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By my reckoning, this is a false start. Firstly, there aren’t that many alternatives to monetary reserves for central bankers. For a central bank, the alternatives of any size are the U.S. Dollar, the Euro and, to a lesser extent, the Japanese Yen.
Brad Setser’s always insightful analysis has indicated that central banks haven't abandoned Dollar assets. What’s more, is the Euro a viable long-term alternative for reserves given the Eurozone’s very public problems?
As John Mauldin observed, the European banking system is a mess:
There are a number of signs that this is a false dawn. Bespoke reports that gold analysts are not expecting inflation this year. Moreover, if there was truly an outbreak of rising inflationary expectations, gold prices would be rising in other currencies, not just USD. A look at the price of gold in EUR, JPY, AUD and CAD show a very subdued rise, indicating that global inflationary expectations are well under control.
The key is economic growth. Until we get a global economic recovery, it’s too early to get excited about the inflation play.
The day for a sustainable commodity bull and the commodity supercycle will come – but not yet. In the short term commodities may have some more upside, as Bill Luby of VIX and More points out. Moreover, investor sentiment for gold, crude oil, copper, the CRB Index, etc. show rising bullishness but readings are not excessively high indicating crowded longs.
http://seekingalpha.com/article/1395...market-not-yet
Brad Setser’s always insightful analysis has indicated that central banks haven't abandoned Dollar assets. What’s more, is the Euro a viable long-term alternative for reserves given the Eurozone’s very public problems?
As John Mauldin observed, the European banking system is a mess:
European banks are in far worse shape than their US counterparts. That is because they utilize far more leverage, on an average about 30 times leverage. How can that be, in what is supposed to be a conservative industry?
[snip]There are a number of signs that this is a false dawn. Bespoke reports that gold analysts are not expecting inflation this year. Moreover, if there was truly an outbreak of rising inflationary expectations, gold prices would be rising in other currencies, not just USD. A look at the price of gold in EUR, JPY, AUD and CAD show a very subdued rise, indicating that global inflationary expectations are well under control.
The key is economic growth. Until we get a global economic recovery, it’s too early to get excited about the inflation play.
The day for a sustainable commodity bull and the commodity supercycle will come – but not yet. In the short term commodities may have some more upside, as Bill Luby of VIX and More points out. Moreover, investor sentiment for gold, crude oil, copper, the CRB Index, etc. show rising bullishness but readings are not excessively high indicating crowded longs.
http://seekingalpha.com/article/1395...market-not-yet
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