Forever blowing bubbles
Nouriel Roubini has warned of the growing asset bubble based on the US dollar carry trade. It’s certainly behind the recent stock market rally. Is there a bubble in precious metals forming? I don’t think so, and neither does Jim Rogers.
It’s been one hell of a month for Gold, breaking out through $1000 and going north of $1100 on the back of India’s purchase of 200 tonnes from the IMF. The old IMF chestnut has been wheeled out many times over the last few years whenever things heated up. It was the bogeyman in the closet waiting to jump out and frighten the hell out of the market. Well he finally jumped out and nobody flinched. Everybody knows what he looks like now, and he ain’t that scary, in fact the kids love him and want to play with him. Like China.
Everybody expected China to take that bullion, and India has surprised everyone by jumping in first. And in doing so they’ve really altered the market psychology, and perhaps set a new floor at $1000. Sri Lanka has already joined the party, and I betcha all other central banks are looking askance. It just looks so cheap: $6.7 billion dollars for a stack of gold larger than Saudi Arabia’s entire reserve. This happened in the same week that the UK-Mugabe regime poured an additional $43 billion down the Royal Bank of Scotland shithole.
Countries sat on trillions of foreign reserves will gladly swallow anything else the IMF has left. How long will it be before Russia and China follow India’s lead? What about the other growing commodity countries such as Australia, Canada and Brazil? When will the various sovereign wealth funds want to secure their piece. How about the Middle Eastern oil billionaires? And with the printing presses on overdrive the world over, how long will it be before some bright spark in any government office realizes the ease at which his country can secure a significant portion of the world’s wealth by writing numbers into a computer terminal and then making a real asset purchase?
I think the Gold train is just leaving the station and India blew the whistle.
