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Thread: sneaking by US media - India buys 200 TONS of gold with it's US dollars

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    Default sneaking by US media - India buys 200 TONS of gold with it's US dollars

    from

    (snip)"Gold prices on Tuesday surged to an all-time high after India’s central bank bought 200 tonnes of the precious metal, swapping dollars for bullion as the country’s finance minister warned the economies of the US and Europe had “collapsed”.

    India’s decision to exchange $6.7bn for gold equivalent to 8 per cent of world annual mine production sent the strongest signal yet that Asian countries were moving away from the US currency.

    The purchase by New Delhi’s Reserve Bank from the International Monetary Fund pushed gold prices to a record $1,086.10 per troy ounce, up 2.6 per cent on the day, as traders bet that other central banks would also become buyers.

    Pranab Mukherjee, India’s finance minister, said the acquisition reflected the power of an economy that laid claim to the fifth-largest global foreign reserves: “We have money to buy gold. We have enough foreign exchange reserves.”

    He contrasted India’s strength with weakness elsewhere: “Europe collapsed and North America collapsed.

    “This is a landmark trade,” said Jonathan Spall a director at Barclays Capital and a gold specialist. “Central banks are conservative institutions and India’s move is a sign for other central banks and sovereign wealth funds that were contemplating buying gold.”

    New Delhi’s acquisition came months after China revealed it had almost doubled its gold reserves in the past six years (snip)

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    Banned Eric Stoner's Avatar
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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    Gold is now selling for more than twice the "extraction" price. Ultimately, it's another one of those "bubbles" I was talking about. It will burst but more and more it's looking like later rather than sooner.

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    Featured Member minnow's Avatar
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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    Quote Originally Posted by Eric Stoner View Post
    Gold is now selling for more than twice the "extraction" price. Ultimately, it's another one of those "bubbles" I was talking about. It will burst but more and more it's looking like later rather than sooner.
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

    Soooo-- If one really hasn't bought any gold in a while, should one buy some now??? (But, watch investment closely & sell if it goes up a bit more- would hate to watch it go up, only to sink like a grand piano below the level one bought it at just after peaking) How much more might it go up? Or wait for bubble to burst??
    I'm right 96% of the time. I don't sweat the other 5% .......................

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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    ---> disclosure ... I own both physical gold as well as stock in non-US based gold mining companies. With that said ...

    The real point behind the news story has little to do with the fact that the Indian gov't's purchase of 200 friggin TONS of gold caused the price to rise 3-4%. While the 3-4% pop put the price of physical gold at record levels in US dollar terms, it is certainly far from record levels in terms of 'purchasing power' or other world currencies.

    The real point behind the news story is actually this ... that the Indian gov't disposed of however many billions of its US dollars in exchange for gold. Consider the significance that the Indian gov't also had Japanese Yen, Euros and other currencies in it's foreign exchange reserve account, and did NOT trade these other currencies. Nor did the Indian gov't trade its own Rupees for gold. Just some of the US dollars it was sitting on.

    And India is not the first gov't to trade US dollar reserves for gold either ... China also made some recent gold purchases using their own foreign exchange reserve account US dollars.

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    Banned Eric Stoner's Avatar
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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    Quote Originally Posted by minnow View Post
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

    Soooo-- If one really hasn't bought any gold in a while, should one buy some now??? (But, watch investment closely & sell if it goes up a bit more- would hate to watch it go up, only to sink like a grand piano below the level one bought it at just after peaking) How much more might it go up? Or wait for bubble to burst??
    I own gold coins and gold stocks. The reason I think gold will climb much higher is multifold. First the demand for it is increasing. China, India and other countries have cultures based on gold being a store of value. As currencies, especially the dollar, decline in value they look to put their money in something that will retain its value.

    Next is the "doomsday" factor. So long as the overall economic news is bad and the Fed is pumping out money and the deficits stay over a $ trillion as far as the eye can see, then investors will seek to put at least part of their portfolio into gold. 5 % is recommended. Right now, I'm about 20% invested in gold coins and gold stocks.

    Then we have the cyclical market factor. If you look at basic commodities, all have at least doubled in value in real terms relative to what it was worth back in 1980 - corn, wheat, OIL etc. Gold has not. Yet. So there is plenty of slack in the price. Most serious analysts have it going as high as $2500. Frankly I don't see it. My charts have it going to $1500 to $1600 BUT the Fed. and the Treasury could always cooperate by depressing the dollar further. Therefore, one thing I am tracking is the price volatility ( VIX) for gold. I am going to hold onto my gold stocks until gold hits $1500 and then be prepared to sell depending on the overall trend. The stocks would be more likely to drop first. I generally sell on the way down or on a steady plateau. If it hits $2000, which is certainly possible, then I will sell half my stash of coins to lock in my gains and hold onto the rest. Just in case.

    I hope you found this helpful.

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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    I think the key is, how are non-US currencies keeping up with gold prices. If on par, then we are already to late.

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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    well try this chart on for size ... the price of gold in euros is still below where it was last march ... let alone historical highs !


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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    ^^^ Thanks Mel. My point exactly and one reason why I think gold has plenty of road to run before leveling off.
    Last edited by Eric Stoner; 11-09-2009 at 09:06 AM.

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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    ^^^ as long as the US gov't continues to spend record amounts of dollars it doesn't have, with the only available methods of funding this spending being the printing of mountains of new dollars and record levels of treasury bond sales to foreign lenders, I will agree with you completely ! Some of the analysts are calling for US$1200 gold before the end of the year ... which IMHO is a distinct possibility.

    There is also a lot of 'scuttlebut' on professional investor boards about petrodollars and other trade surplus dollars being increasingly channeled towards gold, oil and other commodities, as opposed to being 'recycled' back into US gov't debt ( treasuries ) and US consumer debt as has historically been the case over the past decade. The supposed reasoning behind this shift is the observation that Japan, China, Singapore etc. are already taking official gov't action to keep their currencies from rising relative to the dollar ( to avoid devastation of their export industries ), and that EuroLand will be tempted to do the same. This 'race to the bottom' scenario will, at the very least, create a large amount of exchange rate instability / loss risk, which can be avoided by converting paper currencies into real, tangible, marketable commodities.

    The real key to understanding all of these moves requires mentally dropping the long time paradigm that a US dollar, or a Japanese Yen, or a Euro, or any other floating paper currency, constitutes an accurate measure of value / purchasing power. In value / purchasing power terms, US dollars collecting 2% bank CD interest are losing ground with every passing day.

    ~
    Last edited by Melonie; 11-07-2009 at 05:25 PM.

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    Default Re: sneaking by US media - India buys 200 TONS of gold with it's US dollars

    Here is my take on this topic.

    First of all 6B US dollars is not whole lot of money considering their economy is worth 1T dollars.

    This is simply an action taken to diversify their forex reserve.

    They have been generating lots of US dollars lately due to rise in bilateral trade between US and India. They are sitting on lots of dollars but the kind of things they want to purchase from USA are not available to them due to trade sanctions. So, they do not see a need to hold on to US dollars. Especially, since more and more countries are willing to accept Indian rupees.

    So, they think it is wise to liquidate some of those dollars in favor of other currencies such as gold. It has nothing to do with US dollar loosing its potency.

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