Author Topic: Lira getting Stronger - Why?  (Read 291385 times)

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Offline Stuart T

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Re: Lira getting Stronger - Why?
« Reply #900 on: November 29, 2017, 17:39:04 PM »
Can't seem to get into it without subscribing but your explanation more than covers it for me.



Offline KKOB

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Re: Lira getting Stronger - Why?
« Reply #901 on: November 29, 2017, 17:53:22 PM »
It's 'free to read' here  ;) :-


   The continued run of the gold price is a global investment sensation. Recently it broke the $1,500 an ounce barrier for the first time, 30 per cent higher than a year ago. Surely this lays bare the extraordinary foolishness of Gordon Brown’s announcement, 12 years ago this week, that the UK Treasury would sell off some of Britain’s gold holdings?

Actually, no. On this one occasion, Mr Brown’s decision was the right one. Let speculators go gambling on a shiny metal, if they want to. For most governments in rich countries, holding gold remains a largely pointless activity.

With hindsight, of course, Mr Brown could have gained a better price by waiting. At current rates, the $3.5bn the UK received selling bullion between 1999 and 2002 would have been closer to $19bn. The difference at current exchange rates, by the way, would be enough to cover a little over three weeks of the UK’s expected public deficit for the fiscal year 2010-2011 – not negligible, but hardly pivotal.

Mr Brown, his critics say, must be kicking himself. Similarly, the French no doubt still suffer sleepless nights for prematurely taking profit on their Louisiana claim by offloading it to Thomas Jefferson in 1803. And had I put my life savings on Ballabriggs at 20-1 before last month’s Grand National, I’d be writing this on a solid platinum laptop while being sprayed with pink champagne in my new beachfront villa in Barbados.

That is the way of things with speculative assets. The truth is that no one has a good explanation why the gold price is currently where it is. The familiar story – a hedge against inflation or government insolvency – is flatly contradicted by the low yields and inflation expectations in US Treasury bonds. The volatility of gold (and other precious metals – witness the huge drop in silver prices this week) merely underlines the risk of holding it. The $1,500 landmark is a nominal price: had governments listened to the bullion fanatics and loaded up on gold in the last big bull market in the early 1980s, they would still be waiting to earn their money back in real terms.

More substantively, criticism of Mr Brown’s sale also betrays a misunderstanding of why a country such as the UK has gold at all.

In common with most rich nations, the function of British foreign exchange reserves is not for the government to manage wealth on behalf of the country. British citizens do that themselves. The UK does not have a sovereign wealth fund that aims to maximise returns, and nor should it. It is not a big net oil and gas exporter such as Norway – UK net foreign exchange reserves are about $40bn, equivalent to 2 per cent of nominal gross domestic product, while Norway’s sovereign fund has $525bn, equivalent to almost 140 per cent of its GDP.

Nor does the UK pile up foreign assets by persistently selling its own currency to manipulate the exchange rate, as does China. It is notable that the much-vaunted official purchases of gold over the past year are mainly by countries such as China and Russia – and, to a lesser extent, Mexico – with big excess reserves.

UK reserves are there mainly for precautionary reasons – to intervene in currency markets to stop a run on sterling or to pursue monetary policy objectives. Yet gold is badly suited for this task because, despite recent interest from private investors, a large proportion of global above-ground stocks – 18 per cent in 2010 – is still held by governments.

Any attempt to sell off large amounts quickly risks driving down the world price, which is what happened after Mr Brown’s announcement in 1999, leading to an international agreement between central banks to restrict further sales.

A precautionary reserve asset held for intervention purposes whose price is likely to fall the instant it is used to intervene is singularly pointless. Of course, central banks selling into a rising market like today’s may not have the same impact as in 1999, but who knows what demand for gold will be like if and when the intervention is needed?

There remains only one other main reason for governments to hold gold – to set monetary policy by linking the national currency to the gold price. This remains as bad an idea as ever. It would have meant sharply tightening monetary policy since the fall of 2008. This would have been madness.

Private investors, and sovereign wealth funds out to make returns, can punt their money on what they like. If they choose to plonk it down on the blackjack table of the commodity markets, that is their decision. But there is no good reason that governments that hold reserves for purely precautionary purposes should feel the need to follow them.

Offline JohnF

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Re: Lira getting Stronger - Why?
« Reply #902 on: November 30, 2017, 12:23:17 PM »
5.33 to the pound earlier this morning, but the dollar still not broken the symbolic 4tl barrier yet.

Massive trade deficit announced (73.9%) and inflation at a nine year high (11.9% last month), only a matter of time before the dollar cracks 4tl.

Will it be a rant from the wee fella, or will it be the CHP backing up their claims regarding the wee fella and his family?

I reckon this coming Monday could be an important days trading for the lira.

JF


Offline JohnF

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Re: Lira getting Stronger - Why?
« Reply #903 on: December 01, 2017, 11:49:28 AM »
Interesting article in today's HDN relating to Halkbanks position as a state lender and the allegations that it facilitated sanction busting transactions by Iran.  The penultimate paragraph is probably the most important:

"Ankara is duly expected to deny all the accusations, even if the court eventually fines Halkbank. In that case, however, Turkey’s banking sector may face heavy penalties, as the U.S. Treasury could withdraw a license to clear dollar transactions. Congress could also impose further economic and political sanctions."

Full article

JF

Offline stoop

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Re: Lira getting Stronger - Why?
« Reply #904 on: December 02, 2017, 00:31:35 AM »
It's 'free to read' here   ;) :-


   The continued run of the gold price is a global investment sensation. Recently it broke the $1,500 an ounce barrier for the first time, 30 per cent higher than a year ago. Surely this lays bare the extraordinary foolishness of Gordon Brown’s announcement, 12 years ago this week, that the UK Treasury would sell off some of Britain’s gold holdings?

Actually, no. On this one occasion, Mr Brown’s decision was the right one. Let speculators go gambling on a shiny metal, if they want to. For most governments in rich countries, holding gold remains a largely pointless activity.

With hindsight, of course, Mr Brown could have gained a better price by waiting. At current rates, the $3.5bn the UK received selling bullion between 1999 and 2002 would have been closer to $19bn. The difference at current exchange rates, by the way, would be enough to cover a little over three weeks of the UK’s expected public deficit for the fiscal year 2010-2011 – not negligible, but hardly pivotal.

Mr Brown, his critics say, must be kicking himself. Similarly, the French no doubt still suffer sleepless nights for prematurely taking profit on their Louisiana claim by offloading it to Thomas Jefferson in 1803. And had I put my life savings on Ballabriggs at 20-1 before last month’s Grand National, I’d be writing this on a solid platinum laptop while being sprayed with pink champagne in my new beachfront villa in Barbados.

That is the way of things with speculative assets. The truth is that no one has a good explanation why the gold price is currently where it is. The familiar story – a hedge against inflation or government insolvency – is flatly contradicted by the low yields and inflation expectations in US Treasury bonds. The volatility of gold (and other precious metals – witness the huge drop in silver prices this week) merely underlines the risk of holding it. The $1,500 landmark is a nominal price: had governments listened to the bullion fanatics and loaded up on gold in the last big bull market in the early 1980s, they would still be waiting to earn their money back in real terms.

More substantively, criticism of Mr Brown’s sale also betrays a misunderstanding of why a country such as the UK has gold at all.

In common with most rich nations, the function of British foreign exchange reserves is not for the government to manage wealth on behalf of the country. British citizens do that themselves. The UK does not have a sovereign wealth fund that aims to maximise returns, and nor should it. It is not a big net oil and gas exporter such as Norway – UK net foreign exchange reserves are about $40bn, equivalent to 2 per cent of nominal gross domestic product, while Norway’s sovereign fund has $525bn, equivalent to almost 140 per cent of its GDP.

Nor does the UK pile up foreign assets by persistently selling its own currency to manipulate the exchange rate, as does China. It is notable that the much-vaunted official purchases of gold over the past year are mainly by countries such as China and Russia – and, to a lesser extent, Mexico – with big excess reserves.

UK reserves are there mainly for precautionary reasons – to intervene in currency markets to stop a run on sterling or to pursue monetary policy objectives. Yet gold is badly suited for this task because, despite recent interest from private investors, a large proportion of global above-ground stocks – 18 per cent in 2010 – is still held by governments.

Any attempt to sell off large amounts quickly risks driving down the world price, which is what happened after Mr Brown’s announcement in 1999, leading to an international agreement between central banks to restrict further sales.

A precautionary reserve asset held for intervention purposes whose price is likely to fall the instant it is used to intervene is singularly pointless. Of course, central banks selling into a rising market like today’s may not have the same impact as in 1999, but who knows what demand for gold will be like if and when the intervention is needed?

There remains only one other main reason for governments to hold gold – to set monetary policy by linking the national currency to the gold price. This remains as bad an idea as ever. It would have meant sharply tightening monetary policy since the fall of 2008. This would have been madness.

Private investors, and sovereign wealth funds out to make returns, can punt their money on what they like. If they choose to plonk it down on the blackjack table of the commodity markets, that is their decision. But there is no good reason that governments that hold reserves for purely precautionary purposes should feel the need to follow them.


Brown was an economic fool and cost our country a fortune.

Only Corbin and MacDonald could top him!


Offline Colwyn

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Re: Lira getting Stronger - Why?
« Reply #905 on: December 02, 2017, 09:51:16 AM »

Brown was an economic fool and cost our country a fortune.


Stoop, it's a pity your knowledge of economics is so poor that you couldn't even manage to read this simple article that explains why you are wrong. Never mind, I'm sure you are happy with your simplistic view of the world however misguided.

"Surely this lays bare the extraordinary foolishness of Gordon Brown’s announcement, 12 years ago this week, that the UK Treasury would sell off some of Britain’s gold holdings? Actually, no. On this one occasion, Mr Brown’s decision was the right one."

Offline Scunner

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Re: Lira getting Stronger - Why?
« Reply #906 on: December 02, 2017, 10:06:08 AM »
Stoop has never forgiven Gordon Brown for taking us into the Common Market

Offline Colwyn

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Re: Lira getting Stronger - Why?
« Reply #907 on: December 02, 2017, 12:18:07 PM »
Oh, is it that what it is. I thought it was that he blamed Brown for refusing to let us join the Euro. If we were in € Stoop wouldn't have to get aerated about the Bank of England.

Offline Colwyn

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Re: Lira getting Stronger - Why?
« Reply #908 on: December 04, 2017, 14:51:10 PM »
I reckon this coming Monday could be an important days trading for the lira.
JF
The £ has had a good day on rumours that we might be able to reclaim something from the Brexit mess. It is up against € and $. But is having an even better day: up against the £, further up against the $ and even further up against the €. And the reason for this is ... . . .? Suggestions invited. Finally a post that actually fits the title of the thread!

[P.S. As a wild guess I think the £ money markets may be underestimating "The Irish Problem" - specifically the DUP.].



Offline JohnF

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Re: Lira getting Stronger - Why?
« Reply #909 on: December 04, 2017, 15:16:48 PM »
Yep, pound having a good day against the euro which makes me a happy camper  :)

Had a feeling the lira would go significantly one way or the other today, and sure enough it's done really well against the dollar and to a lesser extent against the pound.

JF




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