Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold is as Good as Cash and Wields More Power

Commodities / Gold and Silver 2011 Feb 12, 2011 - 09:45 AM GMT

By: Barry_Elias

Commodities

Gold is now functioning as collateral to compensate for potential losses in the portfolios of financial institutions.

One month ago, I proposed there may be an underlying economic basis for gold to reach $4,000 per ounce in the next decade. This scenario is looking more probable given these recent developments.


Currently, the price of gold has ranged between $1,300 to $1,400.

Natalie Dempster, director of government affairs at the World Gold Council (WGC), recently told The Wall Street Journal, "Gold is increasingly being used as collateral around the world. All these moves reflect a growing recognition of gold's role as a high-quality, liquid asset."

According to the World Gold Council (WGC), daily trading volume for gold is $100 billion. It is more liquid than most European government bond markets. This increased liquidity for gold has increased its demand as a form of collateral.

Moreover, the WGC has been in talks with the Basel Committee on Bank Supervision to include gold as tier-1 capital, along with government bonds and international currencies. These assets represent the safest capital reserves to function as collateral for more risky investments. The Basel Committee is charged with creating international regulations to ensure a more stable financial system around the world.

Exchanges around the globe, including New York, Chicago (Chicago Mercantile Exchange), and Europe have accepted gold as a form of collateral. Recently, JPMorgan was added to this list, and considering the possibility is LCH Clearnet, a consortium of the London Clearing House and the Paris-based Clearnet.

In 2010, LCH Clearnet cleared roughly $180 trillion of fixed-income securities. They also clear transactions involving equities and derivatives on international and Over-The-Counter (OTC) exchanges.

John Burke, the director of fixed income at LCH Clearnet, said “at times of market stress, clearing becomes increasingly important" and that “maintaining liquidity and managing collateral are top of the list of priorities for banks”

“With counterparty and sovereign risk remaining elevated, gold is no longer being seen simply as a commodity. Rather, it is increasingly viewed by market participants as an important asset and a currency with no counterparty risk. We are gradually seeing the monetization and indeed the 'financialization’ of gold, as gold is gradually being reincorporated into the modern financial and monetary system,” according to GoldSeek.

Xia Bin, a Chinese Central Bank adviser, said China must increase its gold and silver reserves. In fact last year, Chinese officials announced they plan to increase gold reserves to 10,000 tons from 1,200 tons during the next decade. They believe accumulation of these reserves, when prices decline, will enhance their strategy to internationalized the yuan (Chinese currency).

According to the Chinese Gold & Silver Exchange Society, Hong Kong will soon be offering yuan-based gold futures possibly by April 2011.

This further strengthens gold as an asset and a stable medium of exchange while increasing the international credibility of the yuan.

It is becoming more probable that gold, currently trading near $1,360 per ounce, could reach $4,000 in the next decade.

Read more: Gold is as Good as Cash and Wields More Power

By Barry Elias

Website: http://www.moneynews.com/blogs/Elias/id-114

eliasbarry@aol.com

Barry Elias provides economic analysis to Dick Morris, a former political adviser to President Clinton.

He was cited and acknowledged in two recent best-sellers co-authored by Mr. Morris: “Catastrophe” and “2010: Take Back America - a Battle Plan.” Mr. Elias graduated Phi Beta Kappa from Binghamton University with a degree in economics.

He has consulted with various high-profile financial institutions in New York City.

© 2011 Copyright Barry Elias - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

dr ray
13 Feb 11, 05:48
china gold buying

"Chinese officials announced they plan to increase gold reserves to 10,000 tons from 1,200 tons during the next decade. They believe accumulation of these reserves, when prices decline, will enhance their strategy to internationalized the yuan"

So the Chinese are planning to buy when price of gold declines but you predict price will go up to $4000 and point to Chinese buying as one of the reasons.

Go figure!


Post Comment

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