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Some Oddities!

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barry_1
Super Contributor
Hey i'm not saying buy gold now!....i,ve used it as a trading medium of late as it initially acted as a surrogate for derivitives going up when the resources first tanked....How ever it is interesting to see that gold has fallen back about $500 from its high....More disturbing is that platinum with its many uses has fallen back about over$1600 at the same time....to me this does not reflect so badly on gold as the market generally now gripped in fear is now over shooting the mark.....Hey,the paper gold protagonists,Simon,John now calling gold a relic,should really get going and convince all governments to get rid of all the gold in their vaults as it has no purpose and is costing their tax payer money to store and replace that with newly printed American Dollars!....Interesting that the G8 countries,who should know better have more gold in their vaults than what is still to be mined....of course its a tradional store of wealth for Middle Eastern countries and other third world countries that are not as knowledgable as the major western countries!!!
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16 REPLIES 16
_nova
Super Contributor
XAU just cracked ZAR700 like it wasn't any kind of support. This doesn't look good across the board. XPT also heading for ZAR600 fast
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john_1
Super Contributor
Think about for a second barry...for gold the be a safe haven of choice ...people who don't NORMALLY buy gold must buy at times of finacial stress....What has happened in my veiw is people who normally buy gold have bought more in anticipation of it becoming the base currency, this was supporting the price as we reached blow off phase on the equity markets. The truth of what has happened is that gold has not been bought by people like me( gold bears) and as a result the expectation of higher prices has been found wanting and the gold bulls have sold either by choice or by forced situations...point being untill I or Simon but gold its gonna keep tanking
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barry_1
Super Contributor
U are probably right,but soon unseen action must be taken by the worlds largest governments to SAVE GOLD as it is the basis of their currencies as it is the backing for all....As the gold price declines so does their foreign reserves.
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Vano
Regular Contributor
Barry, perhaps I misunderstood you, but most currencies, and specifically currencies like the US Dollar, British pound, euro and the S. African Rand, are fiat currencies, I.E. they are NOT backed by gold. They are backed by debt. The currency notes are only worth the paper they are printed on. That is the whole point of what the gold bugs are trying to get across. The ONLY valid currency in the world, is gold, and, to a lesser extent, silver. Does everyone know that the US Dollar is not a valid currency according to the united states constitutuion? The united states contitution clearly states that no printed money will be acceptable as legal tender, only gold is good enough for that. In effect, ALL paper dollars are counterfeit according to the United States Constitution. This was never changed, the constitution still states that. I have an old two rand note in my posession. On it, is Printed: "I promise to pay the bearer on demand at Pretoria, two rand" and it is signed Gerhard de Kock, Governor. Try to find that message on today's money. There in not even an empty promise like that one on the new notes. Paper dollars as a safe haven? No wonder dealers in America are cronically running out of stock in gold coins. The love of evil is the root of all paper money. No typo in the last sentence.
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barry_1
Super Contributor
Perhaps some other reserve bank type or Simon can enlighten us,but i'm thinking that in theory all currency is supposed to be backed by gold....it is said in Fort Knox the US has the largest amount stored underground of any government anywhere in the world...Why should they keep it if it does'nt serve the purpose of backing currency? ...PS ,at the moment i have no gold holdings myself.
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barry_1
Super Contributor
A further short sighted step that some reserve bank officials took in other countries(i hope not here) was to lease physical gold to third parties,as they felt it was just sitting in their vaults and their governments could earn good interest.There was no rules on what could be done with the gold so leased at low rates between 2% and 5%....First only governments borrowed,but with time jewellery fabricators got hold of this gold and smelted down ,as a great bargain ,instad of having to pay the going price....When the reserve banks started to get worried about this ,they doubled and tripled the lease rate....The fabiicators then mostly went into liquidation and those reserve banks lost heavily!
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Not applicable
The leg down on gold is not yet complete. Sorry but this is just the way it is.
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barry_1
Super Contributor
u know ,i'm not certain about that,i think ordinary people will start looking around for something tangible and then gold will be one of the alternatives for depreciating paper currencies....look what a mess the debt crisis has brought about....no wonder governments world wide are trying prop up the present system!
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Vano
Regular Contributor
Barry, I do not want to start a long debate about the gold standard and paper money, I am no expert on the matter, but I am ABSOLUTELY convinced that NONE of the world's major paper currencies are backed by gold. If the currencies were backed by gold, we would not have had this global financial disaster now unfolding, and surely you will have to admit that the value of gold should be much higher, if it did back all the major currencies. Perhaps you should consider doing your own research in this regard. I googled "fiat money definition" http://www.investorwords.com/1928/fiat_money.html. OMO.
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barry_1
Super Contributor
I believe that reswerve banks world wide do not value their gold at spot prices,usually at a percentage there of.....I think they partially hedge their currency against gold....Simply explain to me why they keep gold in their reserves at all,if not as a backing for paper money?
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john_1
Super Contributor
Somebody has to keep it...and not alot of people can store a ton of Gold.
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barry_1
Super Contributor
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john_1
Super Contributor
My guess is that its part old habit, second they can't charge interest on the money they hold from banks so they buy gold as it is cheaper to store and easier to count than cash..
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Vano
Regular Contributor
Barry, I am no expert, I do not pretend to have all the answers. As a matter of fact, I have no tertiary education in finance, so I am at a distinct disadvantage in this kind of debate. I am unlikely to convince you, which is why I suggested you do your own research. If you do, you will come to the same conclusion: that the none of the major currencies are backed by gold. I presume the gold is kept as an alternative to the currency. The reserve bank knows that paper money is worthless, gold is REAL money, with international value. Consider this: If all the currencies are backed by gold, then there should be ZERO volatility in the currency exchange rates, or is my reasoning flawed?
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SimonPB
Valued Contributor
Vano, so try paying with gold at pick n pay next time ? sure the fiat currency story is completely legit. But that doesn't make gold the answer, tis also fiat. An john is right, when we buy gold, then tis time .
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barry_1
Super Contributor
U are probably correct,as they have trying to get rid of gold for ages,so treasuries and debt and balance of payments back currencies....How ever its likely that any country without gold would have little clout in the world and in fact it makes governments comfortable to hold it....When the enlarged European Union was formed they laid down rules that made all members sell of about a third of their holdings....Since that time France has broken with this rule and has decided to build up its gold reaerves again as well as i think the Benelux countries....To me anyway ,i'll perhaps incorrectly think as backing paper currencies.
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