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Gold fell nearly 0.6% yesterday
on light volume as the dollar was mixed and oil and most commodities fell
sharply again. Gold in euros and particularly British pounds rose sharply
when interest rates were slashed by the ECB and BoE. Both central banks
indicated that more cuts were likely. Gold has given up some of
yesterday’s gains but remains firm in British pounds and Euros at
£526/oz and €604/oz respectively.
Internationally, central banks are racing towards an unprecedented ZIRP
policy or zero interest rate policy and this will likely put pressure on the
value of all currencies and be very supportive of gold in the coming months.
Buyers again held back yesterday and all eyes are now focused on the release
of U.S. nonfarm payrolls data later today. Nonfarm payrolls are expected to
be poor (economists expect US employers slashed nonfarm payrolls by 320000 in November, which would be the sharpest drop in employment since 2001) and this should put
pressure on the dollar and equity markets.
Bank of England Considers "Nuclear Option" of Massive Money Printing, Monetising Debt and
Direct Injection into Economy
The Telegraph’s economics
editor, Edmund Conway, reports today that the Bank of England is working on
radical plans to inject cash directly into the economy as a last resort to
reverse a slide into recession.
The Daily Telegraph said the Bank was "working on radical plans to
inject cash directly into the economy -- the nuclear option to be used only
when interest rates approach zero."
The report said the Bank was considering engaging in "quantitative
easing" -- printing more money to reflate the economy.
"Measures under consideration include direct purchases of assets, such
as government debt or commercial investments, by the Bank or the Treasury, as
well as expanding the Bank's balance sheet, a means of pumping extra cash
into the banking sector," the newspaper said. The report said the
proposals could be put into action within weeks.
Added weight was given to the proposals by European Central Bank President
Jean-Claude Trichet, who seemed to hint in the press conference to announce
the ECB's 75 basis point rate cut yesterday that it may also consider
"nuclear options". "We will look at what is necessary at
any period of time," he said. "If new decisions are needed, we will
take new decisions."
An adviser to U.S. President-elect Barack Obama told BBC’s
”Newsnight” late on Thursday that central banks may have to
engage in direct lending to lift the economy. Robert Reich, a former U.S.
Labour Secretary and a member of Obama's transition economic advisory board,
told "Newsnight" that "it is probably going to be necessary
for central banks all over the world to get more involved in direct
lending."
A GBP Perspective of the world
markets
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05-Dec-08
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Last
|
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1 Month
|
YTD
|
1 Year
|
5 Year
|
Gold £
|
|
524.89
|
|
11.84%
|
25.11%
|
34.06%
|
123.86%
|
Silver £
|
|
6.46
|
|
-0.72%
|
-13.10%
|
-7.99%
|
105.33%
|
Oil £
|
|
30.09
|
|
-26.77%
|
-39.73%
|
-30.10%
|
69.61%
|
FTSE
|
|
4108
|
|
-9.33%
|
-36.38%
|
-36.74%
|
-5.93%
|
Nikkei £
|
|
58
|
|
4.07%
|
4.12%
|
-15.84%
|
29.23%
|
S&P 500
£
|
|
575
|
|
-10.31%
|
-29.86%
|
-21.45%
|
-9.99%
|
ISEQ £
|
|
2172
|
|
-12.93%
|
-57.36%
|
-56.74%
|
22.43%
|
GBP/USD
|
|
1.469
|
|
-7.28%
|
-26.05%
|
-27.54%
|
-15.20%
|
GBP/EUR
|
|
1.155
|
|
-5.80%
|
-15.13%
|
-16.78%
|
-18.71%
|
GBP/JPY
|
|
135.52
|
|
-12.88%
|
-38.90%
|
-39.72%
|
-27.21%
|
© 2008 Goldassets.co.uk
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Speaking on the same programme,
Martin Sorrell, chief executive of WPP Group, the world's second-largest
advertising company, said that "if we do have quantitative easing, which
I think will increasingly come to the fore, we are going to have very
significant inflation in the future." On the economic outlook, 2009
will be a "very, very tough year," Sorrell said.
Given the extent of the declines seen in asset prices, commodity prices and
especially oil prices and the nature of the international credit crunch it is
understandable the deflation is the the topic du jour and increasingly the
sole worry of most economists (particularly uber Keynesians) and now
investors. They are right to be concerned regarding this deflation however
the real threat, particularly over the medium to long term is that of
inflation due to quantitative easing, monetizing debt and money printing
internationally on a scale never before seen by mankind.
The end of result of ZIRP, quantitative easing and monetizing debt by
printing money to buy their own bonds is likely to be a very sharp global
inflation (as warned of by Martin Sorrell) and possibly even hyperinflation
and a global monetary crisis (with the dollar and pound at its epicenter).
Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
No. 1 Cornhill
London
EC3V 3ND
United Kingdom
Ph +44 (0) 207 060 4653
Fax +44 (0) 207 8770708
Email info@goldassets.co.uk
Web www.goldassets.co.uk
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