Friday , 18 August 2017

Alf Field: Will Derivative Losses Be Black Swan Event Propelling Gold to $4,500?

To achieve the EW target of $4,500/ozt. on the next upward move [in gold that I laid out in my article Alf Field: Correction in Gold is OVER and on Way to $4,500+!] will require something to trigger substantial new buying of gold. What could that event be? By definition, it will be a surprise to all market participants, a “black swan” event. That doesn’t prevent us from making a guess [and] one likely area from which problems could emerge…[would be] derivatives. [Let me explain why that might well be the case.] Words: 591

So says Alf Field in edited excerpts from his original article*.

Lorimer Wilson, editor of (A site for sore eyes and inquisitive minds) and (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Field goes on to say, in part:


The Bank for International Settlements [BIS] produces a list of outstanding derivatives twice a year. The latest report…reveals that the total notional value increased from $601 trillion (with a “t”) at December 2010 to $707 trillion at June 2011.

a) Interest Rate Contracts

Nearly all of the increase in derivatives was accounted for by interest rate contracts which now have a notional value of $553 trillion, some 78% of the total.

As we discovered in 2008, derivatives are benign until losses occur. Once losses emerged from credit default obligations, it was game on for the GFC. Interest rate derivatives protect banks from interest rate rises. Most banks borrow short but have large loan books at fixed rates for long periods. Thus a big rise in interest rates could trigger claims on these derivatives.

For the time being, rates seem to be locked at virtually zero in the USA, but this is not the case in Europe. Europeans are learning the lesson that rates rise when investors become concerned that the borrower can’t repay the amount borrowed, let alone the interest on the capital. When we drill down further into the BIS statistics…we discover that $219 trillion [40%] of the interest rate derivatives are denominated in Euros, compared with $170 trillion denominated in US Dollars.

If just 10% of the interest rate derivatives denominated in Euro’s produce losses, the world’s banking system would be looking down the barrel of a loss of $22 trillion. That would be enough to bankrupt the entire world’s banking system, something that the politicians of the world could not tolerate. What would a bail out of $22 trillion do to financial markets? What would it do to the gold price?

b) Foreign Exchange Derivatives and c) Credit Default Swaps

If it is not interest rates, there are $64 trillion of foreign exchange derivatives [9.1% of the total) and a “mere” $32 trillion [4.5%] of credit default swaps outstanding that could also produce “black swan” surprises.


Related Articles:

1. Alf Field: Correction in Gold is OVER and on Way to $4,500+!

There is a strong probability that the correction in the price of gold [down to $1,523] has been completed. The up move just starting should be…the longest and strongest portion of the bull market…at least a 200% gain… [to] a price over $4,500. The largest corrections on the way to this target, of which there should be two, should be in the 12% to 14% range. [Let me explain how I came to the above conclusions.] Words: 760

Other Articles by Alf Field:

1. Alf Field: Gold Going to $4,500/ozt. in Next Wave Towards Parabolic Peak


Once this present correction in gold has been completed it should [undergo] the largest and strongest wave in the entire gold bull market…to around $4,500 with only two 13% corrections along the way. [Let me explain how I came to that conclusion.] Words: 1900

2. Where Is This Unprecedented Global Financial Crisis Headed? A Retrospective from Alf Field

Everyone must be wondering where this “unprecedented global financial crisis”, (the World Bank’s words), is heading. What follows, for what they are worth, are my cogitations on this crisis. Words: 1641

3. Alf Field’s 7 “D’s” of the Developing Disaster Revisited

When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival…[Let me explain this further by reviewing the 7 major problems facing the U.S. (and thus the world) and how they all will lead to problem #7 – devolution.] Words: 1520

4. America’s Current Account Deficit Causing World’s Financial Crisis! Here’s Why

The onset of the world’s worst financial crisis in many decades is one of the most important factors (if not the most important factor) currently influencing investment decisions. The crisis has created chaos and confusion. Not many people understand how the world has arrived at this unfortunate situation. This report endeavours to identify the underlying causes of the crisis and explains why the USA current account deficit has been the main destabilising force in world finance. Words: 3806