TemplarX
06-27-2011, 11:27 AM
2011-JUN-27
Gold and silver prices are continuing to fall as more and more hedge funds conduct panic sales in a dash for cash. The gold price is trading around $1,500 per troy ounce, while the silver spot price is currently just above $34 per ounce. The gold price has now fallen lower in two of the last three weeks.
As The Wall Street Journal highlights, many traders are being forced to sell even safe-haven assets in gold investments in order to meet margin calls. This dynamic is reminiscent of that which affected the precious metal markets in the autumn of 2008, when fears over banks’ exposure to US subprime loans prompted a massive stock market sell-off and a dash for the US dollar that resulted in sharp corrections in commodities and precious metals.
Many investors are increasingly fearful of the effect that a Greek default or debt restructuring programme would have on the international financial system, owing to the large number of credit default swaps taken out on Greek sovereign debt. There is doubt as to whether all the banks, insurance companies and hedge funds that have sold this form of insurance will be able to make good on their promises when (as seems inevitable) Greece defaults.
As George Soros stated at a conference in Vienna yesterday: "let's face it: we are on the verge of an economic collapse which starts, let's say, in Greece but could easily spread. The financial system remains extremely vulnerable... We are on the edge of collapse and that is the time to recognise the need for change."
The Greek parliament is due to vote on the EU/IMF austerity programme on Wednesday, and will more than likely vote through the measures to guarantee the 12 billion euro bailout. This could see a momentary lull in European sovereign debt fears, with financial market and media attention turning to negotiations in Washington between Republicans and Democrats over raising the US government’s debt ceiling.
Meanwhile, today has seen news of a warning from the Bank of International Settlements that low interest rates across the globe are posing a threat to world financial stability. The BIS is particularly concerned about inflation and asset bubbles in emerging economies, and thinks that higher interest rates and tighter monetary policies are needed “if central banks are to preserve their hard-won inflation fighting credibility.”
But as pointed out in previous News Desk commentaries, owing to crushing debt burdens across developed economies, any serious attempt at tighter monetary policy on the part of central banks in these developed nations will likely result in a global depression of unparalleled proportions. As far as their “hard-won inflation fighting credibility is concerned”, central banks are between a rock and a hard place.
Source: http://www.goldmoney.com/gold-research/george-soros-we-are-on-the-edge-of-collapse.html
Gold and silver prices are continuing to fall as more and more hedge funds conduct panic sales in a dash for cash. The gold price is trading around $1,500 per troy ounce, while the silver spot price is currently just above $34 per ounce. The gold price has now fallen lower in two of the last three weeks.
As The Wall Street Journal highlights, many traders are being forced to sell even safe-haven assets in gold investments in order to meet margin calls. This dynamic is reminiscent of that which affected the precious metal markets in the autumn of 2008, when fears over banks’ exposure to US subprime loans prompted a massive stock market sell-off and a dash for the US dollar that resulted in sharp corrections in commodities and precious metals.
Many investors are increasingly fearful of the effect that a Greek default or debt restructuring programme would have on the international financial system, owing to the large number of credit default swaps taken out on Greek sovereign debt. There is doubt as to whether all the banks, insurance companies and hedge funds that have sold this form of insurance will be able to make good on their promises when (as seems inevitable) Greece defaults.
As George Soros stated at a conference in Vienna yesterday: "let's face it: we are on the verge of an economic collapse which starts, let's say, in Greece but could easily spread. The financial system remains extremely vulnerable... We are on the edge of collapse and that is the time to recognise the need for change."
The Greek parliament is due to vote on the EU/IMF austerity programme on Wednesday, and will more than likely vote through the measures to guarantee the 12 billion euro bailout. This could see a momentary lull in European sovereign debt fears, with financial market and media attention turning to negotiations in Washington between Republicans and Democrats over raising the US government’s debt ceiling.
Meanwhile, today has seen news of a warning from the Bank of International Settlements that low interest rates across the globe are posing a threat to world financial stability. The BIS is particularly concerned about inflation and asset bubbles in emerging economies, and thinks that higher interest rates and tighter monetary policies are needed “if central banks are to preserve their hard-won inflation fighting credibility.”
But as pointed out in previous News Desk commentaries, owing to crushing debt burdens across developed economies, any serious attempt at tighter monetary policy on the part of central banks in these developed nations will likely result in a global depression of unparalleled proportions. As far as their “hard-won inflation fighting credibility is concerned”, central banks are between a rock and a hard place.
Source: http://www.goldmoney.com/gold-research/george-soros-we-are-on-the-edge-of-collapse.html