Where Is Gold Going In This Market

[Naam]

poor little boys like you don't make me click on the report button

[edgarfriendly]

who reported whom?

pots calling kettles names?

how comes no-ones mentioned the stratosphere or other sensational fluff yet....?

has everyone been sent to the naughty corner?

don't tell, don't care.

i need a new aircon...i like the idea of a solar unit....

gold! always believe in your soul.

You're indestructible

[churchill]

From .. http://en.wikipedia.org/wiki/Tier_1_capital

'The theoretical reason for holding capital is that it should provide protection against unexpected losses. Note that this is not the same as expected losses, which are covered byprovisions, reserves and current year profits. In Basel I agreement, Tier 1 capital is a minimum of 4% ownership equity but investors generally require a ratio of 10%. Tier 1 capital should be greater than 150% of the minimum requirement.^{[citation needed']}

^{So banks .. all banks are required to hold a minimum of 4% Tier 1 assets but normally 10% ( which will potentially include gold ) in 6 months ...}

How can this not mean higher demand from all banks and Central Banks for Gold ???

[Jayman]

poor little boys like you don't make me click on the report button

rich old men like you don't make me click on the report button

[Asiantravel]

poor little boys like you don't make me click on the report button

rich old men like you don't make me click on the report button

[Naam]

^{So banks .. all banks are required to hold a minimum of 4% Tier 1 assets but normally 10% ( which will potentially include gold ) in 6 months ...}

How can this not mean higher demand from all banks and Central Banks for Gold ???

for those who seek information:

-don't adopt the stance that wishful thinking becomes potentially a reality,

-don't expect Basel III will come into effect in 6 months,

-some people have no idea that all "Basel agreements" are voluntary agreements between banking authorities (in most cases central banks) of some (not all) countries affecting in essence the banks under their regulatory supervision,

-ignore generalising misinformation such as "all banks are required".

but wait... there's more! full implementation / finalisation of Basel III is "expected" in 2019

[churchill]

It has nothing to do with Basel 3

( where by the way (Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets (RWA))

but Gold being upgraded to Tier 1 .

Basel agreements are voluntary but I assume generally accepted by those banks that want to survive .

[Naam]

Gold being upgraded to Tier 1

true, finally gold may have made it. Basel agreement may consider gold not yet (as the jury is still out) but sooner or later as good and as "risk-free" as worthless fiat cash.

[Gary A]

There are good things about gold. It doesn't rust, rot or corrode and it doesn't take up a lot of space. At least the amount that I could afford to buy doesn't take up a lot of space.

Edited July 28, 2012 by Gary A

[churchill]

Gold being upgraded to Tier 1

true, finally gold may have made it. Basel agreement may consider gold not yet (as the jury is still out) but sooner or later as good and as "risk-free" as worthless fiat cash.

Ah .. so now it is true ! banks having to hold Tier 1 assets as a % , which gold may be part of .....tbc

and when Basel 3 is adopted..... 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets

and I notice although you said 2019 that HK at least is phasing in Basel 3 from January 1st next year .. the same date gold will probably be made tier 1 .

http://www.news.gov.hk/en/categories/finance/html/2012/03/20120309_113715.shtml

I expect that means banks selling

[Naam]

gold... Basel III... T1... probably... perhaps... maybe... yawn...

[yoshiwara]

There are good things about gold. It doesn't rust, rot or corrode and it doesn't take up a lot of space. At least the amount that I could afford to buy doesn't take up a lot of space.

Tins of spam are reputed to last up to 100 years and have the advantage over gold of being edible.

[mccw]

Gold being upgraded to Tier 1

true, finally gold may have made it. Basel agreement may consider gold not yet (as the jury is still out) but sooner or later as good and as "risk-free" as worthless fiat cash.

Ah .. so now it is true ! banks having to hold Tier 1 assets as a % , which gold may be part of .....tbc

and when Basel 3 is adopted..... 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets

and I notice although you said 2019 that HK at least is phasing in Basel 3 from January 1st next year .. the same date gold will probably be made tier 1 .

http://www.news.gov.hk/en/categories/finance/html/2012/03/20120309_113715.shtml

I expect that means banks selling

This reform applies to commercial aswell as central banks?

I thought most banks don't currently have gold as part of their reserves.

So wouldn't their be significantly more buying as banks seek to diversify in to gold and meet the Basel reforms? When you say "selling", by whom?

Please elaborate. Interested to hear your theory.

--------

Unrelated trivia:

I just heard a well known Thai lady visionary named puu sees gold price dropping towards the end of this year and major calamity in the west "not enough food" and disasters.

[Naam]

This reform applies to commercial aswell as central banks?

I thought most banks don't currently have gold as part of their reserves.

So wouldn't their be significantly more buying as banks seek to diversify in to gold and meet the Basel reforms? When you say "selling", by whom?

Please elaborate. Interested to hear your theory.

-Basel III is not a "reform". "Basel agreements" are voluntary agreements between banking authorities (in most cases central banks) of some (not all) countries affecting in essence the banks under their regulatory supervision,

-correct! most banks don't hold gold neither as reserves nor as part of their capital,

-banks don't have to "seek" or "meet" anything except in the wishful thinking of some people who either spread misinformation deliberately or rely on misinforming sources with an agenda,

-Basel III allows banks to hold gold and count it as T1 capital if they so desire,

-whether the afore-mentioned permission will cause banks significantly buying gold is nothing but speculation. time will tell.

[churchill]

'-Basel III allows banks to hold gold and count it as T1 capital if they so desire,

-whether the afore-mentioned permission will cause banks significantly buying gold is nothing but speculation. time will tell.'

Given that Naam ... don't you think it likely that banks will either buy or hold gold rather than sell ..?

Edited July 28, 2012 by churchill

[Naam]

'-Basel III allows banks to hold gold and count it as T1 capital if they so desire,

-whether the afore-mentioned permission will cause banks significantly buying gold is nothing but speculation. time will tell.'

Given that Naam ... don't you think it likely that banks will either buy or hold gold rather than sell ..?

i don't see any valid reason for banks to hold gold as part of their capital as long as it fluctuates in value vs. their main capital which is cash. the capital a bank's balance sheet is denominated in cash of the domestic currency. moreover, i haven't heard of any valid reason why banks should buy gold and hold it as T1 cap. once i hear of one, i will comment on it. as the situation is now, buying gold means using the available bank's own (shareholders') cash, i.e. a zero sum game investment if the gold does not appreciate.

T1 capital which is "own" capital, even though a part of it can be borrowed by issuing T1 bonds, can only fluctuate to the extent of the currency in which T1 bonds are denominated if they differ from the "home currency". but these fluctuations can be compensated by deferring or even waiving completely liabilities such as interest/dividend payments as well as writing down the nominal value and by that reducing total liability.

worthwhile to mention in this context is that a certain percentage of T1 bonds will be phased out if the regulating supervisory entity of a country adopts and adheres to Basel III agreements. going into details is irrelevant as far as the topic "gold" is concerned.

[mccw]

^ some reasons for banks to hold gold that immediately spring to mind:

1) no interest could be better than negative interest.

2) if they or market see risk of debasement of currency or systemic break down then gold could be seen as more stable asset or at least one that physically can not easily be debased.

Example - hongkong, china, etc see dollar, euro, actively seeking to devalue, so a shift of some reserves to gold protects wealth while maintaining recognised capital levels. Not just central banks but regional and trading banks I'd think would hold for similar reason.

3) similarly a bank may expect their own national currency could weaken or be at risk. I'm thinking certain euro zone countries but really it applies across the board.

4) if central banks can count the nations gold reserves as tier 1 capital does this not mean that over night the balance sheet of say UK or USA or whoever would suddenly calculate as much more healthy? Enable further leveraging?

5)recognising gold in this way gives banks legitimacy in demanding certain countries hand it over as collateral?

-----

I used the word "reform" in my previous post as that's how the hongkong linked statement refers to what they are about to implement; plenty of alternative words could be used and I don't despite it is "voluntary", but personally see many reasons it would be accepted with open arms.

Interested to hear thoughts why not or why greater selling/ price drop. Maybe selling in, ie transfer of ownership from west to east and or national to corporate!

[cloudhopper]

i don't see any valid reason for banks to hold gold as part of their capital

Just wondering if you see any valid reason for sovereigns to hold gold.

[Naam]

i don't see any valid reason for banks to hold gold as part of their capital

Just wondering if you see any valid reason for sovereigns to hold gold.

most sovereigns hold gold "since ages" and i have not heard of any buying from those central banks which hold the yellow metal "since ages". au contraire! the conspiracy rumour mill has it that this gold or part of it does not exist because it was sold, stolen, misappropriated and what have you.

that's the interesting part of the rumours generated by the gold lovers. when it suits them they shout "...has bought / is buying gold" and when it suits them they claim "...gold no habb!" and that's just one of their diametrical claims not to mention the ridiculous and brainless dead horse flogging mantra "worthless fiat cash" which each of them uses on a daily basis to acquire goods which do possess worth.

disclaimer: i have no idea whether there is a reason for sovereigns/central banks to hold gold or not. i'm neither a central banker nor a sovereign economic policy maker. all what i know are my/our reasons as investors to hold a part of our liquid capital in physical gold. reasons why to hold gold and to what extent are based on individual perceptions and we all know that individual mileages vary.

[Naam]

^ some reasons for banks to hold gold that immediately spring to mind:

1) no interest could be better than negative interest.

2) if they or market see risk of debasement of currency or systemic break down then gold could be seen as more stable asset or at least one that physically can not easily be debased.

Example - hongkong, china, etc see dollar, euro, actively seeking to devalue, so a shift of some reserves to gold protects wealth while maintaining recognised capital levels. Not just central banks but regional and trading banks I'd think would hold for similar reason.

3) similarly a bank may expect their own national currency could weaken or be at risk. I'm thinking certain euro zone countries but really it applies across the board.

4) if central banks can count the nations gold reserves as tier 1 capital does this not mean that over night the balance sheet of say UK or USA or whoever would suddenly calculate as much more healthy? Enable further leveraging?

5)recognising gold in this way gives banks legitimacy in demanding certain countries hand it over as collateral?

-----

I used the word "reform" in my previous post as that's how the hongkong linked statement refers to what they are about to implement; plenty of alternative words could be used and I don't despite it is "voluntary", but personally see many reasons it would be accepted with open arms.

Interested to hear thoughts why not or why greater selling/ price drop. Maybe selling in, ie transfer of ownership from west to east and or national to corporate!

1. investment banking is what generates the lion profit share of profit of most (especially huge) banks. and profits in investment banking are usually generated very fast. if sovereign policy makers eliminate cash parking with positive interest rates banks will indeed look for profitable investment. has gold always been a profitable investment? investment banking is looking for profits and its bankers are for fast quarterly profits because that not only makes shareholders happy but is filling their pockets with huge cash.

2. the emphasis is on "gold could be seen as stable asset". was it stable during the last four quarters? was it stable during the crisis in 2008?

3. banks and individual investors can hedge any real or perceived risk no matter whether currency nor any other asset.

4. that's putting the carriage in front of the horse because and the theory "more healthy" or "further leveraging" does not apply because:

-the value of gold reserves is miniscule compared to most countries national debt.

let's take a look at:

United States of A.

official gold reserves at todays value $ 430 billion...............430'000'000'000

sovereign national debt (official "benign" valuation)..........16'000'000'000'000

gold reserves percentage national debt...............................................2.69%

Germany

official gold reserves at todays value $ 173 billion...............173'000'000'000

sovereign national debt (official "benign" valuation)...........2'700'000'000'000

gold reserves percentage national debt...............................................6.44%

Japan

official gold reserves at todays value $ 40 billion..................40'000'000'000

sovereign national debt (official "benign" valuation)...........8'500'000'000'000

old reserves percentage national debt.................................................0.47%

all three countries are issuing short term debt at mini or even negative interest.

where's the beef for them to "leverage"? not to mention that gold reserves are

included in the countries' "balance sheets" (an expression that actually does not apply).

5. there were small but futile attempts to ask for gold as collateral (Greece).

nobody is talking about it anymore.

[GreenSnapper]

There are good things about gold. It doesn't rust, rot or corrode and it doesn't take up a lot of space. At least the amount that I could afford to buy doesn't take up a lot of space.

Tins of spam are reputed to last up to 100 years and have the advantage over gold of being edible.

I doubt that.

(the "edible". Not even today)

[cloudhopper]

-the value of gold reserves is miniscule compared to most countries national debt.

A component of the speculative up side to gold is that a satisfactory solution might be found by (a fiat) revaluing of gold upward by the major sovereign holders.

[churchill]

-the value of gold reserves is miniscule compared to most countries national debt.

A component of the speculative up side to gold is that a satisfactory solution might be found by (a fiat) revaluing of gold upward by the major sovereign holders.

as the revaluing of gold upwards hurts nobody .. unlike other commodities .....

[yoshiwara]

There are good things about gold. It doesn't rust, rot or corrode and it doesn't take up a lot of space. At least the amount that I could afford to buy doesn't take up a lot of space.

Tins of spam are reputed to last up to 100 years and have the advantage over gold of being edible.

I doubt that.

(the "edible". Not even today)

Apparently canned food has been recovered from long-sunken ships. If you think the financial system is finally going to collapse, or a nuclear war happens or invasion by aliens or a meteor hits or Obama gets re-elected then a staple supply of tinned food in the basement is an absolute must.

[churchill]

Not sure about your fetish with basements and canned food ..... ' Obama gets re-elected then a staple supply of tinned food in the basement is an absolute must. '

being a Thatcherite I disagree ...... Romney .....what a joke ... if he gets elected I would be worried ....

'In a major foreign policy move scheduled for late Sunday in Israel, Mitt Romney will deliver an unmistakable warning to Iran that war is inevitable should the Islamic Republic develop nuclear weapons.'

http://politicalticker.blogs.cnn.com/2012/07/29/in-israel-romney-to-issue-unmistakable-warning-to-iran/

[Naam]

-the value of gold reserves is miniscule compared to most countries national debt.

A component of the speculative up side to gold is that a satisfactory solution might be found by (a fiat) revaluing of gold upward by the major sovereign holders.

yawn

[Jayman]

Quote of the day:

"Moody's has confirmed Finland's AAA rating because Finland has received collateral against the rescue loans it contributed to. This is the solution for Germany." Hans-Werner Sinn, President of the German Ifo Institute. (Source: WirtschaftsWoche)

[Naam]

Not sure about your fetish with basements and canned food ..... ' Obama gets re-elected then a staple supply of tinned food in the basement is an absolute must. '

being a Thatcherite I disagree ...... Romney .....what a joke ... if he gets elected I would be worried ....

'In a major foreign policy move scheduled for late Sunday in Israel, Mitt Romney will deliver an unmistakable warning to Iran that war is inevitable should the Islamic Republic develop nuclear weapons.'

http://politicaltick...arning-to-iran/

will this be number umpteen of unmistakable warnings?

[churchill]

Not sure about your fetish with basements and canned food ..... ' Obama gets re-elected then a staple supply of tinned food in the basement is an absolute must. '

being a Thatcherite I disagree ...... Romney .....what a joke ... if he gets elected I would be worried ....

'In a major foreign policy move scheduled for late Sunday in Israel, Mitt Romney will deliver an unmistakable warning to Iran that war is inevitable should the Islamic Republic develop nuclear weapons.'

http://politicaltick...arning-to-iran/

will this be number umpteen of unmistakable warnings?

would you trust , want Romney in power ....... I hope not .

[mccw]

http://m.youtube.com/watch?v=qBbvBdcwLOI

Devils in the detail