Pullback in Gold may Continue as US tames Currency Tensions

ONG Focus | Insights | Written by Oil N' Gold | Wed Oct 20 10 07:23 ET

Commodities rebound as the sharp fall yesterday attracts bargain-hunting. WTI crude oil price rose above 80 ahead of the oil inventory report. The market regained confidence on Chinese demand after Zhang Fuqin, the bureau chief of PetroChina's Planning and Engineering Institute, said the country's net crude oil imports may reach 310M metric tons in 2015. Moreover, some investors continued to buy commodities with the view that the rate hike in China would push the RMB higher, hence, positive for commodity demands.

Gold price recovers to 1343 as USD's rally eased. While we do rule out seeing another leg of decline, the long-term outlook for the metal remains bullish. Factors sending gold to record higher in recent weeks have not yet dissipated. Easy monetary policies together with heavy fiscal deficit in the US and others in the advanced world, currency tensions originated from global economic imbalances and sovereign risks in the Eurozone are expected to linger as the financial leaders struggle to revive the economy.

In our opinion, gold's pullback in recent days was driven by US Treasury Secretary Timothy Geithner's attempt to ease currency tensions. Geithner said that the US did not intend to weaken the dollar as no country could 'devalue its way to competitiveness'. He also affirmed the US will work to preserve confidence in a strong currency. While his comments were interpreted as a tactic before the G20 meeting this week and the US mid-term election in November, the dollar rebounded, pushing risky assets lowers.

Another short-term catalyst was China's unexpected rate hike. When PBOC raised the required reserve ratio by +50 bps in January, gold plunged 10% while the euro and equities dropped. While we do not expect the same magnitude of decline in gold this time as the market has partly factored in the possibility of Chinese tightening given strong economic data from the country. Yet, market sentiment will be affected in the near-term.

According to BOE's minutes for the October meeting, policymakers voted 7-1-1 for keeping the Bank Rate unchanged at 0.5% and the asset-purchase program at 200b pound. While Andrew Sentance voted again for a rate hike of +25 bps, Adam Posen favored further easing by expanding the asset-purchase program to 250B pound. The minutes said that 'some of the members felt the likelihood that further monetary stimulus would become necessary in order to meet the inflation target in the medium term had increased in recent months'. Posen's view is shared by the British Chambers of Commerce (BCC). The Chamber said while 'we support the painful fiscal measures that the government is preparing to implement, it is important to reduce the risk of a downturn, and increasing the QE program can play an important role in sustaining demand in the economy'. The move 'is necessary given the expected impact on the economy of the forthcoming VAT increase and spending cuts'.

 

Latest Analysis from this Author

Economic Calendar 11/1/10 (Sunday, 31 October 2010 14:44 ET)Weekly Fundamentals - QE2 Decisions the Key Event ... (Saturday, 30 October 2010 12:11 ET)Gold Weekly Technical Outlook (Friday, 29 October 2010 18:03 ET)Silver Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Crude Oil Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Natural Gas Weekly Technical Outlook (Friday, 29 October 2010 18:01 ET)Sentiment Sours ahead of US GDP (Friday, 29 October 2010 07:07 ET)Gold Soars as ECB Policymakers Warn about Currency... (Friday, 29 October 2010 00:39 ET)Economic Calendar 10/29/10 (Thursday, 28 October 2010 11:43 ET)Gold Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)

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Pullback in Gold may Continue as US tames Currency Tensions

ONG Focus | Insights | Written by Oil N' Gold | Wed Oct 20 10 07:23 ET

Commodities rebound as the sharp fall yesterday attracts bargain-hunting. WTI crude oil price rose above 80 ahead of the oil inventory report. The market regained confidence on Chinese demand after Zhang Fuqin, the bureau chief of PetroChina's Planning and Engineering Institute, said the country's net crude oil imports may reach 310M metric tons in 2015. Moreover, some investors continued to buy commodities with the view that the rate hike in China would push the RMB higher, hence, positive for commodity demands.

Gold price recovers to 1343 as USD's rally eased. While we do rule out seeing another leg of decline, the long-term outlook for the metal remains bullish. Factors sending gold to record higher in recent weeks have not yet dissipated. Easy monetary policies together with heavy fiscal deficit in the US and others in the advanced world, currency tensions originated from global economic imbalances and sovereign risks in the Eurozone are expected to linger as the financial leaders struggle to revive the economy.

In our opinion, gold's pullback in recent days was driven by US Treasury Secretary Timothy Geithner's attempt to ease currency tensions. Geithner said that the US did not intend to weaken the dollar as no country could 'devalue its way to competitiveness'. He also affirmed the US will work to preserve confidence in a strong currency. While his comments were interpreted as a tactic before the G20 meeting this week and the US mid-term election in November, the dollar rebounded, pushing risky assets lowers.

Another short-term catalyst was China's unexpected rate hike. When PBOC raised the required reserve ratio by +50 bps in January, gold plunged 10% while the euro and equities dropped. While we do not expect the same magnitude of decline in gold this time as the market has partly factored in the possibility of Chinese tightening given strong economic data from the country. Yet, market sentiment will be affected in the near-term.

According to BOE's minutes for the October meeting, policymakers voted 7-1-1 for keeping the Bank Rate unchanged at 0.5% and the asset-purchase program at 200b pound. While Andrew Sentance voted again for a rate hike of +25 bps, Adam Posen favored further easing by expanding the asset-purchase program to 250B pound. The minutes said that 'some of the members felt the likelihood that further monetary stimulus would become necessary in order to meet the inflation target in the medium term had increased in recent months'. Posen's view is shared by the British Chambers of Commerce (BCC). The Chamber said while 'we support the painful fiscal measures that the government is preparing to implement, it is important to reduce the risk of a downturn, and increasing the QE program can play an important role in sustaining demand in the economy'. The move 'is necessary given the expected impact on the economy of the forthcoming VAT increase and spending cuts'.

 

Latest Analysis from this Author

Economic Calendar 11/1/10 (Sunday, 31 October 2010 14:44 ET)Weekly Fundamentals - QE2 Decisions the Key Event ... (Saturday, 30 October 2010 12:11 ET)Gold Weekly Technical Outlook (Friday, 29 October 2010 18:03 ET)Silver Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Crude Oil Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Natural Gas Weekly Technical Outlook (Friday, 29 October 2010 18:01 ET)Sentiment Sours ahead of US GDP (Friday, 29 October 2010 07:07 ET)Gold Soars as ECB Policymakers Warn about Currency... (Friday, 29 October 2010 00:39 ET)Economic Calendar 10/29/10 (Thursday, 28 October 2010 11:43 ET)Gold Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)

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China sees another currency crisis as inevitable

From Mish’s Global Economic Trend Analysis:

…Unbridled printing of dollars is the biggest risk to the global economy, an adviser to the Chinese central bank said in comments published on Thursday, a day after the Federal Reserve unveiled a new round of monetary easing.

China must set up a firewall via currency policy and capital controls to cushion itself from external shocks, Xia Bin said in a commentary piece in the Financial News, a Chinese-language newspaper managed by the central bank.

"As long as the world exercises no restraint in issuing global currencies such as the dollar -- and this is not easy -- then the occurrence of another crisis is inevitable…

Read full article…

More on currencies:

Bond King Bill Gross: U.S. dollar set to get smashed

The global currency war is escalating

You can profit from the coming currency wars

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Gold Soars as ECB Policymakers Warn about Currency War. USD Resumes Weakness

ONG Focus | Insights | Written by Oil N' Gold | Fri Oct 29 10 00:39 ET

Expectations of Fed's QE continued to dominate movements of asset prices. While it's almost certain that the Fed will announce new easing measures at the upcoming FOMC meeting, the size and the timing have spurred rigorous debates in recent days. The dollar resumed weakness yesterday as the New York Fed surveyed bond dealers' expectations of asset purchases over the next 6 months. Losses were pared later in the day but mixed economic data failed to depict a clearer outlook for Fed's move. Commodities rebounded as USD fell. The front-month contract for WTI crude oil climbed higher and settled at 82.18, up +0.29% while gold rose strongly to a 3-day high before closing at 1342.5, up +1.50%.

BOJ's decision to bring forward the next meeting to November 4-5 signaled that the Fed will very likely to announce QE2 next week. While the dollar had rebounded amid worries that the program may be smaller than previously expected, renewed selling pressure was seen after a Fed's survey. The New York Fed asked bond dealers about their expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asked companies how often they anticipate the Fed will re-evaluate the program, and to estimate its ultimate size. Questions such as estimated changes in nominal and Treasury yields 'if the purchases were announced and completed over a 6-month period', with amounts ranging from zero, 250B, 500B and 1 trillion induced speculations that the Fed's measures may be aggressive.

On the macro front, indicators showed some improvements in economies developments. However, it fails to provide a better gauge on the Fed's move. Initial jobless claims unexpectedly plunged -21K to 434K in the week ended October 23, bringing the 4-week moving average to 453K, the lowest level in 3 months. Yet, one should caution that the reading might have been distorted by the Columbus Day holiday. Kansas City Fed manufacturing index dipped -4 points to 10 in October but both 'new orders' and 'employment' improved, to +16 and +1 respectively.

Apart from QE2, there are other factors directing gold price. 2 top ECB policymakers warned about the risks of currency wars ECB Governing Council member Mario Draghi said that 'current account imbalances are widening again, free floating currencies are suffering from (government currency interventions), divergent policies and consequent speculative tensions. The global recovery itself is at risk'. His views were shared by Axel Weber who said 'it is a well-known fact that more flexible exchange rate regimes would help redirect growth from export to stronger domestic demand' and 'Market-oriented exchange rates that reflect underlying economic fundamentals contribute to global economic stability'.

Meanwhile, the IMF said emerging economies should appreciate their currencies to ease currency tensions while the dollar is 'on the strong side' relative to US economic performance. In our opinion, there's long way to go before advanced and emerging economies resolve currency tensions and the situation is positive for gold.

Concerning dataflow, US GDP probably grew +2.2% q/q in 3Q10 after a +1.7% expansion in the prior quarter. Chicago PMI is expected to have slipped to 58 in October from 60.4 while University of Michigan Confidence revised up to 68 from 67.9 in October.

 

Latest Analysis from this Author

Economic Calendar 11/1/10 (Sunday, 31 October 2010 14:44 ET)Weekly Fundamentals - QE2 Decisions the Key Event ... (Saturday, 30 October 2010 12:11 ET)Gold Weekly Technical Outlook (Friday, 29 October 2010 18:03 ET)Silver Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Crude Oil Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Natural Gas Weekly Technical Outlook (Friday, 29 October 2010 18:01 ET)Sentiment Sours ahead of US GDP (Friday, 29 October 2010 07:07 ET)Economic Calendar 10/29/10 (Thursday, 28 October 2010 11:43 ET)Gold Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)Silver Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)

View the original article here

Gold Soars as ECB Policymakers Warn about Currency War. USD Resumes Weakness

ONG Focus | Insights | Written by Oil N' Gold | Fri Oct 29 10 00:39 ET

Expectations of Fed's QE continued to dominate movements of asset prices. While it's almost certain that the Fed will announce new easing measures at the upcoming FOMC meeting, the size and the timing have spurred rigorous debates in recent days. The dollar resumed weakness yesterday as the New York Fed surveyed bond dealers' expectations of asset purchases over the next 6 months. Losses were pared later in the day but mixed economic data failed to depict a clearer outlook for Fed's move. Commodities rebounded as USD fell. The front-month contract for WTI crude oil climbed higher and settled at 82.18, up +0.29% while gold rose strongly to a 3-day high before closing at 1342.5, up +1.50%.

BOJ's decision to bring forward the next meeting to November 4-5 signaled that the Fed will very likely to announce QE2 next week. While the dollar had rebounded amid worries that the program may be smaller than previously expected, renewed selling pressure was seen after a Fed's survey. The New York Fed asked bond dealers about their expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asked companies how often they anticipate the Fed will re-evaluate the program, and to estimate its ultimate size. Questions such as estimated changes in nominal and Treasury yields 'if the purchases were announced and completed over a 6-month period', with amounts ranging from zero, 250B, 500B and 1 trillion induced speculations that the Fed's measures may be aggressive.

On the macro front, indicators showed some improvements in economies developments. However, it fails to provide a better gauge on the Fed's move. Initial jobless claims unexpectedly plunged -21K to 434K in the week ended October 23, bringing the 4-week moving average to 453K, the lowest level in 3 months. Yet, one should caution that the reading might have been distorted by the Columbus Day holiday. Kansas City Fed manufacturing index dipped -4 points to 10 in October but both 'new orders' and 'employment' improved, to +16 and +1 respectively.

Apart from QE2, there are other factors directing gold price. 2 top ECB policymakers warned about the risks of currency wars ECB Governing Council member Mario Draghi said that 'current account imbalances are widening again, free floating currencies are suffering from (government currency interventions), divergent policies and consequent speculative tensions. The global recovery itself is at risk'. His views were shared by Axel Weber who said 'it is a well-known fact that more flexible exchange rate regimes would help redirect growth from export to stronger domestic demand' and 'Market-oriented exchange rates that reflect underlying economic fundamentals contribute to global economic stability'.

Meanwhile, the IMF said emerging economies should appreciate their currencies to ease currency tensions while the dollar is 'on the strong side' relative to US economic performance. In our opinion, there's long way to go before advanced and emerging economies resolve currency tensions and the situation is positive for gold.

Concerning dataflow, US GDP probably grew +2.2% q/q in 3Q10 after a +1.7% expansion in the prior quarter. Chicago PMI is expected to have slipped to 58 in October from 60.4 while University of Michigan Confidence revised up to 68 from 67.9 in October.

 

Latest Analysis from this Author

Economic Calendar 11/1/10 (Sunday, 31 October 2010 14:44 ET)Weekly Fundamentals - QE2 Decisions the Key Event ... (Saturday, 30 October 2010 12:11 ET)Gold Weekly Technical Outlook (Friday, 29 October 2010 18:03 ET)Silver Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Crude Oil Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Natural Gas Weekly Technical Outlook (Friday, 29 October 2010 18:01 ET)Sentiment Sours ahead of US GDP (Friday, 29 October 2010 07:07 ET)Economic Calendar 10/29/10 (Thursday, 28 October 2010 11:43 ET)Gold Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)Silver Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)

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"Aggressive Investors" Target $1400 Gold and $25 Silver as Global Currency Crisis "Is Upon Us"

"Aggressive Investors" Target $1400 Gold and $25 Silver as Global Currency Crisis "Is Upon Us"London Gold Market Report

THE WHOLESALE PRICE of gold and silver bullion retreated from fresh record highs against the Dollar early Thursday afternoon in London, slipping back from overnight jumps of 1.3% and 4.5% respectively as the US currency's latest plunge paused.

European stock markets reversed early gains, but Asian stocks ended the day more than 1.5% higher on the MSCI index, as the Japanese Yen squashed the Dollar to a new 15-year low beneath ¥81 and the Euro leapt above $1.41.

"It is no wonder the rally of precious metals has been relentless," said a Hong Kong dealer of Thursday's Asian trade. "Silver led the pack higher...Then gold took over.

"[Platinum and palladium] have been relatively tame...failing to hurdle last week's highs."

With crude oil rising back above $83.50 per barrel today, the Canadian Dollar broke above parity to the US currency – only the second time since 1977.

But gold rose faster still, setting new record highs vs. the Loonie at C$1385 per ounce. Priced in US Dollars, gold and silver bullion hit $1387 and $24.90 at Thursday morning's peak.

There are "large [numbers of] December option strikes at $1400 and $25," notes one London dealer.

"Aggressive investor buying is pushing gold towards the next major resistance level of $1400," agrees Walter de Wet at Standard Bank.

"Expectations of further quantitative easing by the Fed, continues to dominate precious metals markets. [But] the physical market remains weak, with gold scrap availability remaining high."

Wednesday's slump in the Dollar – and concomitant rise in gold and silver – came after European Central Bank policy-maker Axel Weber told a conference that the ECB should halt its government-bond buying program, and start raising interest rates "before the phasing out" of the exceptional banking support offered since 2007.

"This statement had more effect on the market than the [US Federal Reserve] minutes," notes MKS Finance, a division of the Swiss refinery group.

"The cracks are getting wider, the crisis is upon us," says Marc Ostwald, strategist at Monument Securities in London.

Warning clients to pay attention to "the rifts that are opening up within Asia" over the US Dollar's six-month tumble, Ostwald points to unilateral controls on foreign-investment flows and exchange rates by Russia, Singapore and Taiwan.

Bank of Korea chief Kim Choong-Soo today rebuffed comments from a "certain country" – Japan's finance minister Yoshihiko Noda – questioning Seoul's ability to lead next month's G20 summit of advanced and emerging economies because of its repeated interventions in the currency market.

Tokyo meantime confirmed that it spent ¥2.1 trillion ($25bn) last month buying US Dollars to try and halt the Yen's rise.

"We believe many hedge funds may have enjoyed [in Sept.] their highest earnings for the past year," says a report from Japanese bank Nomura, quoted by the Financial Times' Alpha blog, pointing to the slumping-Dollar-led surge in bonds, equities and commodity prices.

"Accordingly, we now expect those hedge funds to lock in those profits ahead of their year-end book closing in November."

Noting that Fed chairman Ben Bernanke is due to speak on monetary policy Friday, "The main risk [to silver and Gold Prices] is that he might...reign in expectations of quantitative easing," says Standard Bank's Walter de Wet.

"This could prompt a pull back in precious metals, possibly amplified by profit taking ahead of the weekend...[But] we anticipate some seasonal jewelry demand to prompt some buying into dips."

Currently moving towards the peak of its post-harvest buying season, Indian gold demand will see the Hindu festival of Diwali end on 5th Nov

Adrian Ash

Head of Research

Bullionvault.com

You can also Receive your first gram of Gold free by opening an account with Bullion Vault : Click here.

City correspondent for The Daily Reckoning in London, Adrian Ash is head of research at BullionVault.com – giving you direct access to investment gold, vaulted in Zurich, on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed herein are those of the author and are subject to change without notice. The information herein may become outdated and there is no obligation to update any such information. The author, 24hGold, entities in which they have an interest, family and associates may from time to time have positions in the securities or commodities discussed. No part of this publication can be reproduced without the written consent of the author. Disclaimer

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Is Gold Another Fiat Currency?

This past week gold surpassed $1100 an ounce in the futures market. This is certainly good news for gold bulls, and it's difficult to argue with this powerful trend. However, there are some things that bother me about the latest impulse move up. Maybe it's just my contrary nature. I am a long time gold bug. I started trading gold more than 30 years ago and I strongly believe in the principals and arguments favoring gold. But timing is another matter.

I just drove to Costco and during the 10-minute drive there I heard two commercials urgently urging listeners to buy gold now to protect their wealth. On the way home I heard three commercials, two on one channel and another upon changing the channel, again urging listeners to buying gold now. I admit I was in a bit of a Seattle traffic jam on the way home so it may have been a 15-minute drive. I just wonder if urging the public to buy gold at $1100 is going to be a sensible investment. I heard few commercials urging buying when gold was under $300 not that long ago.

One argument that gold bugs make is that gold is a hard asset that can't be created at the whim of a politician or fed chairman. Soybeans and pork bellies would also fit as a real asset, but gold is non-perishable and very resistant to degrading over time. Soybeans and pork bellies are more useful as they are commodities than have a use. Well, gold does have some uses. A miniscule amount can be used in industry, such as electrical contacts in important components which makes gold unique due to its anti-corrosive qualities. A much larger use is in jewelry. But the vast majority of gold is held in vaults as a store of value. It seems ironic that gold, that was once in the ground, requires such a huge effort in terms of human labor often in dangerous conditions to extract it from the Earth, only to return it to vaults and safes, often located underground as well.

But what about gold as a store of value. It is difficult to mine so it can't be created out of thin air, as being the case with paper fiat currencies. It is durable. It can't be debased, as the actual gold content can be determined. Even with all that going for it, there really isn't much in the way of intrinsic value, other than the small amount used in industry and for jewelry. The value of gold is really set by supply and demand. Traders riding trends have a big say in how high or low gold can go. Demand is fixed to some degree by the difficulty of getting the gold out of the ground. On the other hand, most of the gold ever mined is still available to dump on the market, so supply is available if those hoarding decide to sell. Very little gold is used up. Much of the demand side comes from the perception of safety. Those who bought at the peak in the early 1980s and held through more than 20 years of a bear market might have a different perception of the safety of gold. Adding insult to injury is the fact that the general stock market had its largest bull market in history during the very long gold bear market.

But how safe is gold as a store of value when the price can be set by people, much the way people set the value of a currency. A paper currency is nothing but a promise based on nothing but good faith. The price of gold isn't really based on much more than that if you think about it. What is to stop a central bank from dumping a huge quantity of gold on the market? What is to stop traders from riding a downtrend, forcing prices lower and lower? Demand can change quickly. There is no intrinsic value to guarantee that gold won't go back to much lower levels. And there is certainly no guarantee that prices will keep climbing, as promised by all the gold ads. People set the value of a currency. And people set the price of gold. The price isn't set in the heavens. It is perception creating supply and demand. It isn't absolute. If all the gold suddenly disappeared, nobody would miss a meal. The Earth would still rotate. Life would go on.

As governments can't possibly pay for all the spending and deficits, it seems logical that all paper currencies will continue to decline, and that so called hard commodities will at least hold their own in relation to those paper fiat currencies. But for those who believe that gold is a good hedge against irresponsible governments, timing gold purchases is probably still a good idea. Piling on the bandwagon after such a lengthy price increase might mean buying at too high a price. In the very long run as currencies continue to decline gold may still be a safe bet even at these nosebleed levels. But one might be better to wait until the bandwagon tries to knock off the speculators and prices come back down to Earth.

There have been a few technical divergences that might suggest gold could be ready for a pullback. One is the failure of gold mining issues to lead the way higher. Another is the relationship during the last impulse up between gold and silver. Gold and silver have had a symbiotic relationship for a very long time. There are times when one commodity is in favor over the other, but they generally move in the same direction. Sometimes, but not always, a clue to a turn can appear when one of the commodities makes a new high while the other fails to do so. This is the case now between the gold and silver market. In many of the impulse moves in the past silver would lead the advances as well as the declines. This can get decoupled a bit when there is fear of continued recession at a time when inflation appears to be a threat, such as in the current environment. After all, silver is more of an industrial metal than gold so it is more sensitive to weak industrial demand. But divergences between the two should be watched closely.

Calling tops in a greed driven bull market is very difficult, and I am not trying to call a top here. I'm just pointing out some warning signs. The trend is still up, but that could change quickly if the dollar should have a rebound rally and all the traders in gold rush for the exits at the same time. I've seen it many times in the past. This time probably won't be different.

Doug Tucker has a blog with daily commentary on stock indexes, precious metals, and other markets. There are many articles on technical analysis and indicator design and interpretation. To visit go to: http://tuckerreport.com/

IMF failure, currency war helping <b>gold price</b> boom

By Ben Davies, CEO of Hinde Capital
(King World News) - Henry Hazlitt was the modern literary agent of libertarianism. At the advent of Bretton Woods he stood alone in his New York Times editorials condemning the monstrosity, as he termed it, that was the IMF. He considered this entity no different to the Federal Reserve Bank.

Another organization espousing the values of economic growth and price stability. In reality, they were both merely agents for the propagation of money to aid and abet the continuation of the flawed policies and practices of a country.

In the case of the IMF they called on loans from member countries to 'bail out' bankrupt nations globally. The IMF prolonged the inevitable misery and didn't address the issues that got the country into difficulties in the first place.

Emergent nations once patronized by IMF bailouts and inappropriate 'conditional love' have put two fingers up. I can almost hear the BRIC nations silent mutterings, "Why should we 'flex' our currencies to assist the developing nations who so highmindedly leered over us in troubled times passed and revelled in our misery."

Bretton Woods was possible due to the economic strength of US. The Plaza Accord was permitted because it was in the best interest of the US. The Louvre Accord which tried to arrest the efforts of the Plaza Accord of two years earlier, ironically, was permitted because it was in the best interest of the US.

The US and developed nations no longer wield power anymore. " IMF who? " the BRIC’s cry. Right now the emergent nations are more content to say "our currency, your problem". Unfortunately the West, particularly the US have returned the favour, "our bonds, your problem" and so the stalement will prevail.

Unfortunately as each day passes, the friction of the global monetary fault lines grow stronger. These fault lines will release their energy in the largest world monetary earthquake known to man, as we witness the inevitable demise of the fiat currency system - as all such systems have failed before, leaving not one survivor.

As currency wars escalate, it is wise for individuals to have a presence outside of the system by owning gold.

Courtesy: http://kingworldnews.com/kingworldnews/King_World_News.html

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