Will Gold be the only Currency?
Commodities / Gold and Silver 2010 Jan 12, 2010 - 06:47 AM GMTBy: Andrew_Abraham
Lets face it…when we look at a $100 Bill. It says this note is legal tender for all debts public and private. More so. It says In God We Trust. However… Can we still believe in the central banks, the FDIC or for that fact any currency because at the end of the day it is just a piece of fine weaved paper. It does not matter if it is the US dollar, the Japanese Yen or the Swiss Franc… It is just paper. I am not a gold bug nor do I know where the gold market is headed. I am a trend following commodity trader who just reacts and tries to follow trends when they happen.
However many central banks have been buying gold. Even small countries like Sri Lanka and Mauritius have been buying gold. Needless to say the populace of China and India has been buying gold. The fact is that Wall Street gambled and placed very bad bets that resulted in unprecedented losses, losses that are being passed on to the American taxpayer. Just the interest on the debt is shocking.
Looking at the facts is very sobering.
It was the first time in 20 years that gold purchases for investment purposes outpaced gold purchases for jewelry demand For the first time in over 20 years, central banks became net buyers rather than net sellers of gold.
India bought 200 tones of gold in the fall of 2009 and what was most shocking is that they were willing to pay the market price for gold.
Rumors have been flowing around that Arab oil producing states want to to stop using the US currency for oil trading China, Russia and France.
The Iranian oil bourse allows oil sales in several currencies except the US dollar.
There was an agreement between ten member states in Central and South America and the Caribbean to use the Sucre rather than the dollar for intra-regional trade.
The fact is that since 1973, the US has been able to accumulate huge deficits thanks to an agreement with OPEC to price oil in dollars exclusively. This system worked until the 2008 financial crisis.
Look at this last fact and tell me how comfortable you feel. The US must refinance at least two trillion dollars of debt in 2010. The FED can refinance in one of three ways:
1. through the sale of bonds,
2. through increased taxation
3. through monetization by the Federal Reserve
What is ironic to me as a trend follower and follower of the commodity markets are all of those who think all is clear. The Great Recession is over.
Time will tell.
Andrew Abraham
www.myinvestorsplace.com
Andrew Abraham has been in the financial arena since 1990. He is a commodity trading advisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.
Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)
© 2010 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
