Mish: IMF is stupid for dumping gold, reasons to cheer gold sales:

[randomname]

Some may think that the IMF dumping gold is part of the vast conspiracy to suppress the price of gold. Instead, I propose the IMF sale of gold is sheer stupidity on the part of the IMF. However, given that I do not like the IMF or its meddling, I am glad they are doing it.

Reasons To Cheer IMF Gold Sales

1) If the IMF wants to dump gold in favor of paper assets diminishing in value over time, it's fine by me. I hope they dump it all. It will reduce the amount of meddling they can do down the road.

2) IMF gold sales are a bull market phenomenon. The UK dumping gold at $250 marked the bottom.

3) China is a possible recipient of the gold. If the real reason for this move is to allow China to get rid of some US dollars or treasuries in return for gold I view that as good thing.

Bretton Woods II is coming to an end. That we know. What we do not know is the timeframe or the replacement. However, China may need to accumulate gold for whatever the next agreement might be. IMF gold sales may be a small step down that path.

Gold is consolidating recent gains now. Bear in mind that March to August is generally a seasonally unfavorable period. That is not a prediction of a further pullback, although it is likely. Further consolidation is a good thing that will add fuel for the next leg higher.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

[Rock Sexton]

.................well we're talking about an institution that clearly is an influence on policy and creating money out of thin air so they'd prolly just buy it back if forced to......at least that's what I'm worried about.

[hugolp]

New Breton Woods?

So the dollar is not going to be the king anymore, Mishy?

[PatriotG]

Some may think that the IMF dumping gold is part of the vast conspiracy to suppress the price of gold. Instead, I propose the IMF sale of gold is sheer stupidity on the part of the IMF. However, given that I do not like the IMF or its meddling, I am glad they are doing it.

Reasons To Cheer IMF Gold Sales

1) If the IMF wants to dump gold in favor of paper assets diminishing in value over time, it's fine by me. I hope they dump it all. It will reduce the amount of meddling they can do down the road.

2) IMF gold sales are a bull market phenomenon. The UK dumping gold at $250 marked the bottom.

3) China is a possible recipient of the gold. If the real reason for this move is to allow China to get rid of some US dollars or treasuries in return for gold I view that as good thing.

Bretton Woods II is coming to an end. That we know. What we do not know is the timeframe or the replacement. However, China may need to accumulate gold for whatever the next agreement might be. IMF gold sales may be a small step down that path.

Gold is consolidating recent gains now. Bear in mind that March to August is generally a seasonally unfavorable period. That is not a prediction of a further pullback, although it is likely. Further consolidation is a good thing that will add fuel for the next leg higher.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

The only problem that I have with this is that based on my past experiences in the market, is that there is a likely case scenario where the gold is really not sold by the IMF.

The IMF will lease it to member banks, who in turn will sell it, and then of course, the price weakens.

These leases could run anywhere from 1 month to a few years, normally 1 or 2.

The member banks sell the leased gold out into the market. Of course eventually the lease comes due and the gold has to be returned. so the member banks wiould ultimatley have to buy the gold back from the open market, so it can be returned to the IMF.

Lets assume they are 5 year leases. That means that the gold price could theoretically be surpressed for 5 years.

BTW, of course everyone makes money on this deal for obvious reasons.

THE IMF makes money on the actual lease. and of course they can get short if they want to, before all the selling begins.

The member banks, can do the same. Get short first then sell the leased gold.

Its done primarliy in the OTC market where there is no regulation.


It would be wise at this point to keep an eye on lease rates, and see if there are any interesting moves in the coming weeks, months.

http://www.kitco.com/market/LFrate.html

[ctiger2]

"Mish" = Douche