The Commodity Futures trading Commission’s (CFTC) Commitment of Traders Report released last Friday conveniently shows the positions of trading categories the night before the FOMC minutes were released.
China and Russia have taken the lead in establishing the Asian Infrastructure Investment Bank (AIIB), seen as a rival organisation to the World Bank and the Asian Development Bank, which are dominated by the United States with Europe and Japan.
We know that today’s macroeconomists are very confused about inflation, if only because despite all experience they think they can print money and increase bank credit with a view to generating price inflation at a controlled 2% rate.
It will be important to watch big macro events, such as the possible fragmentation of the Eurozone, a run on Greek banks, particularly if it threatens to destabilise the euro or other Eurozone banks, as well as the developing crisis in Ukraine.
Gold and silver started the year at a muted point, with gold at $1168 and silver at $15.50, from which modest rallies have developed, with gold up 4% and silver 6%. These rises were against a background of high volatility in equity markets, a strong US dollar and very weak oil prices.
With oil prices having halved in the last six months, together with the attendant currency destabilisation, there have been significant transfers of value through derivative positions, so large that financial instability may result.
This week has been extremely volatile for oil, currencies and stock markets. Against this background gold and silver have drifted sideways to slightly lower, which given the dollar’s strong performance is almost a positive result.
This week I look at another aspect of the dollar, which almost certainly will become a significant source of supply: a global shift out of it by foreign holders.
The hypothesis that follows, if carried through, is certain to have a significant effect on gold and the relationship between gold and all government-issued currencies.
Alternatively, watching paint dry. That’s how it has felt this week with gold’s volatility slowing to a crawl ahead of Thanksgiving yesterday and the Swiss gold referendum on Monday.
