IMF Diversion Will Not Stop Gold Buying

April 8, 2009 Global Economy, Physical Gold, Politics No Comments

The IMF diversion will not stop gold buying! I will explain why I am buying gold and why you should be buying gold. The proposed IMF gold sale is a non event that will not stop people around the globe from buying gold.

The markets are once again in a holding pattern, this time waiting on the release of the Fed Reserve Minutes. Does anyone else find it ironic that the entire U.S. financial system grinds to a halt while waiting to see what a private group that has nothing to do with the Federal Government, deigns to give the public in regards to why they chose to do what they did with interest rates at their last meeting? Why not pick people at random to run the Fed, they would probably do as good a job if not better!

The DOW is up 36 at 7,825, the NAS, up 18 at 1,579, the dollar is up .13 (.17%) at 85.77 and gold is up $4.80 at $885.90.

Gold may come back under pressure if the Fed pulls a rabbit out of it’s hat today, but if it does it will be short lived. There are just too many factors in favor of gold at this time for it to be held down for long. We have recently been barraged with all the negatives for gold, so I want to go into a little more depth as to the pros and cons of the warning flags that some are touting as they apply to the future direction of the price of gold.

The reasons why investors bought gold — fears of longer- term inflation and currency debasement — remain intact, wrote UBS AG analyst John Reade today. Once gold has stabilized, we expect bottom-fishers to begin the next cycle of investment.

This is a major point in favor of gold. The basic market sentiment has not changed. People around the world are buying gold coins and gold bullion in record numbers. and they will continue to buy gold coins and gold bullion on any dips in the price. If anything, the early arrivals to the gold market are learning discipline and tend to purchase at the oversold levels of the market. This is a good sign that we are no where near a market panic bubble. When the general public thinks that it is time to buy gold coins and gold bullion, the prices will sky rocket and the early purchasers will be taking profits on the big up days.

IMF Sound And Fury, Signifying Nothing!

I wrote yesterday on the commotion the prospect of IMF gold sales brings to the market, but I feel it deserves a little more attention today. The proposed IMF gold sale is not the big fear event that will bring the gold market down as some analysts are touting. In fact, it is a nothing event, if it even occurs at all!

The first fact that is rarely mentioned is that 403 tons of gold is simply not that much gold when you lay it alongside what is occurring in the financial markets today. 403 tons comes to about $11 billion at today’s prices.

China alone, out of the global governments, has about $2 trillion in reserves of which less than one percent is held in gold. China has recently expressed concern over the amount of U.S. dollar assets that it has in it’s reserves and could snap up 403 tons without even blinking and has more than enough reasons to do so considering the monetization policy that the U. S. government is embarking on. When you add the other countries that can read the writing on the wall and the odds that any of that gold will actually be sold to any entity other than another central bank, the effects of this latest threat are slim and none.

This proposed IMF sale is not a new story that just popped up on the radar in the past week, because the IMF has been trying to sell gold for more than two years without success. To make a long story short, it hasn’t succeeded in getting the sale going because the sale of IMF gold requires an 85% majority vote from the IMF’s 185 member countries. Once that is accomplished, it must overcome the U.S.’s proportional voting rights, which are so large, that it can veto any sale of gold. If the odds were not tilting far enough away from the IMF’s position, the U.S. government has informed the IMF that, by order of law, authorization from Congress is required for any gold sale to go ahead. What a show that would be for all the clowns in Congress.

When taken in the context of the facts, the proposed IMF gold sale is a non event! It does, however, provide another opportunity for central banks to smack gold down and take the focus off the $ trillions they are printing in order to try to put the genie, that they released with the help of the clowns in Washington, back in the bottle. Both Russia and China would jump at the chance to unload dollars and replace them with gold. If they are willing to buy gold in this market, why are you afraid to.?

You should be buying gold coins and gold bullion on any dips. Now is the time, so if you haven’t started yet, start buying gold coins and gold bullion. Once we see a turn in the gold stocks, and they start to lead the way up, there will be plenty of time to leverage money on the gold stocks.

Till next time, good luck and good trading!