Wednesday, February 17, 2010
IMF Gold Sales Will Jolt Confidence Further
This AFP Report declares that the IMF has decided to pick this very moment to announce further gold sales. They will not be allowed to disrupt the gold market, you understand, and the sales will be made on-market in phases or to governments and central banks if any takers can be found.
This however, as far as the gold market is concerned could not be a worse time to announce, pulling the rug from under what amounts to a very tentative rally. Physical demand for gold worldwide fell by 11% in 2009, while mining supply and scrap reprocessing rose 11%. The market is barely clinging on to its nine year bull phase which saw the price rise from $250 an ounce to $1220 two months ago.
The EU's troubles are ratcheting liquidity pressures onto the IMF, with the PIGS needing major refinancing packages, whether they stay inside the Euro or not. The Euro was held up only for two days by the declaration of solidarity from the EU summit last week, and already this evening, the currency is slipping away under further speculative attack, back at $1.36.
Gold sales could be the last straw that breaks the camel's back, sending commodity markets, many currencies and stock markets back onto a declining basis.
The time to declare sales is in the middle of the bull market, not when the requirement for funds is obvious for all to see. One can never be sure with markets but somehow you wonder how long the risk appetite of the bulls can hold up amongst all the evidence of financial crisis building. Each day that goes by, things seem closer to another earth-shattering financial event. China is reining in lending. The Euro is close to cracking. QE is having to be halted to keep government debts in check. The IMF might well have missed the boat this time, and their ill-timed actions bring the nine year gold rally to a halt.