Wednesday, May 19, 2010

Gold Is Also Crashing Today - Carry-Trade Unwind

thanks to Germany's ban on naked shorting (bank shares and CDS on eurozone sovereign debt).

Gold Prices Dip as Investors Go for Cash (5/20/2010 The Street)

"NEW YORK (TheStreet ) -- Gold prices Wednesday were falling as investors sold gold for cash to cover losses as Germany's ban on naked short-selling spooked markets.

"...Germany's sudden ban on naked short-selling was weighing on the euro, which sunk to a low of $1.21 in Asia. Traders worried that the midnight ban signaled impending disaster and without the ability to short European bonds and stocks, investors were left few choices but to bet against the euro.

"The European Commission reportedly wants all European Union nations to follow Germany and restrict naked short-selling of certain assets. Any unilateral move could put continued pressure on the euro and support higher gold prices over the long term as investors buy gold as paper money loses value. The U.S. dollar is currently seen as one of the safest fiat currencies. The yield on U.S. 10-year bonds fell to 3.38%, which means that investors are more willing to lend the U.S. money." [Emphasis is mine. The article continues.]

It looks like a dumb bomb exploded over Europe.

As the article says later, the world today is more uncertain than yesterday, and fund managers think it is a good opportunity to buy gold "at a discount", thanks to this unwind.

In case you haven't heard, it's not just about Germany's stupid ban; there's a rumor that Greece may leave the EU, which has caused euro to jump.


Unknown said...

To make a long story short, if you want to make sure that the company which you're selling your wares to is a gold wholesaler, not a retailer.

sell gold for cash

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