Inflationary Concerns
Sally Limantour
February 9, 2007
A heavy flow of US Fed dialogue today could rekindle inflationary concerns. The Fed’s Poole is speaking now (7:45 am) and Fed Fisher at noon. With oil prices strong the March crude oil punched through that quasi triple top of 60 yesterday and gold seems to have solid footing now above the $650 level. There are a number of bullish themes for gold right now. First, as mentioned on Feb 7th, the European legacy banks are selling far less gold to meet the quotas of the Washington Agreement. The IMF is considering selling a “limited amount of gold” and in the past six to seven weeks the monetary base has exploded to the upside rising approximately $18 billion since the last week of December.
Bill Fleckenstein(http://www.fleckensteincapital.com/) wrote, Golden Glad Tidings? On the subject of gold, I received an email from a friend who said…
“The China Gold Association is claiming that the country plans to raise reserves by 3,500 tons over the next five years. (The Washington Accord selling agreement is 2,500 tons).
If that is true, we finally have hit the moment that I thought we’d eventually see – which is that Asia’s dollar-buyers of last resort are finally voting to exchange them for gold. They are willing to give them to the “European legacy banks”, which up until now have been so willing to part with their gold, though judging from the recent data I shared yesterday, they may be a little less excited about selling it than they once were.”
Let us remember not to just look at gold in US dollar terms. In other currencies, such as the South African Rand gold is breaking out. Gold denominated in Japanese Yen has gold moving to a new multi-year high.
“The China Gold Association is claiming that the country plans to raise reserves by 3,500 tons over the next five years. (The Washington Accord selling agreement is 2,500 tons).
If that is true, we finally have hit the moment that I thought we’d eventually see – which is that Asia’s dollar-buyers of last resort are finally voting to exchange them for gold. They are willing to give them to the “European legacy banks”, which up until now have been so willing to part with their gold, though judging from the recent data I shared yesterday, they may be a little less excited about selling it than they once were.”
Let us remember not to just look at gold in US dollar terms. In other currencies, such as the South African Rand gold is breaking out. Gold denominated in Japanese Yen has gold moving to a new multi-year high.
