VOODOO ECONOMICS: ‘Red Ponzi’, What Triggers The Next Financial Collapse? – By David Stockman | RIELPOLITIK
Gold has a small trading value, or market cap, compared to something like a trillion dollars that turns over in the repo market every day. Or the five trillion dollars a day that turns over in the currency markets. Gold is a minor player, compared to that.
If central banks begin to really stock up on gold, what’s going to happen is people will try to front run them.
This is the whole secret of what’s been ongoing for the last 20 years in other markets. The reason bond yields have gone to rock bottom is the central banks have been buying the bonds. So, the smart traders are buying what the central banks are buying.
If the central banks are going to start buying gold, the same guys who have been buying the 10-year Treasuries or Bunds are going to start buying gold, and it’ll soar. The same way that bond prices have in last few years.
In other words, the world is awash with massive artificial liquidity created by the central banks. It’s in the hands of traders, who move in split-second intervals and attempt to leverage anything that looks like it’s going up. Especially if they can put it on leverage that costs nothing.
Maybe the next chapter is the whole system becomes unwound and the banks start buying more gold, and the front runners start buying more gold, and the price begins to multiply by breathtaking rates.