30 January 2012
China Doubles Gold Holdings: No Other Asset is Safe
Posted by Brittany Stepniak - Monday, January 30th, 2012
Due to the latest phenomena in China, some experts are calling this the “Gold Era”.
The Chinese are buying gold in record numbers and the trend has been increasing exponentially within the past year as the race for wealth-guarding picks up pace.
It has been estimated that China purchased approximately 490 tons of gold in the 2011 year – double the estimated 245 tons purchased just one year earlier in 2010.
With stories of China's gold hoarding blowing up headlines around the world, people are beginning to ask: “Who's buying all the gold?”...and “Why are they buying in such massive quantities?”
Usual Suspect #1: The People's Bank of China (PBOC).
According to Zhang Jianhua from the PBOC. “No asset is safe now...The only choice to hedge risks is to hold hard currency—gold.” Jianhua also commented on it being a wise move to purchase the expensive yellow-metal on price dips.
After Mr. Jianhua made these statements, global analysts immediately assumed they meant that the fifth-largest holder of gold would be on the prowl for even more of the glistening precious metal. Hence, an easy explanation as to "who's buying all the gold."
However, others argue that there is little proof to support that theory. Perhaps most the most important thing to remember before jumping to conclusions is the simple fact that it'd be an extremely rare scenario that China's government would want to purposefully disclose their short-term investment strategies, at the risk of hurting itself.
Second, the central bank has less purchasing power these days. China’s foreign reserves declined in Q4 2011, falling $20.6 billion from Q3. The first quarterly outflow since 1998 was not large, but the trend was troubling. The reserves declined a stunning $92.7 billion in November and December.
What Made Gold Break Out?
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch -
Last week, gold broke through heavy overhead resistance, as did silver, to look very positive for the days ahead. Many technical analysts didn’t feel that gold had that kind of momentum but then came the break. It wasn’t a struggling break; it was robust sweeping resistance aside as though it wasn’t even there.
Fed’s Announcement Last Week
You’re probably saying now that it was the announcement from the Fed that interest rates would be held at current levels for another year more, through to the end of 2014. The superficial assumption is that this means that the dollar will earn nothing, so risk assets should outperform dollar deposits. That’s true, but a great deal more was implied in their statement (as we detailed in the latest issues of the Gold Forecaster & Silver Forecaster). The Fed pointed to long rates rising to above 4% over time, while inflation remained at 2% –and could fall further. Why?
If long-term rates are going to rise while inflation is dropping and short-term rates are flat, it’s more than likely that there will be a robust recovery. In those conditions it is more than likely that it is the dollar that will become suspect with dollar investors moving out of Treasuries. This could cause long-term rates to rise as they sell. The dollar would suffer in the process. What’s of considerable importance is that a rise in long-term rates means that the Treasury markets will fall to reflect interest rate rises. Currently, long-term bonds are at very high prices, so a fall could prove particularly harmful to those markets as well as the broad economy –including housing at a time when that will hurt that struggling market even more.
It is difficult not to see a sad picture for both the dollar and other facets of the developed world economies going forward, despite the noble efforts of the Fed.
What Made Gold, Silver Rise Beyond the Announcement
Investors who are aware that the U.S. gold market is not the hub of the gold market, must be asking why did the price jump in U.S. time? The sophisticated nature of the developed world market allows the U.S. trading markets to act like the waves on the sea shore and move prices quickly and dramatically. It takes the 24-hour market to smooth out the moves to reflect the true demand and supply picture. That’s why London pulled back the gold price on Monday this week. But the jump of $65 after the announcement reflected short covering and new long positions being established in those markets. The jump through $1,700 has been held in position and looks like staying there now.
Spring Festival sparks a 'gold rush' in China
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| Customers swarm to buy gold products at Caishikou Department Store in Beijing, capital of China, Jan 25, 2012.[Photo/CFP] |
Sales of gold, silver and jewelry rose 57.6 percent during the week-long holiday at Caibai, one of Beijing's best-known gold retailers, according to data released by the Ministry of Commerce (MOC) on Saturday.
Other jewelry stores across the country also saw sales boom during the period, with customers favoring New Year-themed gold bars, gold ingots and other types of Dragon-themed jewelries.
"Long treasured by Chinese, gold is no longer owned only by a privileged few, but has become a new investment channel open to all," said Guan Qiang, assistant manager at Caibai.
The Spring Festival gives people a chance to preserve and present gold as gifts, offering hopes that it will increase in value and not be impacted by inflation, Guan said.
During the week-long holiday, which lasted from January 22 to 28, the sales volume in Caibai and Guohua, another of Beijing's top gold retailers, reached about 600 million yuan ($95.28 million).
The figure showed a 49.7-percent increase over that of last year's Spring Festival, said a report released by the Beijing Municipal Commission of Commerce.
Caibai began selling gold bars as investment items during the 2008 Beijing Olympic Games, but the trend of buying gold or silver bars during the Spring Festival has really taken off in the past two years, Guan said.
For Guan and his colleagues, the Spring Festival rush was an exciting but exhausting experience, as customers flooded the store and surprised clerks with their purchasing enthusiasm.
"With customers crowding and rushing in, we did not even have time to eat and drink," said a sales clerk at the gold bar counter surnamed Li.
She said each shop assistant had received hundreds of customers per day and wrote several times more orders than on ordinary days.
"You can hardly even see the gold bars, necklaces and pendants in the display case. People seem crazy about gold, snatching it up more like a 'cheap cabbage' than such a precious metal," said Beijing resident Miao Miao.
THE CARTEL IS BOXED IN: Ranting Andy
THE CARTEL IS BOXED IN: Ranting Andy [Part 1 of 2]
IT'S TWO PARTIES VS. THE PEOPLE: Ranting Andy [Part 2 of 2]
IT'S TWO PARTIES VS. THE PEOPLE: Ranting Andy [Part 2 of 2]
Gold up 10% on India, China, Iran rumours
By: Vicky Kapur
Published Monday, January 30, 2012
May pay in bullion for Iran oil; Dollar under attack
Gold prices are currently trending around the $1,730 per ounce mark, within touching distance of their 60-day high of $1,747/oz, and up 10 per cent in the first 30 days of 2012.
Fuelling the bullion’s newfound drive are rumours that India and China, one of the world’s largest oil consumers, are secretly mulling paying in gold for Iranian oil, and bypassing a European Union (EU) oil embargo on Iran, effective from July 1, 2012.
The EU voted last Monday to ban oil imports from Iran. The move came after a defiant Iran announced earlier in January that it had launched a nuclear enrichment programme at a well-protected underground facility near the city of Qom.
Western nations suspect Iran, which is already under numerous international sanctions, of pursuing a secret nuclear weapons programme but Tehran insists it needs nuclear power solely for civilian purposes.
Nevertheless, the new EU sanctions are being seen as a way for the Western world to bring Iran to the negotiations table, but any move by China and India, which together purchase more than one-third of Iran’s oil, to bypass the sanctions will significantly reduce the EU’s negotiating prowess.
India, which has had traditionally friendly relations with Iran and has found a relatively new ally in the US, is in a precarious situation and has reportedly been working at finding a middle ground and strongly urging for a diplomatic solution.
Published Monday, January 30, 2012
May pay in bullion for Iran oil; Dollar under attack
An employee counts some gold bars before he sells them to a customer at a gold shop in Hanoi August 23, 2011. (REUTERS)
Fuelling the bullion’s newfound drive are rumours that India and China, one of the world’s largest oil consumers, are secretly mulling paying in gold for Iranian oil, and bypassing a European Union (EU) oil embargo on Iran, effective from July 1, 2012.
The EU voted last Monday to ban oil imports from Iran. The move came after a defiant Iran announced earlier in January that it had launched a nuclear enrichment programme at a well-protected underground facility near the city of Qom.
Western nations suspect Iran, which is already under numerous international sanctions, of pursuing a secret nuclear weapons programme but Tehran insists it needs nuclear power solely for civilian purposes.
Nevertheless, the new EU sanctions are being seen as a way for the Western world to bring Iran to the negotiations table, but any move by China and India, which together purchase more than one-third of Iran’s oil, to bypass the sanctions will significantly reduce the EU’s negotiating prowess.
India, which has had traditionally friendly relations with Iran and has found a relatively new ally in the US, is in a precarious situation and has reportedly been working at finding a middle ground and strongly urging for a diplomatic solution.
***2012 The Class Warfare Election***
This is sad, Americans have been so brain washed and so conditioned by the government that people are in an absolute tizzy about Mitt Romney paying an effective tax rate of 13.9%. Now everyone knows we are not supporters of any of the big government politicians, so this is NOT a political email in the sense of endorsing a candidate or party. This is about the mindset of most people, something we honestly find disgusting. The masses and the politicians from both sides of the aisle are using this 'tax return" story to beat the drums of class warfare.
Has anyone in the main stream media, colleges, or anyone brought up the fact that instead of everyone demanding Mitt pay more, why don't we demand that everyone else pay less. In fact, since it is the fruits of your labor, why don't we demand to keep all of our earned income? To us, this is a property rights issue, not a "pay your fair share" issue, that would be stupid to even say something like that. Seriously, Mitt paying more in income taxes than probably 150 million people combined, is he really paying his fair share? No, he is paying a lot more than his fair share.
The fact is taxing our income is oppression by the government, especially since the IRS is pointing a gun at our heads. If you don't pay your income tax, you might end up in jail. Don't believe us, ask Irwin Schiff, an anti-income tax advocate who the feds threw in jail for failure to report income.
Think about the tyranny in this tax, you exchange your time, energy, and body to produce income, and then instead of You using your earnings for yourself and family, the government forcefully takes some of it away in order to give it to others. Perhaps a Saudi prince, a life long smoker who needs medical care, or maybe to pay for a warrentless wire tap.
The Coming Paradigm Shift in Silver
By Steve St. Angelo
The biggest problem for investors today in trying to forecast the future price of silver is the enormous amount of contradictory analysis on the Internet. There are bulls, bears, paper traders, physical buyers, technical analysts, hedge funds, commercial banks and silver manufacturers all trying to play a part in this highly volatile silver market. Trying to sift through the huge volumes of silver analysis on the internet can be extremely frustrating. In addition, some of this information is not meant to inform, but rather to confuse or mislead the investor.
The biggest problem for investors today in trying to forecast the future price of silver is the enormous amount of contradictory analysis on the Internet. There are bulls, bears, paper traders, physical buyers, technical analysts, hedge funds, commercial banks and silver manufacturers all trying to play a part in this highly volatile silver market. Trying to sift through the huge volumes of silver analysis on the internet can be extremely frustrating. In addition, some of this information is not meant to inform, but rather to confuse or mislead the investor.
There is a great deal of misinformation on the internet when it comes to silver. I find it ironic that one of the so-called “bullion specialists” seems to give bearish commentary whenever the price of gold or silver rises to new highs. This is akin to a CEO of a corporation telling the media and shareholders that the company’s stock price is too high and needs to drop down to more sustainable levels. What CEO on Earth would say something as stupid as this with the best interest of the company and shareholders in mind? Furthermore, how many CEOs would keep their job if they repeated this over and over for the past several years, and got it wrong time and time again?
Unless you have been in the precious metals markets for quite some time, it is easy to be misled by this type of information. This is the very reason behind the motivation that I had to write this article. In it, I will attempt to give the reader-investor a more detailed and fundamental comparative analysis of the future price of silver, rather than the typical fly-by-night technical charting or bull-bear rant. This should give a more commonsense methodology in forecasting the future path of silver and its eventual paradigm shift.
Paradigm Shift: —n, a radical change in underlying beliefs or theory
The coming paradigm shift in silver will not happen due to technical analysis, fundamentals, or supply & demand forces, but rather due to a change in mass psychology of investors. Even though fundamentals and supply-demand forces will play a part in this shift, they will not be the ultimate cause. I believe technical analysis as it is used today, only charts the amount of manipulation and mass psychology in the silver market.
The coming paradigm shift in silver will not happen due to technical analysis, fundamentals, or supply & demand forces, but rather due to a change in mass psychology of investors. Even though fundamentals and supply-demand forces will play a part in this shift, they will not be the ultimate cause. I believe technical analysis as it is used today, only charts the amount of manipulation and mass psychology in the silver market.
Throughout history, a paradigm shift occurs in rigged markets when the manipulation of the financial system and economy is no longer sustainable. This occurred in the banking and housing markets in 2007-2008 when we had what I call a “Negative Paradigm Price Shift”— a trend where prices or values are declining.
Negative Paradigm Price Shift in Housing and Banking
Prior to 2007, the real estate market was kept alive by the work of clowns and magicians in the mortgage industry and banking system. For several years everyone was having a great time. As housing prices and sales continued towards the heavens, bank profits hit all-time records. Everything was going along just fine until the market realized one day that there was nothing left after “Liars Loans” were levied to keep the Ponzi going. Once the housing market collapsed, so too did the banking system. Like two twins attached at birth, one could not live without the other.
In true waterfall fashion, investment banks, commercial banks, government-sponsored entities and insurance companies went bankrupt, were either taken over or became a mere shadow of their former selves.
Here we can see several examples of a Negative Paradigm Shift:
As you can see from these 10-year charts, the prices of these stocks were range bound prior to 2007. All of a sudden, in the middle of 2007, the bottom fell out and the prices of these stocks suffered exponential losses. Other examples of companies that have experienced similar Negative Paradigm Shifts include Lehman Brothers, Bear Stearns, Merrill Lynch, Washington Mutual and Freddie Mac.
How could all of these institutions collapse in this fashion? It was due to policy deregulation as well as the manipulation of financial products, assets and information. Thus, the banking system and these institutions were functioning and supposedly solvent a great deal longer than a free market would have allowed. The act of misleading the market gave false values and elevated stock prices.
This is a perfect example of the mass psychology of the public investing in highly inflated assets based on superficial and bogus technical analysis. As the housing and financial markets were reaching their peak in the 2007, fundamentals played no part in their real market values— it was based entirely on mass psychology instead; the false belief projected by investors and the corporations themselves that these companies were actually of high value.
This disintegration of the housing market and banking system was not an isolated episode; rather it was part of the events that take place in STAGE 1 of what Dmitry Orlov calls the Five Stages of Collapse.
- Stage 1: Financial Collapse
- Stage 2: Commercial Collapse
- Stage 3: Political Collapse
- Stage 4: Social Collapse
- Stage 5: Cultural Collapse
According to Orlov:
STAGE 1: Financial collapse. Faith in "business as usual" is lost. The future is no longer assumed resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings are wiped out, and access to capital is lost.
Here we can see that the majority of these conditions in the Financial Collapse have already taken place. The only reason why the U.S. banking system is still functioning today is due to the ability of banks to mark to model their assets giving the impression that they are still solvent. Furthermore, the increased guarantee of FDIC deposit accounts to $250,000 as well as a temporary unlimited coverage for noninterest-bearing transaction accounts until Dec 31, 2012 have kept a major bank run on the banking system. These changes of policy have postponed the United States from entering into STAGE 2 or the Commercial Collapse. This will be discussed at the latter part of the article.
If this wasn’t bad enough, the current U.S. banking system is based on a fractional reserve requirement of 10% in fiat money; basically paper backing paper. This wasn’t always the case. To get a better idea of how disastrous the present banking system has become, we need to take a look at fractional reserve requirements of the past.
From an Historic Gold-Backed Fractional Reserve System to a Paper Farce Today
Eric Sprott made a recent comment posted in an article on Zerohedge.com, stating that “The financial system is a farce” . He couldn’t be more correct in his assumption. Not only is the present U.S. banking system based on a financial debt instrument called a Federal Reserve Note, but its fractional reserve ratio is virtually nonexistent.
In 1932, the United States had a fractional reserve banking system backed by gold. The member banks had different reserve requirements: central reserve city banks (13 percent), reserve banks (10 percent) and country banks (7 percent). All member banks had a 3 percent reserve requirement on time deposits. Even with these official reserve ratios, the total paper dollar claims to gold were much higher. For this analysis, we are going to compare the M2 money supply to the amount of U.S. Treasury-held gold.
Central-bank gold holdings reach 6 year high: joining the dots
Central banks are holding more gold but they're holding very much more wood-pulp and although there may ultimately be a change in structure of a global reserve currency this may still be some time away.
Author: Adrian Ash
Posted: Monday , 30 Jan 2012 LONDON (BullionVault) -
The gold price on Wednesday broke up through the downtrend starting at last summer's record high. Or so a technical analyst studying the price chart would tell you.
But just as in late 2007 - from where gold began a 55% run inside 6 months - this week the price of gold bullion jumped on news that is fundamental: the price of money, specifically Dollars, the world's #1 currency for trade and central-bank reserves.
Back in 2007, the catalyst came as a baby-step rate cut of 0.25%, signalling the Fed's switch from raising to destroying the returns paid on cash savings. Now the Fed's new zero-rate promise "took gold comfortably clear of the 50, 100 and 200-day moving averages, and opened up some big targets to the upside," says one London technician. The previous ceiling of $1700 has become a support level according to bullion bank Scotia Mocatta, "with further key support at the 200-day moving average at $1645."
Whatever you make of such numbers, it's worth stepping back to see the wood for the trees. Because the trend in who's buying gold, and why, is so plain to spot that you hardly need join the dots.
Gold bullion holdings amongst the world's central banks, for instance, have risen to a 6-year high, according to data compiled by the International Monetary Fund. Emerging and developing nations have swollen their gold reserves 25% by weight since 2008. The debt-heavy West is a net seller, but only just.
James Turk from the GoldMoney Foundation interviews Eric Sprott on precious metals and the global banking system.
Eric Sprott - James Turk - GoldMoney Foundation 1/3
Eric Sprott - James Turk - GoldMoney Foundation 2/3
Eric Sprott - James Turk - GoldMoney Foundation 3/3
Eric Sprott - James Turk - GoldMoney Foundation 2/3
Eric Sprott - James Turk - GoldMoney Foundation 3/3
3 Months After The MF Global Bankruptcy, We Find That $1.2 Billion (Or More) In Client Money Has "Vaporized"
On the three month bankruptcy anniversary of the company whose rehypothecation gimmicks will one day be seen as a harbinger of everything that is broken with the multi-trillion ponzi system, but not just yet despite loud warnings otherwise, we are getting close to a final verdict of where the $1.2 billion (and possibly more as originally predicted by Zero Hedge - see below) in commingled client money may have gone. Note the use of the passive voice because using the active, as in money that MF Global executives stole from clients, is prohibited in a legal system in which nobody goes to jail for something as modest as $1.2 billion in theft. That verdict? "Vaporized." No really (and yes, in the passive voice of course). From the WSJ: "As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing, said a person close to the investigation." Uh huh... Because money simply vaporizes. Which means one of two things: i) the "vaporization" is merely the phrase that so called investigators use to avoid the far more troubling sounding "stolen" as it would imply guilt, something which the former NJ governor and Goldman CEO (and not to mention JP Morgan which most likely was on the receiving end of the $1.2 billion + transaction) will, under guidance from counsel, sternly disagree with, or ii) the capital markets are such an unprecedented and manipulated fraud, that nobody has any clue at any moment, where any client money is, and that any residual capital still "invested" in mythical representations of "assets", which are likely rehypothecated so many times, that not even Bank of America's robosigning division would have a clue where to start unraveling, will promptly be converted into tangible manifestations of capital. So when someone asks what happened to stock market volume, and to investor confidence in the "stock market" feel free to use just that phrase: "it vaporized."
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