Victoria Gold Corp VITFF

RE: Carry trade unwinding and impact on gold

[Windrunner]

Well that's a different subject to talk about. If you see a wind down of the carry trade what do you get? No one wants the US dollar, price goes down (good for gold). No one wants the dollar, better raise interest rates (to prop the dollar and keep carry trade going,also finance war effort). Increase in interest rates than housing market collapses as no one can finance their home (also bad for markets in general). Markets go down people pull their money out of stocks and into treasuries (or gold but wait). Liquidation of stocks results in market(hedge&fund) managers start having to liquidate their positions to account for redemptions. Usually they will start with their better profit holdings (market goes down) and what are those (all resource stocks gold no exception). Gold price will also go down as managers will probably have holdings in the bullion itself. Stock holders see that and reduce positions (more selling) dollar falls precipitously as US now has to reverse themselves and lower interest rates to keep public order (currencies around the world also fall in sympathy). Now people realize that gold is the only real money and move their money into gold bullion. Gold stocks having fallen during all this start to slow down and reverse to the upside. The frenzy to gold builds as your talking about all that money from the carry trade (which could be trillions) now moves into gold. Price goes from 590 (assuming it dropped in sympathy with the selloff) to 2000 (a conservative estimate). Gold stocks will reflect this jump slowly but will catch up like a rocket (boom). Those of us with nerves of steel during all this will be having margaritas in our new beach houses. Now what could stop this as it did this past week is the "plung protection team" the US and other governments have in place to avoid this scenario. They came in to support the market. Fund managers were selling their resource stocks to pay for redemptions and that's what you saw this past week. The market will head lower over time but not at a rapid pace as I suggest. One other thing you should think about for those invested in uranium is hedge funds hold lots of this commodity. If those redemptions come uranium has been a high profit holding and it will more than likely drop along with anything else. Actually the whole carry trade is quite complicated especially with currencies, interest rates and various governments agendas intertwined. My version could be completely out of touch but it will only take a few incidents to create a bad scenario (the Shanghai surprise). Good discussion topic bottom line gold will still end up the best place for your money. Cheers