Dubai, defaults, dollars and gold - markets and gold price slump

 As Mineweb warned eight months

ago, a financial crisis triggered

from Dubai has decimated markets

as banks are vulnerable to

huge debts yet again and gold price

has fallen as they struggle

to cover potential bad debt positions.

Author: Lawrence Williams 


Don't say Mineweb didn't warn you! 

Writing back in April in an article

entitled  Unwarranted post

G20 euphoria drives gold

downwards, but perhaps

not for long  

we said - "What was described

to me today as the

world's biggest Ponzi scheme,

which makes Bernie Madoff's

activities just appear

as small change, has yet

to implode, although it looks

as though it may be

beginning to do so. 

In one word that is

Dubai where feverish attempts

are apparently being made

by the sheiks to ward off

total economic collapse. 

Expatriates are deserting

the Gulf state almost as

quickly as they can find

seats on airplanes out. 

Huge swathes of apartment

blocks lie empty and,

my source tells me that

those wanting to sell out

are being pushed into

time-controlled sales,

supported by the government,

not that there are any buyers,

as too much coming on

the market at once would

lead to the equivalent of

a run on a bank. 

And given the trillions of dollars

in investment that have

gone into the state a run

on Dubai would be disastrous

for the global economy and

the banks that are involved. "

Well it's taken a little longer

to come about than we feared

at the time, but a potential

collapse of Dubai government

backed organizations which

are struggling to reschedule

debt of billions of dollars

has precipitated a fall in

the markets reminiscent of

what happened with

the subprime crisis of

a little over a year ago. 

Banks globally have

huge exposure to Dubai debt

and may now need yet more

bailing out by

shellshocked governments - and

some may well collapse.

What this has done to

nervous markets has led

to yet another sharp sell-off

potentially undoing much of

the recovery which has

been seen over the past year. 

And, as with the subprime crisis,

anything liquid has come under

the hammer - even gold which

has dived this morning.

What is the prognosis? 

For the markets in general it

doesn't look good. 

For gold maybe once things

settle down there will be

a recovery which may take it

to yet higher levels as

'safe haven' buying returns. 

Financial uncertainty tends

to be good for the gold price. 

The dollar could be helped,

at least temporarily,

at least vis-a-vis European and

Asian currencies as perhaps

U.S. banks are not as exposed

to Dubai as their European

and Asian counterparts. 

But loner term the outlook

for the dollar has to remain bleak.

Maybe China and India will

continue buying gold on

the dips which will stabilize

this sector - after all China

in particular has been

pushing its populace into

buying gold - another story

which may not have been

actually broken by Mineweb

but one which we were

instrumental in bringing to

the attention of the investment

public - see China pushes

silver and gold investment

to the masses which we

published in September. 

China has the financial muscle

to control a fall in the gold price

and perhaps can't afford

to let it collapse. 

Watch this space.


MINEWEB is an interactive

publication, with rolling

deadlines through each day,

commencing in the

Sydney morning,  and

concluding, 24 hours later, 

in the Vancouver evening

If you believe your side of

an issue deserves inclusion,

but has failed to meet one

of our deadlines, you are

invited to notify the Editor in

Chief in Johannesburg, and

we will include you in

our editing and expanding

on our stories. Email him

at alechogg@gmail.com

Link here

Sent from Kigali, Rwanda

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