Further confirmation of gold’s continuing but gradual renaissance as a safe haven asset was given by the IMF yesterday who warned that a “growing shortage of safe assets” poses a threat to “global financial stability.” The IMF identified $74.4 trillion of potentially safe assets today, including gold, investment grade government and corporate debt, and covered bonds. Sovereign debt crises are reducing the number of governments that investors trust to issue "risk-free" bonds just as new financial regulations are increasing demand for safe securities from banks. Importantly, the IMF’s latest Global Financial Stability Report’s introduction finds that "In the future there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets.” “Both the lack of political will to reshape fiscal policies at times of rising concern over debt sustainability and an overly rapid reduction of fiscal deficits limit governments’ capacity to produce assets with low credit risk.” The IMF has warned regarding illiquidity in “safe haven” markets. Gold remains one of the most liquid markets in the world and the illiquidity in bond markets would see increased safe haven demand for gold. The IMF is warning regarding deteriorating public finances. As many governments see themselves being downgraded - safe haven bonds may become less safe.I have no doubt that financial elites are already positioned in gold, and have been for very long. Gold is a storage of wealth, equivalent to the work needed to extract it. It is not subject to the laws of supply and demand the same way other commodities are since its monetary component must be factored in. With the previous article, even the IMF, the very core of the financial monetary and credit system, is telling you.
I was able to detect the past week's temporary bottom with the help of a growing divergence of Gold/EUR ratio. With today's rumors about an incoming QE3, I have even more reason to celebrate. And if it turns down and falls, to quote Jim Rogers, I hope I am smart enough to get some more.
What the IMF is telling you is that energy is a scarce resource, and so is wealth, but currency is created and manipulated at will. In fact, the IMF is just expressing the theory of thermodynamical economics. But gold is beyond human manipulation and there might come times when trust is no longer assumed by every counterparty.