Gold - The
Weekly Global Perspective
Week ending
1st July, 2005
Julian D.W. Phillips
Gold-Authentic Money
Jul 5, 2005
Gold's Independence
from Currencies - What does that mean, really?
The independence of gold in
the different currencies does not mean that gold will move against
all currencies at once. No, each different gold market
faces different facets of the global problems that are
now building up so will react to the gold price in their own
situation in their own currency and not be driven by the
$ price of gold in isolation. For instance, when the €
falls, Europeans will buy gold, irrespective of the $
price, as they are concerned with their own € saving
and investments. If the $ falls, then $ followers
of gold will buy, probably at differnet times, because of different
news. But global problems are flowing over into each of the global
gold markets at different times, creating seemingly independent
market reactions.
 Only the rare, perspicacious,
cosmopolitan Investor will be able to see the opportunities in
the different currencies and combine his gold dealing to dealing
in gold and gold related investments in different currencies.
For instance, if you believe
the € will fall against the $ and you tend
to be a 'bull' of gold in the $, then it would be better
to buy gold with the €, to maximise profits. This
type of Investor is rare, but usually successful. Just as we
'ratio' trade, so we should extend to take the weakest currency
against gold to maximise profits. Our review of the different
currencies below, may help you do this? Please contact us if
you need clarity on this.
The Central Bank
Gold Sales to date!
Source: World Gold Council
Note 1) The German sale
of 3.4 tonnes was not part of the C.B.G.A agreement, but a sale
for coins, but their sale has been included by many people. We
included it to clarify this point.
Note 2) Likewise the E.U.
sales were unannounced and no clear statement on their future
sales was included in the future, so they have made no commitment
to sell and so there is no amount remaining. It could be they
withdraw and Germany replaces them, we don't know. The sale could
even have been German, we don't know. If Germany returns to the
market to sell the picture changes again.
These figures are the latest
issued by the World Gold Council in its three monthly update.
As you can see from these figures there remains 91 tonnes
to be sold in the months July through to the 26th September,
which marks the end of the first year of the agreement amongst
the Eurozone Central Bankers. Clearly they assumed that the summer
months would be quieter, so they allocated less gold for sales
so as not to disturb the market price too much.
We can see that the agreement
is very much on track, despite the loss of confidence in the
€ seen at present in the market place. Will this
change their policies? But Germany remains the enigma.
 The figures
give rise to certain questions:
1. Provided the remaining 91
tonnes is sold in the next three months until the 26th September
2005, there will be only 1540 tonnes remaining to be sold
over the next four years of the agreement from the public
commitments made so far.
2. Will Germany take up its option to sell 500 tonnes under the
agreement next year? If it does not, then this will leave less
than 1,000 tonnes to be sold over the next four years under the
agreement, provided the balance of 91 tonnes is sold by the 26th
September this year. Will other sellers replace Germany?
3. Will the signatories of the agreement disclose their sales
beforehand? The sales by the E.C.B. were not disclosed before,
but are now set at 47 per annum through the agreement. The sale
of 53.8 tonnes from the end of April until the 18th of June has
not been attributed to any particular seller, why not?
The way the agreement is going
indicates that there is a co-ordinated policy between the signatories
to maximise the prices available to them in the market place,
without deviating too far from the targeted 'ceiling', monthly
requirements. This points to Germany going ahead with its sales
of gold from October onwards. We would also expect an unannounced
seller to appear in the market place from amongst the signatories,
as occurred in May/June this year, if the total 'ceiling' of
2500 tonnes is to be reached by the end of the agreement.
From now onwards, we expect
the agreement to suffer opposition as the € suffers
more loss of confidence. With the proceeds arriving in $
form, or in € form, and gold moving upwards, this
policy is clearly now, inappropriate when measured by sound investment
criteria.
However, the E.C.B. policy
of gold forming 15% of E.C.B. reserves will be extremely difficult
to maintain if the gold price rises, as now appears likely. At
what point will the Eurozone Central Bankers, in the face of
declining currency values halt the gold sale policy. Right now,
it appears most unlikely there will be any change in the agreement
or the amounts intended for sale, we are sad to say.
After all, Gold is no friend
of Bankers! Bankers would love a cash-free gold-free world in
which they dictated values and controlled monetary systems. Gold
holds them to account and leaves individuals controlling their
own wealth, as we can see in the India of today.
The Global view is
the professional picture!
Many observers in the U.S.A.
and elsewhere find it difficult to look at the rise in gold being
the result of the fall in the €, not as an isolated
event, but one soon to be followed by a return to a $
/ gold dominance of the gold market. This won't happen,
why?
The problem is really an emotional
one. When you have visited another country, how long has it taken
you to stop relating currency values to your home currency? Every
meal, every price you see, you relate back to the cost in your
own currency. Foreigners actually feel that the locals are foreign
when they are overseas. A similar phenomena is at work here too.
The difficulty in taking a global view of gold is one of familiarity.
To stand back and take all the different parts and put them into
a complete global picture will take time and adjustment, but
to understand the gold price, one has to do that. That's what
we are doing and hopefully we can help you. The benefits are
you being able to buy and sell with understanding and confidence,
when others don't have this insight and perspective. This has
to lead to greater profits for you personally!
Julian D.W. Phillips
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