Gold Starting To Be Used As Currency - Elizabeth Kraus - Gold Coin Blogger
Just as two Iranian warships were making their way through Syria through the Suez Canal Wednesday, and Israel’s foreign minister felt it’s a “provocation” by the Iranian government, saying there was absolutely no justification for Iran to put warships into the Mediterranean, Gold and Oil just shot straight up. And while, another tension was mounting as protestors demonstrated in Bahrain, Libya, and Yemen, both incidents gave Adam Klopfenstein, a senior trading analyst with Lind Waldock in Chicago to say, “anything that brings geopolitical instability will be signal for investors to buy gold.” The double edged sword, sharpened by growing global instability is twisting its edge to gold.Whether its geopolitical instability or fear of the Fed’s printing machines, after a brief pullback, rising oil prices are now also providing the next leg for gold prices, said John Licata, Chief Commodity Strategist at Blue Phoenix. He believes energy issues in the U.S. could push the price of oil into “triple-digits” by the end of the year. The knock-on effect would be the U.S. economy stalling, and that in turn could push gold to $1,500.
But the push for gold and oil as Rep. Mark Kirk (R-IL,) told Greta Van Sustern, is even stronger coming out of China as they are buying gold and moving away from the FRN$ (Floating Rate Note.) And now, to subsidize its oil reserve, China is making the largest gas deal ever with Canada. Chinese oil giant PetroChina said it will invest US$5.42 billion to acquire a 50 percent stake in a shale gas project developed in Canada by Encana (NYSE: ECA), North America’s top gas producer. With this deal, Chinese investment in Alberta has now topped $20 billion over the past two years.
As a result, between buying gold, enough to fill up Fort Knox 2x, China is not only establishing its own oil supply, but its merging in gold exchange within its territorial banks. The Shanghai Gold Exchange has authorized the China Bank, China Industrial & Commercial Bank, China Constructional Bank and China Agricultural Bank as the banks for settling gold accounts. So, while contrarians argue that gold does nothing but sit there and look pretty, Chinese say gold is as good as cash in hand, in banks, and will even buy oil.
Gold bullion trades for oil?
Yes! As Equedia Weekly published in The First Time in History, how gold was good as cash, and when it mentioned that on November 22, 2010, clearing house ICE Europe would begin accepting gold bullion as initial margin for crude oil and natural gas futures trading, it marked the first day in modern financial history that gold will be eligible collateral for energy futures. And this is a big deal. A really big deal.
The only form of collateral allowed by ICE before this was cash, and government securities. But with this announcement, ICE has effectively made gold equivalent to cash and government bonds. This trend is expected to continue. Using gold to margin on oil marks a new era in making gold a usable and credit worthy currency and we can expect that other firms will soon follow suit.
As I mentioned in a previous blog, JP Morgan Chase, one of the largest banks in the US, will be accepting physical gold as collateral for certain transactions. Again, for example, a hedge fund wanting to borrow money for a short period can put up gold as collateral and use the borrowings to invest elsewhere. That means gold is as good as cash. Gold has appreciated in value over the last decade more than any other asset, including real estate. That means it’s not only a better investment, but also an inflation hedge, a safe haven against a falling Dollar, a hard asset, and now it’s also as good as cash. So while the gold is all of the above, it can also be used as leverage to further one’s return on investment!
Using gold as collateral is a trend happening all over the world.
According to the WSJ: Exchanges in New York, Chicago and Europe recently agreed to accept gold as collateral for certain trades. The World Gold Council is also gaining traction in its push to have the Basel Committee on Banking Supervision accept the precious metal as a Tier-1 asset for banks, along with government bonds and currencies. In India, many financial-services companies are offering personal loans against physical gold, a market that is expanding. So for all of the contrarians that still believe gold does nothing but sit there and look pretty, tell that to the banks.
All of this leads to one thing: Continued growth in precious metals, which includes the most recent soaring of silver. “South Carolina, Virginia, Georgia and Utah are all trying to pass bills to be able to print their own currencies that are backed by gold and silver” states Ron Fricke president of Regal Assets “this is not a good sign and it seems like gold and silver are starting to become the universal currency as these flailing monetary systems suffer worldwide”
Just to touch upon its figures, as precious metals go, although silver doesn’t have quite the same mystique as gold, the “white metal” certainly has its backers, too – not to mention a longstanding cultural tradition that has imbued it with great value for thousands of years. In 2011, silver prices climbed 16 cents to $30.69 and pushed through their $30.50 resistance area. Backwardation, where front contract months trade higher than contracts farther out, which was a bullish signal on Monday, reversed on Tuesday. While Silver prices have soared to more than $30 an ounce from $18 a troy ounce in the last year, and though the world has roughly a 5,000-ton surplus of silver, prices for the metal that closed last year at their highest level in three decades, says Suki Cooper, a precious-metals analyst with Barclays Capital, for the first time in history, the metal is pinching the film industry!
It’s interesting to note, that while Kodak this year started indexing the price of its film to silver prices as Chief Executive Antonio Perez told investors earlier this month, Fujifilm Holdings has raised prices 10% on its silver-halide photographic paper and print materials in the U.S. The company also increased prices between 5% and 20% world-wide on photographic paper. The Tokyo-based company said surging raw-material prices on items like silver reduced operating income by 9.4 billion yen ($112.8 million) in the latest quarter.
Source: http://goldcoinblogger.com/gold-starting-to-be-used-as-currency/#more-2835
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