Sell Gold Before The Treasury Does

By: Nicholas Ventimiglia Tuesday, September 30, 2008 9:40 AM

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With equities, commodities and shorting in the Cross hairs of the world, I have been looking for a defensive sector besides Campbell's to go to. The knee jerk reaction was Gold. Gold was my "Should Of" Trade of last week. After the missed opportunity I began looking for entry points. In my studies I have discovered that in the Great Depression Central Banks liquidated gold.

Allow me to repeat myself: In order to unfreeze the credit markets the central banks could dump their gold.

Wiki Excerpts

Every major currency left the gold standard during the Great Depression. Great Britain was the first to do so. Facing speculative attacks on the pound and depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets.

Great Britain, Japan, and the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935-1936.

According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between national economies (25).

This is obviously a counter trending observation. Regardless, I wonder which of the emerging markets will be kind enough to take the Gold off of our hands. Furthermore the comments on Silver, which is currently out preforming gold, are interesting to say the least.

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9/30/2008 3:32:37 PM In an Inflationary Depression Governments Will Flock to Gold, Silver and other assets by Marc The reason the gold standard was abandoned was because a gold backed dollar during the 1930's was creating a deflationary depression or a shortage of money (the printing of money could not exceed a particular ratio of the gold it was backed by). The response was the government's switch to a fiat currency which allowed them to cure the shortage of money by printing as much money as needed. As a result today the world is drowning in a sea of paper money. What we are about to experience is an inflationary depression, that will probably result in the return to a non-fiat currency backed by gold, silver or oil. Reply Rating: (3) (1)
9/30/2008 6:17:55 PM What in the @!*$? by Adrian Ash You think central banks SOLD gold during the Depression because of something you read on Wikipedia? Your "studies" need revising... http://goldnews.bullionvault.com/gold_standard_total_war_090120082 Reply Rating: (1) (0)

The reason the gold standard was abandoned was because a gold backed dollar during the 1930's was creating a deflationary depression or a shortage of money (the printing of money could not exceed a particular ratio of the gold it was backed by). The response was the government's switch to a fiat currency which allowed them to cure the shortage of money by printing as much money as needed. As a result today the world is drowning in a sea of paper money. What we are about to experience is an inflationary depression, that will probably result in the return to a non-fiat currency backed by gold, silver or oil.

Rating: (3) (1)

9/30/2008 6:17:55 PM

What in the @!*$? by Adrian Ash

You think central banks SOLD gold during the Depression because of something you read on Wikipedia? Your "studies" need revising... http://goldnews.bullionvault.com/gold_standard_total_war_090120082

Rating: (1) (0)

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