-- Posted Thursday, 21 November 2013 | | Disqus

A sell order for 2,000 gold futures contracts yesterday led to a 10 second halt to futures trading in London and a $10 drop in the price of the yellow metal. That’s ironic really because the FCA has just announced that it is investigating alleged rigging of heavily traded commodities or asset classes such as gold and currencies.

Who pressed the button in this electronic trade is unknown. Was it perhaps one of the two bullion banks who allegedly take secret orders from the Federal Reserve? The Fed has long seen gold as an enemy of the US dollar. Maybe somebody was reacting to the news that the Fed is closer to a QE exit than previously thought according to recent meeting minutes.

Win-win-win?

Why should that necessarily be bad news for gold? If QE is coming off then the real economy must be doing better, and if the real economy is really picking up then banks will start lending all their QE cash. That would be inflationary and good for gold prices.

Then again if this is all wishful thinking by the Fed then money printing will have to continue ad infinitum and logically printing piles and piles of paper money should eventually force up the value of the one money that nobody can print.

Then again if the FCA investigation proves to have teeth and the fixing of the gold price is stopped then standby for a massive hike in the gold price.

That makes for a win-win-win situation for gold investors. It has been a very disappointing year for gold bugs. But the old adage of buying what is cheap in investment markets before it goes back up is good for gold. It is not relevant to most other asset classes that look decidedly frothy.

Bubble trouble?

A Bloomberg Global Poll of investors found 46 per cent thought Twitter and social networking stocks and Chinese real estate a bubble, and 41 per cent thought the same of London house prices.

We would have thought London and New York stock market prices might also be classed as bubbles at current all-time highs. Still stocks and houses never fall, do they?

Nobody would consider gold prices as being in a bubble. That said prices could still go lower if the bullion banks are told to send them down, and they are falling again today. But buying the asset class with the most upside usually makes sense in the long run.

-- Posted Thursday, 21 November 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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