Hedge Fund Blogs From HedgeCo.Net


Precious Metals Outlook: Another Gold Watershed Event Occurs Confirming the Secular Bull Market is Alive and Well

The Economic and Monetary Affairs Committee of the European Parliament has approved gold to be used as collateral

If you listen closely you will be able to hear the crickets. Not a word about this story in the typical financial newspapers. I’ve unfortunately been listening to Bloomberg TV and CNBC all day and have yet to hear a discussion about this truly remarkable event. I have of course heard countless tales of impending doom for a non-existent bubble. And hours have been wasted on the ridiculous notion the Fed will stop the liquidity train come July first; a debate I fillet in the post titled, Debate of QE Termination a Head Fake; Expect Market Rallies Upon Completion of QE2

This momentous decision by the European parliamentary committee ushers in a new era of legitimacy for an investment that was often referred to as a “barbarous relic” only a few years ago. Lest we all forget Nouriel Roubini’s (Dr.Doom’s) rather recent Dec. 14 2009 piece,“Here’s Five Reasons The “Barbarous Relic” Gold is Going to Tank”. The price of Gold is only up over 35% since that reference; as The Heavy would say, “How you like me now” Nouriel?

The committee’s declaration may in retrospect set the stage for a dramatic revaluation of gold to rebalance (reliquefy) the debt laden treasuries of bankrupt western governments. A $10,000-$15,000/oz Gold price would probably do the trick and fix the U.S. treasury’s horrendous balance sheet.

Zero Hedge offers a different take on the matter:

Wonder why Europe is pressing so hard for Greece (and soon the other PIIGS) to collateralize its pre-petition loans on a Debtor in Possession basis? Here is your answer: “Yesterday’s unanimous agreement by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) to allow central counterparties to accept gold as collateral, under the European Market Infrastructure Regulation (EMIR), is further recognition of gold’s growing relevance as a high quality liquid asset. This vote reinforces market demand for a greater choice of assets that can be used as collateral to meet margin liabilities.” Luckily for Greece, it has 111.5 tons of gold in storage (somewhere at the New York Fed most likely). Looking down the road, Portugal has 382.5 tons, Spain 281.6, and Italy leads the pack with 2,451.8 tons.

The press release from the World Gold Council reads:

Capturegoldascoll

 

About Bret Rosenthal

Interpreting the news that moves markets. Principal of RCM, LLC, and founding partner of the Fortune's Favor Family of Funds
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