Central Banks, Gold and USD

Posted | 26/03/2015 / Views | 2785
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We reported earlier on the WGC’s 2014 report, the 2nd highest net purchases by central banks on record at 477t.  A recent IMF survey revealed that over half of all central banks considered gold a safe haven asset over the long-term and would mitigate portfolio risks. Additionally, over 60% of respondents believed that gold would constitute a larger proportion of central bank reserves over the next two years.  This is not surprising when you consider the USD exposure many countries, especially emerging countries, have at the moment.  As we explained here the high USD could have disastrous consequences.  As countries look to de-dollarise in the current risk environment gold becomes the logical alternative purchase for their foreign exchange reserves.  So there is clear USD upside risk and Phoenix Capital Research outlines the downside…

“And the US Dollar has been rallying... HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown.

Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up.

You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed's FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up.

Rate hikes, QE, all of this stuff is minor in comparison to the carnage the US Dollar is having on the financial system.  

The US Dollar took down Oil, commodities, even emerging market currencies. Stocks will be next. The first REAL sign that the 2008 Crash was coming occurred when the US Dollar began to skyrocket in the summer of 2008.

The time to prepare is now, BEFORE the crash hits”