Gold is up, but still not near peak
Gold has shown more resilience this week. At last check, it鈥檚 still higher than it鈥檚 been anytime up until鈥� hmm, let鈥檚 check the chart鈥� two weeks ago.
Still, the known big buyers and sellers of the yellow metal are making for an interesting trading environment currently.
The is being pulled down, for example, by news that George Soros is cleaning out some of his considerable position.
The trade hasn鈥檛 shown up in a 13-F filing 鈥� because that will be issued later this month 鈥� but The Wall Street Journal claims 鈥渢he Soros fund has sold much of its gold and silver investments over the past month or so,鈥� according to 鈥渟omeone close to the firm.鈥�
As authoritative as that sounds, the story the WSJ tells is that Soros loaded up on gold to guard against a collapse in consumer demand after the crisis. Gold, the theory goes, would buy more if prices were falling. But now that the Fed has loosened the monetary spigots, and will keep dribbling even after wraps up in June, Soros does not fear 鈥渄eflation鈥� so much.
Likewise, if he鈥檚 selling his gold, he doesn鈥檛 think 鈥渋nflation鈥� is much of a threat either.
Alan Fournier of Pennant Capital is unloading some of his gold too, most likely to take profits as the market gets jittery near this false peak.
Meanwhile, John Paulson is happy to take the other side of the trade鈥� which is helping keep a floor under gold.
The man who made his fortune shorting subprime told investors yesterday that lax monetary policy from the Fed, and the Bank of England, has him convinced gold will head to $4,000 an ounce over the next three-five years.
Mexico鈥檚 central bank added 93.3 metric tons of gold to its reserves in February and March.
We haven鈥檛 seen a number like this since November 2009, when India happily snapped up 200 metric tons of the International Monetary Fund鈥檚 gold stash. Most of the Mexican purchase 鈥� 78.5 metric tons 鈥� came in March, marking the single largest one-month accumulation by a central bank in 10 years, according to the World Gold Council.
Combined with steady purchases by China and Russia since 2003, the news 鈥渟eems to confirm there鈥檚 an appetite now among emerging economies with large forex reserves to add to their gold reserves,鈥� says Matthew Turner, precious metals strategist at Mitsubishi.
Central banks worldwide became net buyers of gold last year for the first time since 1988.
Using the government鈥檚 current CPI calculation, gold would be priced at $2,442 today. And using the government鈥檚 1980 CPI methodology, we鈥檇 be looking at $8,331 鈥� a tad more ambitious than John Paulson鈥檚 $4,000.
--------------------------
海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
