+ 15 reasons to own gold +, page-2

That article was primarily written for the US where gold is a prime commodity.
Unfortunately, increased gold prices in terms of the USD have not sufficiently expressed themselves in foreign currencies, hence I invest in Canadian explorers.

It is possible that some currencies may collapse or depreciate but the Canadian currency is highly rated after the Swiss Franc and thus is likely to come out reasonably well compared with all currencies when the going gets tough.

There are a number of potential time bombs present:
Quote:
3. "Alarming Financial Deterioration in the US:
In the space of two years, the federal government budget surplus has been transformed into a yawning deficit, which will persist as far as the eye can see. At the same time, the current account deficit has reached levels which have portended currency collapse
in virtually every other instance in history".

And the latest from Roach, today:
"To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day.
That is an amazing 80 percent of the entire world's net savings. Sustainable? Hardly.

Comment: That is if they want to buy US depreciating Bonds.
_______________________________________

Quote:
8. Large Short Positions:
"To fill the gap between mine supply and demand, Central bank gold has been mobilized primarily through the leasing mechanism, which facilitated producer hedging and financial speculation. Strong evidence suggests that between 10,000 and 16,000 tonnes (30- 50% of all central bank gold) is currently in the market. This is owed to the central banks by the bullion banks, which are the counter party in the transactions".

AND

10." Rising Gold Prices and Low Interest Rates Discourage
Financial Speculation on the Short Side:
When gold prices were continuously falling and financial
speculators could access central bank gold at a minimal leasing rate (0.5 - 1% per annum), sell it and reinvest the proceeds in a high yielding bond or Treasury bill, the trade was viewed as a lay up. Everyone did it and now there are numerous stale short positions. However, these trades now make no sense with a rising
gold price and declining interest rates.
__________________________

COMMENT: Summarizing the position, the Central Banks have leased out a massive supply of gold to Bullion Banks at very low interest rates.

The Bullion Banks would have sold most of it and then lent the money out at much higher rates.

With ever increasing prices of gold, the Central Banks may want some or all of the leased gold back on the stipulated date.

There is a grave suspicion that
1. Much of this gold is not anymore in the market.
2. The Central Banks won't be seeing all if not most of their gold back.
The Bullion Banks will be forced to buy back the owed gold from the market with added complications.

All this is well explained by TED BUTLER:
http://www.gold-eagle.com/gold_digest/butler414.html

Yes, the world of gold is fascinating but will be a dangerous one for some ie Bullion Banks.

Gerry
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