Discussion in 'Commodity Futures' started by trader60611, Sep 4, 2009.
Gold surged over $40/oz 9/2 - 9/3
There are more buyers than sellers
1. There are no obious news, except G20 is meeting.
2. There is significant weakness in both EUR and USD (vs XAU)
My Guess is, inflation is ready to kick in right in a few weeks.
Much earlier than I expected 6 mo ago.
The central banks would really need to EXIT instead of discussing strategies (G20). My concern is, they will simply not raise rates when time is due, to easen problems with fiscal stability for the governments.
the CB's can't raise rates or all the deals with mortgage resets in the US will be unable to re-fi. That would be another banking catastrophe I guess... I wonder if we could have inflation with low rates? That would be wonderful for my adjustable rate mortgaged property
There is new assessment on world economy coming out of the G20 meeting. 40% surveyed said economy will not recover until second half of 2010. The common consensus on recovery was by the end of 2009 before this news came out.
September is seasonally strong for gold as it is the start of the wedding season in India.
true ... but there will probably be less "splurging" on gold
in india this yr
people there are having problems making ends meet just like in the rest of the world and there are monsoons to worry about
so it does not make sense to me that with prices at all time highs
( or close to it when prices in rupees ) that the wedding partys
will be lavish on gold gifts this season
Author: Lawrence Williams
Posted: Wednesday , 02 Sep 2009
Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.
While CIC was set up only two years ago, funded with $200 billion in initial capital, a report to the U.S. Congress noted that according to top Chinese officials, it was created to improve the rate of return on China's $1.5 trillion in foreign exchange reserves and to soak up some of the nation's excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC might be allocated more of China's growing stock of foreign exchange reserves - and this has already proved to be the case.
Probably the most interesting of the recent reports of what is happening with Chinese sovereign wealth fund investment outside China has come from Paul Mylchreest's Thunder Road Report where an ex-U.S. intelligence service member is quoted. He reports that he has a friend who is in the Chinese Sovereign Wealth fund sector who says - hearsay I know and it wouldn't stand up in court - indicated that the wealth fund analysts were working all hours of the day and night trying to put investment deals together - particularly in the oil and precious metals sectors. The conclusion is that China recognises that the U.S. dollar is going to tank and it wants to convert as much of its trillions of dollars of holdings into strategic assets as possible before the collapse really takes hold.
The trouble is there is too much money available chasing too few assets - and too little time available - or such is the conclusion. As a result the Chinese government seems to be doing its utmost in trying to persuade the Chinese public to buy gold and silver by relaxing the restrictions - it's now easier to buy precious metals in China than in the U.S. - and by pushing gold and silver investment on state-owned television. If this continues the likelihood is that China will permanently overtake India as the world's biggest buyer of gold and silver, while the country's store of wealth will help shield it against further western economic collapse.
If this is indeed the case then it must be likely that the country is also building its own gold reserves - perhaps surreptitiously - through creative accounting by buying by a state entity, but not through the Central Bank itself where such sales would need to be reported. Positive for gold looking forward.
Returning to the Sovereign Wealth Funds angle though, CIC's chairman, Lou Jiwei, is reported by the WSJ as saying that investment in CIC's global portfolio for "one month this year equalled that of the whole of last year" and that given that the fund is expecting a positive return on its investments this year it may well ask the government for additional funding. Where it is going to place additional funding, who knows but there seems little doubt that China is using the western recession to buy up assets on the cheap and the funds available to do this are virtually unlimited by Western standards. But the Chinese won't buy up any old rubbish. They'll be looking for the crÃ¨me de la crÃ¨me.
Already CIC has bought 17% of Canada's last real remaining diversified miner - Teck Corporation - smartly buying when the latter was only just beginning to recover from last year's collapse and it has to be likely that more minerals-strategic investments are on the cards or being negotiated, either by CIC or other state organisations. Chinalco's ultimately thwarted move into Rio Tinto would have been another such instance and the Chinese investments and takeovers of Australian miners and promises of huge funding for minerals rich African countries are other examples.
Some reckon that China will be the world's second biggest economy, overtaking Japan, within the next couple of years and will overtake the U.S. by 2030. If it continues the way it is going and the U.S. continues the way it is going, this could happen much sooner. Communism, Chinese style, is winning the war of economic dominance and soon the world will no longer rely on the dollar as its reserve currency, but the renminbi!
In an interesting, but perhaps disturbing footnote to the Thunder Road Report mentioned above, Paul Mylchreest comments that in Latin America, where he has been living for 25 years, for the first time he can remember, locals are now preferring their own currency to U.S. dollars. He goes on to finish with this comment: "If a fellow with no education, a poor diet, and inadequate medical treatment living at 3,500 metres above sea level can figure out that the US dollar is undesirable as a store of wealth, how much longer do you think it can last as the world's reserve currency."
There is a lot of money in technically oriented trend following funds, so that's a contributing factor to the high volume breakout. Fundamentally, there's been an increase in the supply of fiat currency relative to commodities - an increase in paper chasing the same amount quantity of goods (though demand for many of those good has dropped as well). It's the same reason for the increase in crude oil, which is another inflation hedge.
Plus, we are headed for the inevitable wave of currency crises. Good times ahead. Trade small.
The Euro/Dollar and the other majors have been in a very coiled range since early June. It should be a big move.
Let me guess, this was posted on goldismoney.info or kitco?
Post the link and let's see the credible source.
Separate names with a comma.