the “bottom” the ensuing “recovery”may be a far more elusive. (See here, here and here) However, there are three major clues that housing will continue to elude recovery for quite some time – global drag, employment and the velocity of money.
Clue 1: Global Drag
It is entirely understandable why everyone wants housing to recover. From a homeowners standpoint, particularly the 1/3 of Americans who are underwater in their mortgage, a recovery in housing gives them not only a psychological boost but also the options of selling, which offers mobility, or simply refinancing to lower monthly payments. Economists and other financial analysts believe that a recovery in housing is needed to boost economic growth from the large multiplier effect of each dollar invested in the overall economy. However, residential investment today, as a percentage of GDP, is far less impactful than it has been in the past. Currently residential investment is near the lowest levels on record as a percentage of economic growth.
Is the word PIIGS to be extended with another “S”? Slovenia, the little nation and a part of former of former Yugoslavia, is showing similar signs to several of the other PIIGS countries. PIIGSS here we come. Facts by Edward Hugh.
Slovenia is in the news. According to press reports (and here) solving the problems which have accumulated in the country’s banking system may well mean the country is next in line for some sort of EU bailout assistance. Speculation was fueled last week when ECB Governing Council member and Bank of Slovenia Governor Marco Kranjec said that the country may well eventually need assistance, even if for the moment it will not be necessary. Sounds a lot like the other denials we have heard just before the “happy event”.
“We do not exclude anything … but for now this is an entirely hypothetical question,” he told his conference audience,”Conditions (in the Slovenian banking sector) are going in the bad direction, but for now I do not see a reason that Slovenia would need to ask for (international) help.” He also made the point that “Yields on our (Slovenian) debt are very high but poor availability of (financial) resources is even more worrying,”