State of sterling

[unit731]

A prominent fund manager has claimed today (February 4th) that the gold price will continue to rise this year as production of the yellow metal dwindles further, Citywire reports.

 

Evy Hambro, who co-manages BlackRock's major World Mining and World Gold funds - which are both worth around £2.7 billion - believes that investing in gold is in vogue at present due to sustained economic turbulence.

 

Although he stopped short of an exact price prediction, he explained that he expects the yellow metal to extend its gains this year and noted that gold bullion is attractive as it is "nobody else's liability".

 

He told the news provider: "Over the medium to long term the underlying supply and demand fundamentals have a bigger part to play in determining the price. Gold production fell last year and may fall further in 2009."

 

Mr. Hambro added that gold miners are struggling to undertake successful exploration projects and noted the discrepancy between the 15 million ounces discovered and 80 million ounces produced last year.

 

His comments follow the assertion last week by Eugen Weinberg, a commodities analyst at Commerzbank, Germany's second-largest bank, that the economic downturn is playing into the hands of anyone with a gold investment.

 

"In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment," he told Reuters.

 

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Goldbug, 04 Feb '09

 

ORIGIN

[Sporty]

One trouble I have with Gold.

 

Russia is the largest miner or the yellow stuff.

 

They have unknown reserves of their mining efforts, some have speculated they may have in storage as much as now exists in the world.

 

Even if 5 or 10%, if they dump it what happens to the price.

[Sporty]

So is the Baht artificially high and is it likely to go tits up any time soon?

I know that the Queens pound his struggling at the moment but our economy is still more stable than Thailand's,methinks!

 

Yes, I think it is artifically high. Can they maintain it, using there monetary scheme, now in place (see previous post).

 

Two troubles, I see, for the baht.

 

1) They can not sell their rice, now in storage.

(See other post about rice).

 

http://en.wikipedia.org/wiki/Thailand#Economy

 

2) The monetary scheme, is heavily based on the Yen, and the Japanese Central Bank, is gonna adjust sooner or later, to help their own economy. The Japanese Central Bank, has stated they like to see the Yen at 105/110 to the USD.

 

[HeartThais]

I don't think the baht is artificially high. I do think it is artificially stable but not at a much higher level than it should be. Where are the signs of major government intervention? Is the BOT fudging the balance sheet to hide all their intervention?

 

I don't think you can compare Thailand to Australia, Canada, UK or any other country based on profile. You could make a strong case that the aussie dollar was extremely overvalued last year due to hot speculative money flowing in. UK more stable than Thailand? Well, the balance sheet of RBS alone is larger than the GDP of the UK and their equity is leveraged around 25x. Thailand learned their lesson in 1997 and was clearly willing to give up some foreign investment to slow the flow of hot money into Thailand. I think a large part of the stability now is a result of that discipline.

 

Also, the BOT's stated objective wrt monetary policy is inflation targeting. It is usually mentioned first before fx stability. That's meant they've had a pretty tight monetary policy relative to the world. But with recent news about Thai deflation, I think that excuse for tight policy goes away and we may see more leeway given to the suffering exporters.

 

Anyway, Thailand has 110B now to defend the baht plus it has learned how to apply capital controls. In comparison to 1997, they had about 30B. So, I doubt baht goes tits up. In order for that to happen, we'd have to see a major bank collapse in Thailand or breakout of bloody civil war.

 

That said, I personally think there's a strong case for steady baht depreciation going forward. I just wouldn't expect any drastic revaluation anytime soon.

[Faustian]

There was talk of an interest rate cut...that may cause some movement...maybe.

[Sporty]

Well we disagree, for sure...

 

I find it interesting you think the baht should be mostly pegged to the two strongest reserve currencies in the world, for PPP at this dire economic time.

 

Thailand a country, that's GDP is based on agriculture, commodities, and cheap labor.

 

From the Rice Post alone, you started. I see the baht exchange rate and politics, the reason for the fix Thailand is in today. (I can give you more examples)

 

http://www.thai360.com/fbb/showtopic.php?tid/531430/

 

"Thailand, the worldâ??s largest rice exporter, is considering selling up to 5m tonnes from its stockpile â?? equal to a fifth of the worldâ??s annually traded rice."

 

"The Vietnamese government recently concluded a deal to sell 500,000 tonnes to the Philippines, the worldâ??s largest importer, at a price of $420 a tonne including freight. The two countries are also talking about further shipments of about 1.0-1.5m tonnes.

 

Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said that if Bangkok decided to sell rice from the stockpile, the government would have to absorb the losses, estimated at a minimum of $100 per tonne.

 

â??The question is, are they willing to lose that sort of money?â?Â, said Mr Chookiat."

 

So, with more rice coming in everyday to the stockpile, second crops in the fields, from farmers that never had a second crop before.

 

Lets just say, they got 5m ton to sell losing, only $100 USD, in the above, a minimal loss estimate, at current world prices.

 

5,000,000 ton x $100 USD = $500,000,000 x 34.5 baht to the USD = 1,750,000,000 baht.

 

http://www.thailandblogspot.com/thailand-economy/thai-government-to-implement-rice-pricing-scheme/

 

Interesting you said in last post:

 

"Anyway, Thailand has 110B now to defend the baht plus it has learned how to apply capital controls. In comparison to 1997, they had about 30B. So, I doubt baht goes tits up. In order for that to happen, we'd have to see a major bank collapse in Thailand or breakout of bloody civil war."

 

This year, and next year, when more rice comes along in normal course of events:

 

1) Can or will they bite the bullet and take the loss? Surely, the 110B baht will go quickly.

 

2) CNBC TV, here in the states, Monetary Commentator, believed Bank of Japan, Wednesday this week, began weakening the Yen and will continue to do so gradually, in coming weeks. If true, it makes the rice issue bigger.

 

3) History, has shown rebellion, civil war for less, will you pick the red or yellow shirts, if it does?

 

Interesting for sure, what the outcome will be. I can tell you, I will not be converting anymore USD to baht, at this time, than I actually need too.

 

[HeartThais]

1) Can or will they bite the bullet and take the loss? Surely, the 110B baht will go quickly.

How exactly does the government buying rice and then selling it at a loss reduce the foreign reserves of the BoT??? Also the foreign reserve is 110B USD, not baht.

[Lusty]

I've noticed that the GBP has started to pull away from the Euro.

Dunno if the European Central bank has cut its base rate as yet?

[BelgianBoy]

ECB kept the base rate at 2.0 % last thursday, no change.

But a lowering is expected for march.

 

BB

[Faustian]

Barclays reported a 6.3 Billion pound pre-tax profit, which tells you how much things were being talked up...no crisis there, quite the opposite.