Wednesday, November 25, 2009

Gold will not go below 1000 again

I am not so sure there's a huge dollar carry trade. What happens is that worldwide because interest rates are at zero percent institutions as well as individuals borrow money and they go and speculate. The dollar carry trade is frequently misunderstood in the sense that there are big short positions in the dollars. But one shouldn't over estimate the short positions in dollars because the world is basically awash in the dollars."

There are too many dollars floating around from the American current account deficit that reached USD 800 billion annually and total international reserves in the hands of central banks now are USD 7.7 trillion. That is the dollar overhang and to some extent some people want to hedge their dollar exposure and then they sell dollars and buy foreign currencies and of course also precious metals including gold, silver, platinum, palladium.