What’s Going On With Gold, Gold Stocks, Euro & USD?

Gold-Eagle

Scope of this financial crisis

Just take a look at this partial list of nations in big currency trouble as of now, all due to the rapidly deteriorating world financial/economic situation:

Argentina – Just nationalized the pension funds to help with their ongoing financial deficits, their stock and bonds are falling drastically – again.

Russia – Russian stocks collapse in recent weeks causing weekly market shut downs. The Ruble severely falls. Russian Oligarchs lose hundreds of $billions in the stock crashes. The Russian central bank is using a great deal of foreign reserves to prop up Russian banks. There is actually talk of another Russian default in the future by credible media. Oligarchs have to repay $47 Billion in the next two months in various ways, and it’s doubtful they will be able to.

Iceland – In the midst of a drastically falling currency and literal bankruptcy as they guarantee all deposits in banks that had lent out many times the GDP of the entire country. They now cannot even import food without paying in advance in foreign currency.

China – Said to be a ‘house of cards’ by Andy Xie, former chief economist for Asia of Morgan Stanley. China has supported its economic growth by excessive lending to its industries over the last ten years and hidden non performing loans. China has acted to prop its stock markets. China has a huge hidden banking crisis about to unfold. 50% of China toy manufactures out of business as an example.

Hungary – In the middle of a currency speculative attack as they try to deal with foreign exchange and the collapsing financial/credit markets.

Korea – Won falls 9% in a day as companies lose $billons apiece in foreign exchange losses when their hedges against the USD turn south. Korea has foreign exchange problems amidst the disastrous credit markets. Doubts are now floating about how many developing and even developed trade partners of the West have enough foreign exchange reserves to defend their currencies.

And last but not least in this sampler – the US – and unmitigated banking disaster, and it’s said that if the US did not take the huge steps to quasi nationalize the banks here, the entire US banking industry would have totally collapsed. US corporations are having to hoard cash to operate, whereas normally they use short term credit to fund payrolls, operations, etc. This lack of short term credit is a huge constriction on US and all Western economies right now. These same problems are now spilling over into Asia, once thought to be relatively immune.

EU- Said to have even worse exposure to the credit crisis than the US if that can be believed. They bought heavily of all the bad financial paper emitted from the US, and had their own credit bubble as well. Major EU banks have lent heavily to the developing Easter European regions, and now are on the hook for trillions. Etc, Etc, I’m just glossing over this. There is lots to say. EU employment, especially in the Club Med (southern EU) nations in the tank, and so are their economies.

Japan – Again falling into deflation which they never really exited since 1995.

That’s for a very brief sampler of the economic chaos out there worldwide.

From a Gold Bug forum, but great info none the less

Read up & Stock up

Its a pretty strange situation with gold, commodities and stocks going down. Everything is going into bonds and gilts, currency despite the impending inflation threat.

I can't understand it, the market is behaving incredibly arbitrarily.

People and large holding companies are selling gold in order to raise cold hard cash. They don't want to sell it, but its being sold and lower in the cost of gold , and silver as well.

Even though silver and gold are being bought by the everyday middle class person at record highs.

But its driving the dollar up and its evaluating itself against gold. this is also creating an abundance of gold in the large proportions market. which is why Kitco is showing gold dropping so much.

I agree.

Banks are liquidating gold by the ton for cash since they're not lending to each other. Hedge funds are liquidating gold by the ton to cover their calls. This creates a large supply of gold on the market and drops the price.

There is talk that the US may expropriate gold next year if the US government becomes insolvent, if gold is illegal to own such as in the '70s, the ownership of physical gold is discouraged. Plus, ever try to sell a bar of gold?

I think it is very simple. Besides jewlery, gold is only good as a hedge for inflation. With worldwide economic recession looming or well under way, inflation is no where in sight. Deflation will be prevelant. Gold will not recover until is goes back and tests the $400 range.