Gold Prices Higher Due To New Developments In Financial Markets

Gold prices have drifted slightly lower this week after hitting the highest level in three weeks due mainly to a stronger U.S. dollar and China’s move to cut a key interest rate.

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The greenback received a boost last week when European Central Bank (ECB) President, Mario Draghi, vowed to take more drastic measures to prevent the Eurozone from sliding into deflation, promising to use whatever means necessary as China also acted to boost its sagging economic growth.

Speaking at a banking conference in Frankfurt, Draghi said. “We will do what we must to raise inflation and inflation expectations as fast as possible,” he told an audience of bankers in Frankfurt. “If … our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases,” he said.

On Friday, The People’s Bank of China made an unexpected move by cutting interest rates for the first time since July 2012 stepping up efforts to support the world’s second-largest economy after industrial production and retail sales figures showed the slowdown deepened last month. Recent economic data showed that the Chinese economy slowed to its worst pace in more than five years in Q3. The benchmark one-year loan rate was lowered by 0.40% to 5.6%. The benchmark one year deposit rate was lowered by 0.25% to 2.75%. Also, banks are allowed to offer interest of 1.2 times the deposit rate, up from prior 1.1 times.

Japanese Prime Minister Shinzo Abe has called snap elections, seeking a mandate for his struggling “Abenomics” revival strategy after the economy unexpectedly slipped into recession. The parliament will be dissolved on November 21. As elections must be held within 40 days, the vote is expected on December 14. Abe aimed to delay the sale tax increase scheduled for October 2015 for 18 months.

The BoJ left policies unchanged as widely expected. Governor Haruhiko Kuroda won the tight 5-4 vote on additional monetary stimulus during the October 31 meeting, which included raising the annual target of monetary base expansion to 80 trillion yen.

In another G20 summit held in Brisbane, Australia, the leaders agreed to boost their economies by at least 2.1% by 2018, adding $2 trillion to global economies.

Although, much of the summit focused on Russian President Vladimir Putin’s position on the crisis in Ukraine, what interested me was the new developments regarding tax laws.

Once again policy makers of the G20 and OECD have come up with more ways of taxing individuals, but still have done nothing about corrupt government officials who have stolen massive amounts of tax payers’ money.

Leaders of the G20 welcomed OECD recommendations that will help restore “fairness, integrity and transparency to the international tax system.” In simple terms what they mean is that they have created new additional measures to steal money from individuals and profitable companies.

The G20 is on track to deliver on the two-year Base Erosion and Profit Shifting (BEPS) Action Plan to address tax avoidance, with all actions scheduled to be delivered this year as promised.

All G20 and OECD members, representing 44 countries and around 90% of the world economy, are committed to the Action Plan reforms which will bring international tax rules into the 21st century. They will also ensure countries receive the taxes they are due; revenue which can then be used to provide infrastructure and services to benefit their citizens.

At this Summit, G20 Leaders have endorsed a new global transparency standard that will leave no place for tax cheats to hide. Hey, what about the biggest tax cheats of them all… government officials. What are the G20 going to do about these corrupt individuals who steal billions of tax payers’ money?

As I have mentioned countless times, all I hear and see is how these policy makers are going to find ways and means to extract funds out of hard working individuals and profitable companies, but they are yet to say anything about the billions that is stolen from state coffers all around the world by corrupt government officials. In South Africa, the president used nearly a quarter of a billion Rand on some “security upgrades” to his personal home. Can you imagine if Obama had spent some US$246 billion of tax payers’ money on upgrades to his personal home? But, this amount is miniscule compared to the billions, government officials have stolen over the years. And, this system of theft occurs all around the world. And, despite this, the OECD and G20 have not done a thing to prevent this massive theft of tax payers’ money. Instead, they want to antagonize the little individual and companies who look to ways to minimise their tax bill.

Since the last G20 in St Petersburg in 2013 when there was a high degree of conviction that economic growth would return, the global economic outlook has instead deteriorated significantly. Contrary to government statistics in many different countries, evidence points to flagging growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets. Yet, despite the overwhelming evidence showing failed monetary policies, governments continue with their expansionary monetary policies and low interest rates.

The G20 also confirmed that uninsured bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure.

This new policy puts bank deposits on par with paper investments, subjecting account holders losses that may well occur in the next financial banking crisis. Under this policy, banks no longer recognize your deposits as money, but as liabilities and securitized capital owned and controlled by the bank or institution.

For most U.S. citizens with savings or checking accounts in federally insured banks, normal FDIC rules on deposit insurance are still valid, but anyone with over $250,000 in any one account, or held offshore, will have their money automatically subject to bankruptcy disbursements from the courts based on a much lower rank of priority, and a much lower percentage of return.

This also includes business accounts, money market accounts, and any depository investments such as a certificate of deposit (CD)…

The solution is to have an offshore bank account, spread your deposits as far as necessary so that they remain under the government deposit guarantee or diversify into precious metals held outside of the U.S.

In what could definitely be called a stunning move, the Netherlands has announced it has repatriated in excess of 120 tonnes of gold from the vaults of the Federal Reserve in New York to the Dutch Central Bank in Amsterdam.

The Dutch Central Bank says it has recently shipped 122.5 tons of gold worth around 4 billion euros ($5 billion) from safekeeping in New York back to its headquarters in Amsterdam.

In a statement Friday morning the bank said that its 612.5-ton national gold reserve is now divided 31% in Amsterdam, 31% in New York, 20% in Ottawa, Canada and 18% in London.

“With this adjustment the Dutch Central Bank joins other banks that are keeping a larger share of their gold supply in their own country,” the bank said in a statement. “In addition to a more balanced division of the gold reserves…this may also contribute to a positive confidence effect with the public.”

By publishing this statement, the Dutch Central Bank basically admits that holding gold increases the public trust in the central bank as an institution, and that’s a statement which should not and cannot be underestimated as it basically means that only physical gold can be trusted and that the gold should be stored inside the country. ‘He who owns the gold makes the rules’ once again seems to be up-and-coming again.

Make sure that you have physical gold and silver in your investment portfolio.

Technical picture

Although prices have rebounded from the November lows, they seem to have hit some resistance at around $1200/oz.

gold_price_24_November_2014

 

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