The big news over the weekend is that "The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund". The bigger news is that Gold and Silver Bulls didn't give a damn as both are higher this morning. Silver has hit a new 27 year high overnight. And the biggest news of all...when the IMF sells Gold, the price of Gold usually explodes higher. Let's check the headlines:
G7 approves IMF gold sales
TOKYO (Reuters) - The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund from April as part of a broad reform of its budget, Italian Economy Minister Tommaso Padoa-Schioppa said.
"There was an acceptance among the G7 that resources should be raised by selling gold," Padoa-Schioppa, who is also the head of the IMF's steering committee (IMFC), told reporters after a meeting of G7 finance ministers in Tokyo.
"This is arguably a good time to consider selling some of these gold holdings and investing the proceeds in financial securities with positive yields," Morgan Stanley analyst Stephen Jen said.
"Financial securities with positive yields?" I asked myself. What could have a more positive yield these days than Gold? What a brilliant idea, sell your Gold and by bonds with negative real rates of return. And we wonder why the World's financial markets are in shambles...wonder no more people.
Gold's path to $1,000 an ounce now clear?
This past weekend, yet again, the International Monetary Fund announced it would like to sell some gold. Since gold went bullish in 2002, official sector noises of this type have often appeared just as gold began an important move up. Further back, the IMF gold sales in 1978-80 heralded the great gold surge of that time.
The IMF sold just 50 million ounces between 1976 and 1980 and the price of Gold more than doubled in price. The IMF could sell all their Gold it it would not stop the inevitable in Gold. And bear in mind that NONE of this Gold will ever actually see the "gold market". It will all be bought by BIG buyers. Most notably and more than likely it will be bought by all the bullion banks that are either short Gold or owe the world's central banks Gold they borrowed. This is really probably just a big plan set in motion for the US to get back all the Gold they "used to have" in Ft Knox before they loaned and/or swapped it all out as part of the FAILED effort to supress Gold prices.
Mobilization of IMF gold just a sign of central bank desperation
Mobilization of IMF gold suggests that individual central bank gold reserves are nearing exhaustion or that individual central banks are no longer willing to dishoard what they have left.
The GATA post just above also raises several points pertaining to just how rediculous any IMF Gold sales would be relative to today's Gold environment. It should also be seriously noted:
The IMF's gold reserves are the third largest in the world after the United States of America and Germany.
The Fund is required under United States Law to gain support from the U.S Congress before selling any gold.
The US Congress would be hard to persuade on this issue, but should they buckle and allow the sales, we'll know that a lot of the Gold in FT. Knox has been on vacation, and the guardians would like to see it return home.
Bob Chapman, The International Forecaster, said it best in his post on Goldseek this weekend:
"...gold is not going to go through the ozone. Gold is not going into the stratosphere. Gold is not going to the moon. Gold is not going into the solar system. Gold is not even going intergalactic. Gold is going inter-dimensional as it passes through a wormhole and explodes past the Einstein-DeSitter radius at the outermost bounds of the visible universe!"
Nevertheless, as Dow Theory Letters' veteran Richard Russell put it: "Gold only 10 bucks from its high, and so far it hasn't let any of the "profit-takers" back in at lower prices. Ah well, the danger of trading out in a bull market." And that's a fact Jack. Breakouts in Gold at 910 and Silver at 16.85 Friday might now be considered support, and "possibly" offer an opportunity to reestablish postions, or add to those already owned should those prices "appear" again. However, caution is advised as the daily charts of BOTH Gold and Silver continue to show a bearish divergence in price and RSI.
I have been trying to ascertain the reason for Gold's unusual reaction to interest rate announcements and "proclamations" by the ECB last Thursday. You'll recall that Gold rose in the face of a very strong bid in the US Dollar as the EURO got kicked in the shins by the "prospect" of interest rates in Euroland inthe near future. A very little reported news item Wednesday and Thursday of last week about US Treasury auctions may explain some of the resilience in Gold late last week.
Treasuries Fall as 10-Year Auction Draws Lowest Yield Since '78
``Do investors want to bear hug a 10-year note with these yields or a 30-year bond near lifetime lows?'' said William O'Donnell, a U.S. government bond strategist at UBS Securities in Stamford, Connecticut, one of the 20 primary dealer firms that trade with the central bank. ``We don't think so.''
Investors will now turn to Gold. I think the crappy 10 year, and 30 year auctions the following day, are just the tip of the iceberg as investors begin to wake up to the inflation tsunami about to swamp the USA...and the World. Investment demand will soon over take supply concerns this year, and be the #1 driving force behind the rise in Gold and Silver prices.
IMF Fact Sheet: Gold in the IMF