Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold, Silver & HUI Stocks Big Pictures - 28th Sep 20
It’s Time to Dump Argentina’s Peso - 28th Sep 20
Gold Stocks Seasonal Plunge - 28th Sep 20
Why Did Precious Metals Get Clobbered Last Week? - 28th Sep 20
Is The Stock Market Dow Transportation Index Setting up a Topping Pattern? - 28th Sep 20
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Can the G-20 and the I.M.F. Burst the Gold Bubble?

Commodities / Gold and Silver 2010 Oct 13, 2010 - 10:52 AM GMT

By: Julian_DW_Phillips


Best Financial Markets Analysis ArticleWhen George Soros stated that gold was the "Ultimate Gold Bubble," we believe that he was not saying that it is now in a price bubble, but that it would one day get there. This is backed up by his accumulation of gold and gold shares since then. So we are not looking at a 'gold bubble' even with gold at this price.

The only way that the G-20 or the I.M.F. could burst any gold bubble would be to reform the monetary system in such a way as to restore confidence in the global monetary system and currencies returning to them the stability that reliably prices goods internationally over the long-term. That is not on the table yet. With today's foreign Exchanges seeing rising confrontation between nations that want weaker currencies and those that are fighting the strengthening of their currencies we need to know what these two 'global' bodies think of gold and what they may do as the future of money darkens in the face of the coming storm.

Who runs the I.M.F.?

There is a popular assumption that the I.M.F. is a global body representative of all and equally so. The perception includes the belief that their recommendations are independent of government. The body is empowered by its members to address all matters affecting the world's monetary system. Included in this perception is the money sponsored by the I.M.F. called "Special Drawing Rights", a money creation that allows it to lend to distressed nations facing Sovereign Debt crises, such as we have seen of late. If this were true, there is no doubt that it would have the competence and power to fix the global monetary system.

But these perceptions stray significantly from reality. For instance, let's look at the voting structure in the I.M.F. Each member is entitled to a percentage of the voting power from less than 1% upwards. It takes 85% of all members' votes to pass any I.M.F. resolution. The largest holder of voting rights is the U.S. which holds 16.74% of the votes. This allows it to veto any resolution it wants to. While this does not make it a pawn of the U.S., it does prevent any resolution being passed that it alone does not want passed.

The U.S. effectively controls the actions of the I.M.F., so when Timothy Geithner put forward the idea that China's place at the I.M.F. would be enhanced if it was tied to an appreciation of the Yuan, we saw a strong-arm demonstration of that power. China has made it clear that it will not be pressured on the Yuan, but feels it deserves a greater say at the I.M.F. than its present 3.65% of voting rights. China's central bank Governor Zhou Xiaochuan specifically noted that this weekend.

Next year, the I.M.F. has to review the make-up of the Special Drawing Rights, currently composed of the U.S. dollar, the Yen, the Pound Starling and the Euro. A huge issue that goes far beyond politics is the make-up of a 'currency' that reflects world economic power and influences between currencies. Between now and then, we expect the international presence of the Yuan to be felt considerably more than it is currently. It would seem imperative that the Yuan be a sizable component of the make-up of the S.D.R. and of such a size that reflects it global economic presence and ongoing growth.

Is the G-7 an effective body in itself?

The G-7 comprises the top seven, most economically powerful nations in the world. China is not included. Of course, it should be. It was formed in 1976, when Canada joined the Group of Six: France, Germany, Italy, Japan, United Kingdom, and United States. To date, the G-7 has discussed its own interests behind closed doors, but rarely has it come out with any action to rectify global issues. It is not expected to now, either.

The most recent meeting was held last weekend and the media hoped to hear some policy statement that would address the 'currency' issues causing so much damage right now. None came except an instruction to the I.M. F. that it looks deeply into capital and trade flows with the purpose of proposing some 'rules' over them. No mention of who would likely impose them or enforce them. With national interests a far greater priority than international ones, the proposals are unlikely to be implemented but simply remain 'recommendations' when they come. After all, the U.S. will have to abide by them as well as China. Is this going to really happen?

What we do expect is for the I.M.F. to follow the lines of its previous paper [issued by the I.M.F. in February] on capital inflows, capital controls and financial crisis put forward on the 10th February 2010. In this paper, capital controls are suggested in certain circumstances. [Gold Forecaster has been predicting the potential for these for two years now.] The effect of both inflow and outflow capital controls is to render an exchange rate suspect, with the commensurate drop in confidence in that rate alongside the prospect of severe speculation against the exchange rate.

So the G-7 postponed and passed the 'buck' on global imbalances for at least one month, in which time we will see several currency pressure points. These started today with the Yen reaching historic highs against the U.S. dollar, despite the Bank of Japan's confirmation that it would attempt to lower the value of the Yen. It is likely that we will see 78 against the Yen and huge inflows into Japan. Will they impose capital controls soon? It is most likely.

Are they against Gold?

While the I.M.F. is completing the only sale of gold we expect them to make now and in the future, here is what the I.M.F. feels about gold:

"In 1995 the Executive Board reviewed the role of gold in the Fund. The Board concluded that use of the Fund's gold must take account of the overriding need to maintain and, where possible strengthen the Fund's financial base. In this regard, there was broad agreement that the Fund's policy on gold should be governed by the following principles:

  1. As an undervalued asset held by the Fund, gold provides a fundamental strength to the Fund's balance sheet. Thus, any mobilization of the Fund's gold should avoid weakening the Fund's overall financial position.
  2. The Fund's gold holdings provide the Fund with operational maneuverability both as regards its policies on the use of its resources and through adding credibility to the level of the Fund's precautionary balances. In these respects, the benefits of the Fund's gold holdings are passed on to the membership at large, to both creditors and debtors.
  3. The Fund should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies.
  4. The Fund has a systemic responsibility, given that it is the second-largest official holder of gold in the world, with about 10% of total official gold stocks of member countries."

As you can see here, there is no thought in the mind of the I.M.F. that gold should not be firmly held as a reserve asset. This leaves them with the only way to "burst gold's bubble" is to ensure that the global economy is healthy, cooperative to the extent that a rosy future exists, based on a sound global economy with financially sound, healthy economies using a sound well regulated currency system making up the global economy. As we all know, this looks like a utopian dream at this moment in time. So the I.M.F. will no longer act against gold. Once its present sales of gold are complete they will no longer sell gold.

As for the G-7, gold is not on their mind. Their retentive actions on gold demonstrate that they too see it as a reserve asset to be used in unforeseen circumstances. There is no doubt in our minds that the G-7 will treat gold as an alternative source of value to currencies, when push comes to shove. So neither of these two bodies will "burst gold's bubble", but will they support it now?

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2009 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules