Excerpts From - "Gold Forecaster - Global Watch"
HIGHLIGHTS in "Gold Forecaster
- Global Watch"
Silver - COT, Gold : Silver Ratio EDR.V, SSRI, PAAS,
SIL, SLW / Platinum.
SHARES: HUI, XAU, NEM, FCX, DROOY, NG, VGZ, GSS, GFI, Portfolio - Buy Orders
Index:
1-2. Market Forecasts / Short-term forecasts across the Board!
2-3. Comex Update
3-12. Central Bank gold Sales in 2006 / De-Hedging in 2006/ Iraq Civil war
and Oil? / The Oil crisis / The U.S. economy and the $ / Gold: Oil Ratio /
Dow Jones / Technical Analysis of the Gold Price: Long / Gold price drivers
2006 / Short term in the U.S. $ / Treasury Notes / CRB Index
12 - 27. International Gold Markets / Silver / Gold vs. Silver / Gold:Silver
Ratio / Platinum / Silver & Gold Shares
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Gold in Reserves - What % should it be?
We
have heard the opinion that "Given that over 50% of the Bundesbank's foreign
reserves are in gold (valued at market prices), there is a case for reserve
diversification. Studies show that some gold in the portfolio does improve
risk adjusted returns but the current holdings of the Bundesbank are excessive
for this purpose". We respect this opinion and see it as the present way of
assessing gold in portfolios, even of Central Banks. But we also note the proviso
in this statement, "...for this purpose."
The European Central Bank has set as the level of gold 15% of its reserves to back the Euro. Such a level surely is based on a generally sound monetary future, with gold balancing some heavy must easily manageable swings in the value of those reserves, by far the greater bulk of which are the U.S.$. However, Germany [3427.8 tonnes - 52.4%], Italy [2451.8 tonnes -59.4%] and France [2856.8 tonnes - 59.5%] hold far greater quantities of gold than 15%, closer to 60% still.
Why, by their actions, do they disagree with the E.C.B. and the commentary made? Why indeed does the U.S. hold by far the greater bulk of its reserves in gold [8133.5 tonnes - 67.5%] still? They have to disagree with the basis on which the E.C.B. works out the preferred percentage of gold in those reserves.
Politicians may well see gold as a piggy bank which can be raided if some inadequacy in their financial management is shown up, and a short-term dip into savings is easy. Germany has been dipping into savings at an alarming rate in the last decade, privatizing the country's properties as fast as they can. [Since 1995, 60 billion euros ($72 billion) worth has been sold.]. Fortunately the country's bankers are a deal thriftier. Indeed Axel Weber the Bundesbank President has made it clear he is not a seller of Germany's gold, and made it clear to government that it's their right to manage its gold lies with the Bundesbank alone!
So why the fierce protection of Germany's gold? This may seem a value judgement belonging to the past, but gold, when currencies do fail, act as a life-blood to a nation and knowing they are there shores up confidence. Confidence in a currency? But Germany no longer has a currency of its own it has the Euro, one may say.
One
only has to open one or two pages of a large volume on the past to realise
that currencies have a poor history and it is infinitely wise to protect against
the worst possible eventuality. Why should Germans or Italians or the
French throw caution to the wind and depend on the gold reserves of the E.C.B.?
Why should they increase the proportion of their savings in the U.S.$ when
they have known since the war, the over-issuance of that currency. Why should
they invest their savings in their own currencies when the purpose of gold
is to protect against an adverse future for that currency? Clearly the consensus
opinion of the largest economies in the world, [by their actions] believe gold
should form more than half their reserves! So we do well to try to translate
these actions into the realities of reserve management. As if to corroborate
this view we see both China and Russia belatedly aiming to increase their gold
reserves.
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Author: Julian D. W. Phillips
Julian D. W. Phillips
Gold-Authentic Money
"Global Watch: The Gold Forecaster" covers the global gold market.
It specializes in Central Bank Sales and details, the Indian Bullion market
[supported by a leading Indian Bullion professional], the South African markets
[+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $,
Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the
influential gold price factors across the globe, so as to truly understand
the global reasons behind the gold price.
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