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China should increase precious metals
Sungwoo Park
SEOUL – China should increase its gold and silver reserves, the Economic Information Daily reported on Monday, citing an interview with China’s central bank adviser Xia Bin.
Increasing gold reserves at the “appropriate time” is in line with the strategy of internationalizing the yuan, the report cited Xia as saying. “Related departments” should employ a “buy in the dip” strategy over a very long period of time, Xia said.
Bullion soared nearly 30 percent in 2010, advancing for the 10th year, as the dollar dropped and investors sought a store of value amid currency debasement. China is allowing greater use of its currency for cross-border transactions, seeking to reduce reliance on the dollar.
The report is “a positive factor for gold prices in the mid-and-long term,” Hwang II Doo, a senior trader at Seoul-based Korea Exchange Bank Futures Co, said on Monday. Still “it didn’t have immediate impact on prices as gold’s gain has more to do with the unrest in Egypt at the moment.”
Total gold consumption in China, the second-largest buyer, may gain 15 percent in the first-half, fueled by growing demand for alternative investments and a hedge against inflation, the China Gold Association said last week.
Imports of gold by China jumped almost five-fold in the first 10 months of last year from the entire amount shipped in 2009, the Shanghai Gold Exchange has said. Shipments were 209 metric tons compared with 45 tons for all of 2009, said exchange Chairman Shen Xiangrong.
The country increased gold reserves by 454 tons to 1,054 tons since 2003, the State Administration of Foreign Exchange said in April 2009. The metal only accounts for 1.6 percent of the nation’s reserves held by the People’s Bank of China, according to the World Gold Council. China doesn’t regularly publish gold-trade figures and rarely comments on its reserves.
Bullion for immediate delivery gained as much as 0.7 percent to $1,346.27 an ounce, and was at $1,339.25 at 12:53 pm in Seoul. The price rose 2.5 percent on Jan 28, the biggest intra-day increase since Nov 4 as escalating tensions in Egypt fanned concern that unrest may spread to other parts of the Middle East, increasing demand for an investment haven.
When and How Gold Will Begin its Bubble
The bull market in Gold is in its 12th year (globally it began in 1999) but has yet to exhibit any “bubble-like” conditions. In fact, we still see many people referring to this bull market as “the Gold trade,” as if its an aberration that needs to be reversed or corrected. That aside, we know that Gold is under-owned as an asset class. The very well respected BCA Research estimates that globally only 1% is allocated to Gold and that fits with some of the charts that I’ve shown in the past.
Institutional accumulation began in 2009 (e.g. Paulson, Einhorn) and we know that phase lasts at least a few years before a bull market gives birth to a bubble.
Part of the problem for Gold has been the solid performance of other asset classes through most of the Gold bull market. Stocks performed very well from 2003 to 2007 and from 2009-2010. Commodities performed well from 2001-2002 and in the first half of 2008. If stocks are doing well or if commodities such as oil and agriculture are performing well, it detracts from Gold. Gold performs its absolute best when the other asset classes underperform or don’t perform too well.
Let me explain the conditions and setup that will facilitate the birth of a bubble and Gold going mainstream. Read more…
Gold is to China as paper currency is to US
Bill Bonner
We’d still like to see a deep decline in the gold price. Too many people are getting onto gold. Most of them have no idea of what they are doing. Like readers of MONEY magazine, they’re buying the yellow metal as a speculation. Most likely they’re going to lose money. Almost everyone who speculates on gold loses money. Don’t ask us why. It’s just one of those Iron Laws of investing.
Gold goes up for 10 years straight. Speculators notice. They jump on board. And then the train runs off the tracks.
That’s just the way it works.
Besides, remember that this Great Correction is not over yet…not by a long shot. It has barely begun to correct the excesses of the Bubble Era. A quarter of all homeowners are said to be underwater on their mortgages – that still needs to be sorted out. And the whole financial industry – with the collusion of the Fed – is sitting on trillions of dollars’ worth of mortgage backed securities, pretending that they are good credits.
There are still major bankruptcies ahead…and deflation of assets prices. And in all the sturm and drang of it, the price of gold could go down too.
But if you’re acquiring gold, you have some powerful competition. As nations become rich and powerful, they accumulate gold. Those that are getting weak and poor give it up. Here’s The Financial Times with the latest news: Read more…
Gold: Major Buy Signals!
Gold and Precious Metals
UUP (US Dollar Proxy) Chart.
US Dollar Analysis:
- The Dollar decline on soft volume over the past few days has given me a buy signal. I use our US dollar signals to play the dollar, and to coordinate your Gold and Gold Stock purchases.
- Let me be clear; the move up here in the dollar is nothing more than a dead cat bounce, so don’t play it too big. When looking at the decline in the dollar from July through November, the dollar dropped nearly 15%. The most troubling sign I see for the USD over the longer term is the distribution in the ensuing rally in the Nov- Dec time frame. The dollar is in a major bear market, and rallies in bear markets tend to be sharp, and can end long before they are “supposed to”.
- The performance of the US Dollar over the last ten years is pathetic. The dollar has lost massive purchasing power against almost every single other asset. Consider: Crude Oil is up over 250%, and the Commodity Agricultural Raw Materials Index is up 57%. Many other commodities are up over 200% against the dollar, in the same timeframe. Why has this happened?
- The answer is: Debt Accumulation. Debt is growing, so the fundamental causes of the dollar bear market are also growing. The financial crisis is not ending. It is getting worse. Read more…
Chinese Silver Demand Surges Incredible Four Fold in Just One Year
Gold is flat and silver marginally lower despite dollar weakness this morning. Some market participants are blaming the precious metal sell off on speculation that China may take more monetary action to curb surging inflation. This is unlikely to be the reason for the sharp selloff, rather it looks like another paper driven sell off in the futures market by leveraged players on Wall Street with various motives.
The fact that silver is again in backwardation at the front end of the curve suggests that tightness in the physical bullion market continues and may even be deepening. Indeed, the massive increase in silver bullion demand from China (confirmed overnight – see below) suggests that silver’s bull market remains very much intact despite becoming overvalued in the short term towards the end of 2010.
Table Courtesy of Mitsui
Surging inflation in China, India, wider Asia and much of the world is of course positive for gold and silver as it will likely lead to an even greater appetite for the precious metals in order to protect against the ravages of inflation and the further depreciation of paper currencies. Read more…
China buys gold and the world follows
“We are entering a period of strong seasonal growth in gold demand and Chinese New Year is a big part of that,” said Brien Lundin, editor of Gold Newsletter. “Physical demand has been supporting the gold prices on the downside even during the typical slack periods, and I expect that upcoming increase in demand will also support the price, but at higher levels.”
The Chinese New Year, also known as Lunar New Year, begins on Feb. 3 this year and ends with the Lantern Festival 15 days later.
“Chinese gold and silver demand has been phenomenal ahead of the New Year holiday,” said Adrian Ash, head of research at BullionVault.com, a leading online service for gold bullion trading and ownership, citing comments from dealers among others.
Shipments have been “heavy” and they began very early, in mid-December, he said. Read more…
12 Economic Collapse Scenarios That We Could Potentially See In 2011
What could cause an economic collapse in 2011? Well, unfortunately there are quite a few “nightmare scenarios” that could plunge the entire globe into another massive financial crisis. The United States, Japan and most of the nations in Europe are absolutely drowning in debt. The Federal Reserve continues to play reckless games with the U.S. dollar. The price of oil is skyrocketing and the global price of food just hit a new record high. Food riots are already breaking out all over the world. Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time. Most Americans have no idea that a horrific economic collapse could happen at literally any time. There is no way that all of this debt and all of this financial corruption is sustainable. At some point we are going to reach a moment of “total system failure”.
So will it be soon? Let’s hope not. Let’s certainly hope that it does not happen in 2011. Many of us need more time to prepare. Most of our families and friends need more time to prepare. Once this thing implodes there isn’t going to be an opportunity to have a “do over”. We simply will not be able to put the toothpaste back into the tube again.
So we had all better be getting prepared for hard times. The following are 12 economic collapse scenarios that we could potentially see in 2011….
#1 U.S. debt could become a massive crisis at any moment. China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated. Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates. If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial Read more…
Tunisia President’s Wife Left with 1.5 Tons of Gold
The French government suspects that former Tunisian president Zine al-Abidine Ben Ali and his family may have fled the country with 1.5 tons of gold, French daily Le Monde reported Monday.
According to the French secret service, Leila Trabelsi, the wife of the ex-president, went to the Central Bank of Tunisia to fetch the gold bars, the paper reported.
The governor of the bank is reported to have refused to give them to her, so Trabelsi rang her husband who first also refused to help, before giving in, according to Le Monde.
“It seems that the wife of Ben Ali left with some gold, 1.5 tons or 45 million euros worth (67 million dollars),” a French politician told the paper.
But a central bank official denied receiving verbal or written orders for gold withdrawals, adding that the country’s gold reserves “have not moved,” Le Monde said.
An official from the Elysée told Le Monde that “this information comes directly from Tunisia, in particular the Central Bank. It seems to be pretty much confirmed.”
Trabelsi took a flight to Dubai, before heading to Jeddah. It is still unclear how Ben Ali left Tunisia.
According to Italian sources, reports suggest the former president’s airplane was in Maltese airspace without the authority to land.
There is also speculation that Ben Ali may have left Tunisia by helicopter to Malta and then taken his plane from there.
The French government believes the Libyan secret service may have helped Ben Ali flee in order to avoid violence, Le Monde reported.
Dubbed ‘the Imelda Marcos of the Arab world’ because of her lavish lifestyle and love of designer clothes, Leila Trabelsi is said to have demanded the gold last week as President Zine Al Abidine Ben Ali’s regime collapsed.
The chief of Tunisia’s central bank initially refused but Ben Ali, 74, personally intervened, and she flew out with the bullion as she joined him in exile in Saudi Arabia.
The source of the claim, leading Tunisian economist Moncef Cheikhrouhou, said militia men had tried to take more gold. The clan of the former first lady is widely despised as the ultimate symbol of corruption and excess.
A former hairdresser, Mrs Ben Ali, 53, is known for her love of fast cars – the family had more than 50 – luxury homes and frequent shopping trips to Dubai, during which she is said to have spent hundreds of thousands of pounds.
While many Tunisians faced unemployment, poor living conditions and oppression from Ben Ali’s brutal regime, his family – known as ‘The Mafia’ in the North African country’s capital Tunis – is said to have amassed a £3.5billion fortune. Much of it is kept in France, where some members of the family were still holed up last night.
Chinese President Hu Disses the Dollar; Says U.S. System is a ‘Product of the Past’
“The current international currency system is the product of the past,” Hu noted in answers to questions submitted to his foreign ministry office by The Wall Street Journal and the Washington Post.
BEIJING—Chinese President Hu Jintao emphasized the need for cooperation with the U.S. in areas from new energy to space ahead of his visit to Washington this week, but he called the present U.S. dollar-dominated currency system a “product of the past” and highlighted moves to turn the yuan into a global currency.
“We both stand to gain from a sound China-U.S. relationship, and lose from confrontation,” Hu said in written answers to questions from The Wall Street Journal and the Washington Post.
Hu acknowledged “some differences and sensitive issues between us,” but his tone was generally compromising, and he avoided specific mention of some of the controversial issues that have dogged relations with the U.S. over the past year or so—including U.S. arms sales to Taiwan that led to a freeze in military relations between the world’s sole superpower and its rising Asian rival. Read more…
It Really Is a Small World
There is a flood in Australia of biblical proportions though it must be said there is little news of it in the U.S. media. Much of Queensland is under water which would be comparable to saying that much of Massachusetts, Connecticut, and a large portion of New York is under water. Australia is very big.
If that news was not disturbing enough, on Tuesday, Krakatau volcano in Indonesia erupted, forcing the evacuation of tens of thousands in its vicinity as ash rained down on two large provinces. Meanwhile, the Kizimen volcano on Kamchatka is erupting as well.
England is passing through the worst winter in the last hundred years of recorded history. Its heavy investment in clean energy, specifically wind turbines, has turned out to be a bad idea since they tend not to turn much when the weather turns cold. Having shut down most of its coal mines, England is experiencing a lack of electrical power that is killing some folks.
No, it is not the Apocalypse, but it might as well be for people fleeing or trapped by these huge events.
No doubt some people are trying to organize efforts to save the kangaroos and koala bears in Australia while others are worrying about indigenous animals in Indonesia. If this sounds like they have idiotic priorities, they do. The same indifference Nature shows to these critters applies to you as well.
The anniversary of the Haiti earthquake, January 13, will occasion a flurry of articles and analysis of what has happened since (not much) but will fade by the weekend. Haiti hasn’t had a good day for centuries.
Meanwhile, snow has fallen in 49 of the U.S. States including Hawaii! It covered 69% of the lower 48. The northeast just experienced its second blizzard since Christmas.
Time to panic? Hardly.
So when should we panic? I would suggest a good time would be when we in America wake up and discover that the current administration has forced enough coal-burning utilities to shut down and there’s no electricity or just not enough to go around. Coal provides fifty percent of all of the electricity we use in the U.S.
We might begin to panic when we realize that the government remains steadfastly in the way of building more nuclear plants to generate electricity, despite its rhetoric stating the opposite.
Most Americans will begin to get angry when a gallon of gasoline hits $4 or more and will wonder why without wondering what happens when the U.S. government shuts down much of the drilling in the Gulf of Mexico by simply not issuing permits and forbids exploration or drilling off the long East and West coasts where billions of barrels of oil are believed to exist. Brazil is doing it. Why not us?
Oil is a global commodity which means that its price is determined by supply and demand. Right now, as China’s economy continues to surge and ours continues to stagnate, China is buying up as much oil as it can get its hands on. It is drilling for it off the coast of Cuba, a mere 90 miles from the tip of Florida.
Due to the floods in Australia, a major producer of coal, China is looking to purchase coal dug out of the mines in Appalachia, precisely where the Obama administration has done its best to shut down mines.
So, you see, it really is a small world after all.
The last great eruption of Krakatau actually lowered the temperature worldwide by throwing so much “schmutz” into the atmosphere it interfered with the Sun’s warming rays.
No matter where you live, it helps if the government doesn’t behave in a totally irrational and stupid way in the name of some bogus notion like global warming.
By the way, where is Al Gore these days? I hear China is experiencing some monster snow storms and it wouldn’t surprise me to hear he’s over there.
© Alan Caruba,
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