| sep 13 2009 | | We are taking our gold home. | So Germany and China want their gold back. Both countries want the bullion returned within their borders and hence direct control. There can be only one reason for this. Gold is the ultimate form of insurance. Is does not work if your insurance is outside your realm of control. It negates the whole principle. Just like when a home owner calls the insurance company to report a loss and they announce the policy does not cover that event. The home owner had insurance but he sure as hell isn't getting a remedy to his loss. He paid his premiums, he thought he was covered but he does not have control. The insurance company does.
So the question isn't why they are doing this but why now. Why do they consider it a prudent course of action now? After all, their gold has been securely held in a foreign country for decades with no problem. The answer is the world has entered a disturbing phase and Germany and China want to know they have complete sovereign control of the only asset that will have any chance of saving a countries' economy in the future.
A plausible scenario exists for both cases. In the case of Germany there is every likelihood that the European Union disintegrates and the Euro is discarded as the individual nations readopt their own currencies. There are huge pressures being exerted on this fragile artificial entity. We will await the outcome of this experiment. In the case of China it has already indicated in may condone the default of derivative contracts entered into by the State Owned Enterprises. These SEO's could walk from their derivative contracts causing catastrophe to Goldman Sachs, J P Morgan and the other western bank that hold them. The last thing they would want is for any country to be able to freeze their assets, particularly their gold while it goes through the courts. The Chinese have a fifty year plan to economically flattening America and they are well on the way of achieving it.
So gold at a thousand looks cheap. The Chinese have said they are diversifying out of Dollars and wish to purchase gold without roiling the market. This 'Chinese Put' effectively puts a floor in at a thousand dollars an ounce for gold. They would only have to hint they were making a major purchase for this small market to go to the moon, just as that numpty Gordan Brown did in reverse when he announced ahead of time that Britain was selling half of it's gold reserves and created Brown's Bottom. Traitor.
The market will get very volatile so hold onto your core holding but look for opportunities to trade the moves.
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