End-of-week top gold news

Friday, 15-May-2015

Mehreen Khan (Telegraph) Greece raids IMF emergency account to avoid unprecedented default “Greece avoided an unprecedented default to the International Monetary Fund today after raiding an emergency cash account at the Fund, in a major sign the country is edging ever closer to stiffing its senior creditor.”

Note: The ZeroHedge blog was quick to point out that the raid on the IMF emergency account amounts to the IMF paying itself on behalf of Greece. Another bailout is going to be necessary if Greece wishes to avoid default and perhaps a ‘Grexit’, but now the IMF is indicating that it wants no part of further efforts to save Greece. Europe’s problem child is apparently to become solely a European problem. The saga continues.

Lawrence Williams (LawrieOnGold) China IMF accounts adjustment could lead to new gold reserve announcement “China’s State Administration of Foreign Exchange has announced that the nation is to bring its Current Account reporting in line with International Monetary Fund standards. This will mean that all its reserve assets, including its gold reserve, which is widely believed to be far greater than the 1,054.6 tonnes currently reported to the IMF, will fall under one accounting headline. China, in the past, has reported its reserve assets as a separate item, somewhat parallel to its reporting of its trade account and financial accounts, according to an article in the South China Morning Post.”

Note: When the announcement comes, there are some who think we will find China tripled its gold reserves in the last 6-years.

Lawrence Williams (LawrieOnGold) HSBC WARNS: The world economy faces a ‘titanic problem’ “Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.”

Note: The next recession may in fact require even more ammunition than the last, which will leave the Fed with few options, other than to print like mad.

Michael J. Kosares (USAGOLD) What might be behind today’s jump in the gold price “Over the years, I have written occasionally about the connection between the demand for U.S. government debt and quantitative easing. My contention is straightforward. The primary determinant for quantitative easing is not, as we are constantly told, to keep the unemployment rate down, nor is it to stimulate the economy. (I emphasize the word “primary” as opposed to the word “only”) It is to support the government debt market and keep government in business – not just in the United States but wherever it is employed.”

Note: Mike thinks an absence of demand for government debt may lead to more QE, which is bolstering the price of gold.

Andrew Critchlow (Telegraph) Germans pile into gold amid Greek eurozone default fears “German investors have piled into gold bars and coins in the first quarter of the year as a hedge against European Central Bank policy and the threat of a Greek default bringing down the eurozone. Latest figures from the World Gold Council show that Germans increased their buying of gold coins and bars of bullion by 20pc to 32.2 tonnes in the last quarter, the highest rate of purchases seen in a year.”

Note: Along with concerns over Greece and Russian aggressions, Germans were also pretty adamantly opposed to the ECB embarking on QE. Buying gold seems a pretty logical response to that set of concerns.

Avery Goodman (SeekingAlpha) The Real Reason China Is Buying Up The World’s Gold “China has spent the last 6 years importing thousands of tons of gold and buying all of its own domestic production. . . whoever controls the price of gold against their own currency controls the price of gold against any other currency that gold is denominated in. . . Control over the worldwide currency markets is why China wants to control the gold market.”

Note: I don’t think there is any doubt that China is seeking to eventually establish the yuan as a global reserve currency. Having a large amount of gold as a reserve asset advances the yuan toward that goal. Simultaneously, unseating the dollar as the primary reserve asset would unquestionably hasten the ascent of China.