This page has been archived and commenting is disabled.
How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring
A little over a month ago, we reported that following a year of record-shattering imports, China finally surpassed India as the world's largest importer of physical gold. This was hardly a surprise to anyone who has been following our coverage of the ravenous demand for gold out of China, starting in September 2011, and tracing it all the way to the present.
China's apetite for physical gold, which is further shown below focusing just on 2012 and 2013, has been estimated by Goldman to amount to over $70 billion in bilateral trade between just Hong Kong and China alone.
Yet while China's gold demand is acutely familiar one question that few have answered is just what is China doing with all this physical gold, aside from filling massive brand new gold vaults of course. And a far more important question: how does China's relentless buying of physical not send the price of gold into the stratosphere.
We will explain why below.
First, let's answer the question what purpose does gold serve in China's credit bubble "Minsky Moment" economy, where as we showed previously, in just the fourth quarter, some $1 trillion in bank assets (mostly NPLs and shadow loans) were created out of thin air.
For the answer, we have to go back to our post from May of 2013 "The Bronze Swan Arrives: Is The End Of Copper Financing China's "Lehman Event"?", in which we explained how China uses commodity financing deals to mask the flow of "hot money", or the one force that has been pushing the Chinese Yuan ever higher, forcing the PBOC to not only expand the USDCNY trading band to 2% recently, but to send the currency tumbling in an attempt to reverse said hot money flows.
One thing deserves special notice: in 2013 the market focus fell almost exclusively on copper's role as a core intermediary in China Funding Deals, which subsequently was "diluted" into various other commodities after China's SAFE attempted a crack down on copper funding, which only released other commodities out of the Funding Deal woodwork. We discussed precisely this last week in "What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?"
We emphasize the word "gold" in the previous sentence because it is what the rest of this article is about.
Let's step back for a minute for the benefit of those 99.9% of financial pundits not intimate with the highly complex concept of China Commodity Funding Deals (CCFDs), and start with a simple enough question, (and answer.)
Just what are CCFDs?
The simple answer: a highly elaborate, if necessarily so, way to bypass official channels (i.e., all those items which comprise China's current account calculation), and using "shadow" pathways, to arbitrage the rate differential between China and the US.
As Goldman explains, there are many ways to bring hot money into China. Commodity financing deals, overinvoicing exports, and the black market are the three main channels. While it is extremely hard to estimate the relative share of each channel in facilitating the hot money inflows, one can attempt to "ballpark" the total notional amount of low cost foreign capital that has been brought into China via commodity financing deals.
While commodity financing deals are very complicated, the general idea is that arbitrageurs borrow short-term FX loans from onshore banks in the form of LC (letter of credit) to import commodities and then re-export the warrants (a document issued by logistic companies which represent the ownership of the underlying asset) to bring in the low cost foreign capital (hot money) and then circulate the whole process several times per year. As a result, the total outstanding FX loans associated with these commodity financing deals is determined by:
the volume of physical inventories that is involved
commodity prices
the number of circulations
A "simple" schematic involving a copper CCFDs saw shown here nearly a year ago, and was summarized as follows.
As we reported previously citing Goldman data, the commodities that are involved in the financing deals include copper, iron ore, and to a lesser extent, nickel, zinc, aluminum, soybean, palm oil, rubber and, of course, gold. Below are the desired features of the underlying commodity:
- China is heavily reliant on the seaborne market for the commodity
- the commodity has relatively high value-to-density ratio so that the storage fee and transportation cost are relatively low
- the commodity has a long shelf life, so that the underlying value of the commodity will not depreciate significantly during the financing deal period
- the commodity has a very liquid paper market (future/forward/swap) in order to enable effective commodity price risk hedging.
Here we finally come to the topic of gold because gold is an obvious candidate for commodity financing deals, given it has a high value-to-density ratio, a well-developed paper market and very long "shelf life." Curiously iron ore is not as suitable, based on most of these metrics, and yet according to recent press reports seeking to justify the record inventories of iron ore at Chinese ports, it is precisely CCFDs that have sent physical demand for iron through the proverbial (warehouse) roof.
Gold, on the other hand, is far less discussed in the mainstream press in the context of CCFDs and yet it is precisely its role in facilitating hot money flows, perhaps far more so than copper and even iron ore combined, that is so critical for China, and explains the record amount of physical gold imports by China in the past three years.
Chinese gold financing deals are processed in a different way compared with copper financing deals, though both are aimed at facilitating low cost foreign capital inflow to China. Specifically, gold financing deals involve the physical import of gold and export of gold semi-fabricated products to bring the FX into China; as a result, China’s trade data does reflect, at least partially, the scale of China gold financing deals. In contrast, Chinese copper financing deals do not need to physically move the physical copper in and out of China as explained last year so it is not shown in trade data published by China customs.
In detail, Chinese gold financing deals includes four steps:
- onshore gold manufacturers pay LCs to offshore7 subsidiaries and import gold from bonded warehouses or Hong Kong to mainland China – inflating import numbers
- offshore subsidiaries borrow USD from offshore banks via collaterizing LCs they received
- onshore manufacturers get paid by USD from offshore subsidiaries and export the gold semi-fabricated products to bonded warehouses – inflating export numbers
- repeat step 1-3
This is shown in the chart below:
As shown above, gold financing deals should theoretically inflate China’s import and export numbers by roughly the same size. For imports, they inflate China’s total physical gold imports, but inflate exports that are mainly related to gold products, such as gold foils, plates and jewelry. Sure enough, the value of China’s imports of gold from Hong Kong has risen more than 10 fold since 2009 to roughly US$70bn by the end of 2013 while exports of gold and other products have increased by roughly the same amount (shown below). This is in line with the implication of the flow chart on Chinese gold financing deals: the deals inflate both imports and exports by roughly equal size.
Given this, that the rapid growth of the market size of gold trading between China and Hong Kong created from 2009 (less than US$5bn) to 2013 (roughly US$70bn) is most likely driven by gold financing deals.
However, a larger question remains unknown, namely that as Goldman observes, "we don’t know how many tons of physical gold are used in the deals since we don’t know the number of circulations, though we believe it is much higher than that for copper financing deals."
Recall the flowchart for copper funding deals:
- Step 1) offshore trader A sells warrant of bonded copper (copper in China’s bonded warehouse that is exempted from VAT payment before customs declaration) or inbound copper (i.e. copper on ship in transit to bonded) to onshore party B at price X (i.e. B imports copper from A), and A is paid USD LC, issued by onshore bank D. The LC issuance is a key step that SAFE’s new policies target.
- Step 2) onshore entity B sells and re-exports the copper by sending the warrant documentation (not the physical copper which stays in bonded warehouse ‘offshore’) to the offshore subsidiary C (N.B. B owns C), and C pays B USD or CNH cash (CNH = offshore CNY). Using the cash from C, B gets bank D to convert the USD or CNH into onshore CNY, and trader B can then use CNY as it sees fit.
- Step 3) Offshore subsidiary C sells the warrant back to A (again, no move in physical copper which stays in bonded warehouse ‘offshore’), and A pays C USD or CNH cash with a price of X minus $10-20/t, i.e. a discount to the price sold by A to B in Step 1.
- Step 4) Repeat Step 1-Step 3 as many times as possible, during the period of LC (usually 6 months, with range of 3-12 months). This could be 10-30 times over the course of the 6 month LC, with the limitation being the amount of time it takes to clear the paperwork. In this way, the total notional LCs issued over a particular tonne of bonded or inbound copper over the course of a year would be 10-30 times the value of the physical copper involved, depending on the LC duration.
In other words, the only limit on the amount of leverage, aka rehypothecation of copper, was limited only by letter of credit logistics (i.e. corrupt bank back office administrator efficiency), as there was absolutely no regulatory oversight and limitation on how many times the underlying commodity can be recirculated in a CCFD.... And gold is orders of magnitude higher!
Despite the uncertainty surrounding the actual leverage and recirculation of the physical, Goldman has made the following estimation:
We estimate, albeit roughly, that there are c.US$81-160 bn worth of outstanding FX loans associated with commodity financing deals – with the share of each commodity shown in Exhibit 23. To put it into context, the commodity-related outstanding FX borrowings are roughly 31% of China’s short-term FX loans (duration less than 1 year) .
Putting the estimated role of gold in China's primary hot money influx pathway, at $60 billion notional, it is nearly three time greater than the well-known Copper Funding Deals, and higher than all other commodity funding deals combined!
Under what conditions would Chinese commodity financing deals take place. Goldman lists these as follows:
- the China and ex-China interest rate differential (the primary source of revenue),
- CNY future curve (CNY appreciation is a revenue, should the currency exposure be not hedged),
- the cost of commodity storage (a cost),
- the commodity market spread (the spread is the difference between the futures
- China’s capital controls remain in place (otherwise CCFD would not be necessary).
All of these components are exogenous to the commodity market, except one – the commodity market spread. This reveals an important point that financing deals are, in general, NOT independent of commodity market fundamentals. If the commodity market moves into deficit, or if the financing demand for the commodity is greater than its finite supply of above ground inventory, the commodity market spread adjusts to disincentivize financing deals by making them unprofitable (thus making the physical inventory available to the market).
Via ‘financing deals’, the positive interest rate differential between China and ex-China turns commodities such as copper from negative carry assets (holding copper incurs storage cost and financing cost) to positive carry assets (interest rate differential revenue > storage cost and financing cost). This change in the net cost of carry affects the spreads, placing upward pressure on the physical price, and downward pressure on the futures price, all else equal, making physical-future price differentials higher than they otherwise would be.
* * *
That bolded, underlined sentence is a direct segue into the second part of this article, namely how is it possible that China imports a mindblowing 1400 tons of physical, amounting to roughly $70 billion in notional, demand which under normal conditions would send the equilibrium price soaring, and yet the price not only does not go up, but in fact drops.
The answer is simple: the gold paper market.
And here is, in Goldman's own words, is an explanation of the missing link between the physical and paper markets. To be sure, this linkage has been proposed and speculated repeatedly by most, especially those who have been stunned by the seemingly relentless demand for physical without accompanying surge in prices, speculating that someone is aggressively selling into the paper futures markets to offset demand for physical.
Now we know for a fact. To wit from Goldman:
From a commodity market perspective, financing deals create excess physical demand and tighten the physical markets, using part of the profits from the CNY/USD interest rate differential to pay to hold the physical commodity. While commodity financing deals are usually neutral in terms of their commodity position owing to an offsetting commodity futures hedge, the impact of the purchasing of the physical commodity on the physical market is likely to be larger than the impact of the selling of the commodity futures on the futures market. This reflects the fact that physical inventory is much smaller than the open interest in the futures market. As well as placing upward pressure on the physical price, Chinese commodity financing deals ‘tighten’ the spread between the physical commodity price and the futures price .
Goldman concludes that "an unwind of Chinese commodity financing deals would likely result in an increase in availability of physical inventory (physical selling), and an increase in futures buying (buying back the hedge) – thereby resulting in a lower physical price than futures price, as well as resulting in a lower overall price curve (or full carry)." In other words, it would send the price of the underlying commodity lower.
We agree that this may indeed be the case for "simple" commodities like copper and iron ore, however when it comes to gold, we disagree, for the simple reason that it was in 2013, the year when Chinese physical buying hit an all time record, be it for CCFD purposes as suggested here, or otherwise, the price of gold tumbled by some 30%! In other words, it is beyond a doubt that the year in which gold-backed funding deals rose to an all time high, gold tumbled. To be sure this was not due to the surge in demand for Chinese (and global) physical. If anything, it was due to the "hedged" gold selling by China in the "paper", futures market.
And here we see precisely the power of the paper market, where it is not only China which was selling specifically to keep the price of the physical gold it was buying with reckless abandon flat or declining, but also central and commercial bank manipulation, which from a "conspiracy theory" is now an admitted fact by the highest echelons of the statist regime. and not to mention market regulators themselves.
Which answers question two: we now know that of all speculated entities who may have been selling paper gold (since one can and does create naked short positions out of thin air), it was likely none other than China which was most responsible for the tumble in price in gold in 2013 - a year in which it, and its billionaire citizens, also bought a record amount of physical gold (much of its for personal use of course - just check out those overflowing private gold vaults in Shanghai.
* * *
This brings us to the speculative conclusion of this article: when we previously contemplated what the end of funding deals (which the PBOC and the China Politburo seems rather set on) may mean for the price of other commodities, we agreed with Goldman that it would be certainly negative. And yet in the case of gold, it just may be that even if China were to dump its physical to some willing 3rd party buyer, its inevitable cover of futures "hedges", i.e. buying gold in the paper market, may not only offset the physical selling, but send the price of gold back to levels seen at the end of 2012 when gold CCFDs really took off in earnest.
In other words, from a purely mechanistical standpoint, the unwind of China's shadow banking system, while negative for all non-precious metals-based commodities, may be just the gift that all those patient gold (and silver) investors have been waiting for. This of course, excludes the impact of what the bursting of the Chinese credit bubble would do to faith in the globalized, debt-driven status quo. Add that into the picture, and into the future demand for gold, and suddenly things get really exciting.
»
- 147378 reads
- Printer-friendly version
- Send to friend
- advertisements -
Short Fiat.....Long gold
Watch out for that GOLD Tooth behind your upper lip.... I will get it.
One would assume you have the map of the claymore mines and various other booby traps.
"As Goldman explains, there are many ways to bring hot money into China. Commodity financing deals, overinvoicing exports, and the black market are the three main channels".
And I suspect the missing Malaysian 777 was caring black-market gold hidden within empty battery cases.
I wish those protesting family members would wise up and start chanting 'man-i-FEST! Man-i-FEST!' at the press conferences.
A company I worked for did a good chunk of business with China. We were regularly asked to over-invoice (but still pay the original quote). This was 10 years ago, so it is not a new tactic. BTW, those requests were always refused.
SoP outside the western world.
If you don't do it in the ME,you don't do any biz.
CIA find's 'Wooden Pallet' in Ocean
No shit, I'm not joking that is the news right now on google
Wiki has the best info
http://en.wikipedia.org/wiki/Malaysia_Airlines_Flight_370
zionhead
Also...? http://www.telegraph.co.uk/news/worldnews/asia/malaysia/10691089/Malaysia-Airlines-mystery-US-issued-warnings-over-Boeing-777-weak-spot.html
That's fine and dandy the "PLANE spontaneously combusted" NOT,
The plane turned off its FOFO ( friend or FO ), and did a U-turn, back to the Andaman Sea and went North for 6-1/2 fucking hours, before the Malay's reported the plane off radar.
Yes, everybody is involved in this 'cover-up'.
Neither didn't place the flight simulator with the usa base in the home of the pilot. Why would he be using all his free moments to learn to land in those four remote airport?. In mho it's clearly a sophisticated covert operation. The only question is who has the capabilities necessary to pull it over. Alternatively you can believe the photo of the moon surface with plane on it.
Off Topic - "Sanctions destroy anti-trafficking cooperation with US – Russian drug agency"
“Eventually, thoughtful observers and experts can suggest only one possible explanation behind Washington’s arbitrariness – the lack of readiness for positive cooperation and the fear of responsibility for the 40-fold explosive increase of illegal drug production in Afghanistan since this country’s occupation by the US and NATO forces in 2001,”
And I thought we were there to get the terrorists not the poppy profits, silly me.
http://rt.com/politics/drugs-sanctions-us-russia-329/
I did not support the use of combat forces by Bush in Afghanistan but he did try to reduce the poppy fields and the production of heroin. It was Obama who stopped this action within the first few months of his admistration. The huge increase of heroin world wide has been in the last 5 years. The 2001 date just smooths the data, there has been a massive increase since Obama removed all eradication.
Not true at all. The Taliban crushed poppy yield down to 5% of the peak output. I am no fan of the Taliban, but remving them meant juicing the heroin numbers like crazy.
It is estimated that >50% of the heroin moving through Mexico originates in Afghanistan or Pakistan.
You're no fan of the Taliban? Are you a fan of the Seahwaks? Because you don't need to be a fan of either to understand that the Taliban crushed poppy yield down to 5% of the peak.
Your words not mine.
In 2007 almost 93% of all non-pharmaceutical opiates originated in Afghanistan.
http://www.unodc.org/pdf/research/AFG07_ExSum_web.pdf
The case can be made that the invasion was in part due to wanting the spice to flow. The Taliban executed poppy farmers.
People really should start asking why Afghanistan. The US forces now provide cover for Chinese mining operations, too.
No doubt many brave Men and Women went over there to do good things.
Problem being the M.I.C. had another agenda.
That is what pisses me off.
You lost me at "A little over a month ago"
Well I am sure Goldman would like to say it is CHINA so end of story and investigations. That said, no doubt it appears China was the main beneficiary.
Clearly China will want to see its massive investment in gold appreciate...if they are as capable as the author presumes then they will likely, once they have accumulated as much gold as they deem necessary, cause the price of gold to increase significantly. An analogy could be that the Chinese have been pushing on the accelerator and the brake at the same time...once they release the brake things will get interesting......
They'll probably only do that once the possible upside of their gold holdings outweighs the possible downside of all the fiat they hold as reserves. And I think that's a ways off yet.
"An analogy could be that the Chinese have been pushing on the accelerator and the brake at the same time..."
So, they do their financing the same way as they drive is what you're saying? Makes sense.
Well they need to let the price rise if they want mining to continue...
....and lets not forget that keeping the price of gold suppressed also permitted our Fed to print at will.
Sounds like a bunch of hocus pocus.
Has Germany received their gold from the Fed yet?
Smoke weed; fuck bitches.
You've got to know the Rothschilds are pissed that China isn't playing the fiat game; you also have to assume that there is no way in hell they ship that much gold without a plan to get it back.
Funny, I've had this sneaking suspicion, along the lines of Knuck's musings above, that we may be being played in a real triple mind-fuck and there's plenty of gold stashed in the west...With an estimated 180,000 tons supposedly mined since creation, a little 5-10 thousand tons as a national reserve isn't really so much, and there's a hell of a lot unaccounted for. I too find it unlikely that the tribesmen would ever give up control or allow global control of such an important asset. (far from Jerusalem)
Who knows anymore. But on the flip side they were unable to replace Germany's gold and who knows how many bars are filled with tungsten.
They didn't want to replace Germany's gold because they don't need to. There will always be accounting gimics by the governments. Always.
As for all the gold in the world, you'll never know, and neither will I.
"There will always be accounting gimics by the governments. Always."
Thanks, I didn't realize that.
The point I was trying to make is if there's plenty of gold why the need to dilute? I'm not disputing, just showing the other side of the coin.
There's not plenty of gold. That's the point.
"He that have the GOLD make the rules"
The GOLDEN FUCKING RULE
So, who has the GOLD any opinions here?
IHMO I know the western hairlip doesn't have any gold, but I know everybody here in ASIA and his dog has gold at home.
*
Don't be so sure about ZIO-land (jerusalem) being the CAPITOL of GOLD for ZIO, there are plenty of ZIO's in RUSSIA, and in CHINA.
Sure they put condo's in TEL-AVIV, but just like NYC, that is a target.
Long ago they stole GERMANY gold's fair and square, ... anytime somebody comes to you and say's "LET ME CARE FOR YOUR GOLD, HERE's an IOU".... Well that was a fuck, ... and gold ain't coming back. Period.
*
Some say FT-KNOX, has no gold, ... considering nobody is allowed to look that is a fair guess.
What is a KNOWN-KNOWN to quote RUMSFELD is that the USA has been looted to the BONE.
What we can do for instance is say WHO has the GOLD and WHO doesn't.
EUROPE, INDIA, RUSSIA, ASIA has the fucking GOLD. Probably some in South Africa :)
Given that the Anglo-Saxon empire that let the ZIO's manage, given that they are run out of the UK, probably a good guess a shit-load of ZIO-GOLD is stashed in LONDON.
This PM game of deception is so secretive, so complex, so esoteric and we can only guess and theorize. Appearances are deceiving and you never know which articles lead to the truth or are the other hand of a magician.
What if Fort knox is full to the hilt and they are also expanding?
What if the CIA has all the gold?
Why did Bernanke say he does not understand the price of gold?
I understand the price of gold.....I also understood it over a decade ago.
It's worth more than the stated COMEX price....by quite a lot.
A wearhouse is empty, until PROVEN full.
Fair enough. I just think there's to big a difference between the east and west mindset for them to be completely on the same page.
thanks for the Hope...we eagerly await the Change...
Those pesky Chinese keep selling me cheap screw drivers and buying all my gold!
Why do you keep buying cheap screw drivers?
I'm far too tired to read this now. All I can remember is that ANZ claim that they import 15% of all gold into China. I think it was ANZ. And I think Commerzbank is a big physical player into China also. zzzzzzzzz
A few short years ago anyone suggesting there was a plot afoot to suppress gold was considered the lunatic fringe. Now these manipulation stories are more and more common.
This is the big news- denial is over, now the finger pointing begins.
It was the Chinese!
How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring
#askJPM
Just goes to show: Banksters are the same all over the world.
Nature teaches us that healthy life forms function on self-interest, yet organize on a large scale in an Us-vs-Them fashion.
All successful and enduring cultures are that way: the Chinese, Japanese, Jews, Koreans...
Ironically enough, Anglo-Christians do not (or no longer) have this attribute. Their version of "Christianity" has morphed into sliding the Balance between Selfishness and Selflessness radically toward the Selfless side -- while its non-Christian competitors have not reciprocated in kind. The net result has been a steady and profound decline in the average wealth of "Christians".
IOW, thanks to centuries of breeding and brainwashing by the Christian Clergy and Aristocracy, Christians are true Sheep, and the non-Christian predators are happily 'feasting' on them. It is for precisely these reasons, that I claim that Western 'Christians' are not only their own worst enemy, but will remain Sheeple until they heed the advice of the French philosopher, who proclaimed that "Man shall not be free until the last Monarch (Oligarch) is strangled on the entrails of the last Priest (Christian Cleric)."
Now junk away, stupid Sheeple, Statist shills and trolls.
i wont junk you but im assuming that you include the vatican's cohorts amongst those who are the predators
Discussions of religion are incomplete as long as God Almighty is not considered in the discussion.
He too has a hand in the affairs of man.
this was confusing.
It means if you hold PMs you were bent over a log.
It also means that the last few years have been the time to stack.
this was confusing.
It's suppose to be confusing.
Come around tomorrow....we'll take you again.
I like it because it is shimmery and shiney. I can understand that.
Like the Chinese I buy to keep. I don't know what is going on in the world but something is. Me and the chins are in the protection business.
Long spices.
and this doesn't include black market gold which would rival the official pile.
Good to hear that the Tylers are alive and well.
Nice article.
If the Chinese sell physical gold back into the market like they are selling high end properties the price may not go up.
I'm going back to studying Western and Latin American literature. My head isl spinning like a rehypothicated bankster driven top from reading this article.
in order to join the rest of the western economies the chinese needed to build an SPR (strategic petroleum reserve) and create a central bank gold reserve (they had neither). there is nothing unusual about china (PBOC?) buying gold and if they can jigger the paper market to get the best price, maybe bernanke told them how they could do it?
to get back to oil, the rise of the BRIC nations brings the necessity of more oil storage. (SPR reserves serve as a price management tool) if the PBOC believed bernankes view of gold they wouldn't be building up reserves, but then maybe bernanke doesn't believe bernanke.
anyway it helps to understand how they handle the hot money, and how that might change, (now that the global econ is going risk off) chinas gold reserves were among the lowest in the major economies, not they are up to standard, or nearly. and certainly we all aware of the physical scarcity of gold, particularly when the price drops. (and i say once more if you have that old supply demand chart around, just tear it up, if the price of oil fell in half there would be none left to buy - the gold market somewhat proves this point)
Does Bernanke believe Bernanke?
Many PhD tenured faculty do believe Bernanke so I wouldn't doubt if Bernanke acutally believed Bernanke, but can everyone at the top of the pyramid - in public view anyway - actually belive their crap?
It's doubtful, and somewhere along the line someone -be it Krugman or Bernanke - has to know, has to understand their theories are shite. As for China, they know the fiat game won't last. The Chinese have the best history books in the world and they remember when they experimented with fiat, they remember giving up their gold hoard to the mongols. The Chinese, for better or worse, will manage their wealth very conservatively, becuase that is all they know.
"...maybe bernanke told them how they could do it?"
or Martin Armstrong... heh.
why would the chinese want to 'join the big boys' when the big boys game is unsustainable and collapsing around us?
the grateful un..
Nice try. Got an A for the effort....ummmm, where's USA gold? We can't even pay back Germany....and we just stole the Ukraine’s gold.
Stole Libya's gold, stole Egypt's; tried to steal Syria's but Russia wouldn't let us. We may have got Ukraine's gold but Russia got the Black Sea - and Russia likely has plenty of gold. While Bernanke et al have been doing lecture series battling gold the East has been buying it hand over fist, and not just the central banks, but the public as well.
Just installed countermeasures on my sock drawer.....just to be safe.
Why dig it when you can steal it?
I have a claim and if anybody dugs it for a living, they would realize it is dirt chaep these days.........................
As far as digging it gopes..... It is worth way more than 1300 if you get it your self.................
Probably I would think of selling at 4k, until then it is mine...............
"Market Manipulations Become More Extreme, More Desperate" by Paul Craig Roberts and Dave Kranzler in http://www.paulcraigroberts.org/2014/02/07/market-manipulations-become-extreme-desperate/
OK.
So gold stays flat as they puke it back out to the market in their mini minski moment.
Maybe I won't see 900 gold, but I still don't see how it goes above 1800 again UNLESS there is a run on physical.
There cannot be a run in a general deflation.
Gold did magnificently during the last deflation. When the end of the world was near - so said Paulson anyway - gold bottomed in the Fall of '08 and equity bottomed in the Spring of '09. Bonds were not bought until after gold, too. So what does best in deflation?
Oh the dollar, that old bird, sure, well, go ahead, I dare you, bid on it.
Read Faber's book "tomorrow gold"
It's all in there
All ASIAN housewife will dump at $1550 this has been the plan for years.
At $5,000 they will....weep into their wine I suppose.
Some dude posting under the name Satoshi 101 was saying the exact same thing on these boards last month. Funny how that happens.
I thought it was satoshi911 that said the same thing.
He was a silly fucker, that satoshi123.
Stack On
Stack on to five figures, then sell if you dare.
that is a static environment observation. Things are very likely to be highly dynamic again at 1550, so that number becomes fluid.
I thought Chinese Momma would sell at $2,500 USD?
If I'm understanding the article correctly (didn't read until the end yet), then the meme that China is importing shitloads of physical Gold is just that, a meme - or more accurately an accounting illusion?
Huh?
The next global reserve currtency will obviously include the RMB or its equivalent.
They may have Gold, but we have Kim Kardashian, the Bubble Boy and Duck Dynasty!
What's more important...
Gold or Energy.
Would love some feedback on this.
Gold is a conductor of energy. In real terms and in transit. It is a transistor. Of money and frequency.
Gold is energy. Gold is money.
Gold is a conductor of electricity.
We can talk physics later ;)
good question, years ago I had this father-figure friend of mine, he had worked in the original OSS, which is the original CIA.
He used to have this narrative.
"PORTABLE ENERGY, black-gold, the greatest treasure in the history of mankind"
He who controls the 'portable energy' can be a super-power anywhere on earth.
So to answer your question its OIL, black gold is way more important than GOLD.
*
This reminds me what they used to teach us in special-forces, "IF YOU HAVE A GUN the WORLD IS YOUR SUPERMARKET".
What's more important a GUN? GOLD? OIL?
A gun hands down, you can steal a car, all the gas you need and rob people and take there gold.
If you want to understand the real world, learn to think like the enemy.
I'm walking down the road, carrying a quarter ounce of gold.
Your walking down the same road carring the like amount in gallons of oil.
Who gets down the road faster?
/whoops
/messy
Messi?
What weighs more, a 1/4 ounce of gold, or a 1/4 ounce of a gallon of oil?
"PORTABLE ENERGY, black-gold, the greatest treasure in the history of mankind"
Can you name 1 continent that doesn't have an abundance of oil/nat gas?
I'm quite sure every country has oil/natgas under it.
Correct me if I'm wrong.
correct me if i'm wrong and you had some coherent thought, although unable to clearly communicate your point
oil is not that valuable bc everyone has some of one or the other? is that what you're getting at?
what does that mean, an "abundance"? more than the country will ever need? more than neighboring countries will ever need? more than global demand? hardly seems like an appropriate adjective to use, unless we're talking antarctica, and even then we're speculating what's down thereyou do realize oil and natgas are too very different things, yes? not to be equated, ever and no one had mentioned natgas which is colorless and not black.
can't even equate oil to oil -- say, brent to that tar sands bullshit
Oil/natgas is everywhere in abundance....
Prove me wrong.
I want you to show me a place oil/natgas doesn't exist.
I want you to prove it. SHOW ME
Crickets...
"Can you name 1 continent that doesn't have an abundance of oil/nat gas?"
Answer: Europe
Proof: All the pipelines running INTO it
So there is no energy under Europe? Or No willingness to access it?
Stupidity is everywhere in abundance....
Prove me wrong.
I want you to show me a place stupidity doesn't exist.
I want you to prove it. SHOW ME
Just because something exists somewhere does not mean it is in abundance.
Burden of proof is on you, bud, as there's no oil leaking up from my backyard. None of the yards around here, actually.
There's truth to that, but you also would have to beleive that you were the only one with a gun and that you would get away with it forever.
Energy is more important until you are wealthy enough to take it for granted.
Then gold becomes more important.
Unless/until energy shows that it should not be taken for granted.
For most in the professional classes (and up), energy is a modest fraction of household finance, say 10% direct monthly expense.
Yet, their entire world depends upon it.
Asymmetric risk.
Tyler,
(See iii, buried below.) Reduced to its simplest:
1. GS says the Chinese purchases were to serve as collateral for arbitrage loans.
2. GS says the arbitrage play included hedging in the paper market.
3. GS claims Chinese gold exports offset their imports. (Seems to conflict with Koos' data).
So:
a. Wouldn't the far greater volume in the paper market, render any hedging in the paper market to be insignificant? Seems highly unlikely that it would have been a material cause of a 30%+ drop in gold spot in 2013. But Tyler your point is to assume that such hedging may have been some of the reason for the price drop.
b. Similarly, if the Chinese gold was not purchased for long term reserves, but rather was merely a short term arbitrage collateral, then if those physical positions are liquidated, there will be a downward pressure on pricing (this is GS's position).
c. Tyler you point out that the GS position ignores that the paper hedges will need to be unwound, and that such will have an upward pressure on prices.
There are other possible explanations:
i. Gold price would have crashed even worse than the 30%+ crash; Chinese collateral buying kept the market from being even worse.
ii. Since the arbitrageurs were hedged, the price of gold was irrelevant. There was no incentive for the Chinese arbitrageurs to hammer the physical price. In fact, if the physical collateral fell in value, it might upset the coverage ratios of the bank deals. (I doubt anyone posting collateral for an arb play, wants the collateral to drop in value.)
iii. GS's statement that Chinese gold exports were equal to imports, seems suspect. if it is true, THAT is the huge news here. It would mean that there is no net increase in Chinese demand. Cf Koos Jansen's recent work.
iv. The black helicopter/gold bug side of me wants to write off the GS report as being a way to obfuscate a simple claim, that China gold exports were equal to its imports. (I am skeptical of GS on this point). Tyler, you have accepted that GS claim at face value, and tried to rebut GS's prediction about the effect on the market.
v. GS claim would seem to be that the Chinese gold purchases are really just held in a sort of suspense account, ready for sale. That is, they are held in non-Chinese subsidiaries, or on boats, etc., acting as collateral for loans. It is the sale of this processed gold, that would be the overhang on the market (if GS is correct). Again, this seems suspect.
Again, the Chinese gold export data seems thin. Are those data published (as with the data that Koos publishes), or is it some inside information gleened by GS?
Ditto. I don't know how GS could possibly say if someone buys gold they have the "potential" to sell it; therefore the price devalues. Total bullshit.
I tend to believe the west is passing cheap gold into China as either a way to entice them to keep the USD functioning or/and it's a planned strategy for the world's elite to pass the torch silently to the East.
maybe the chinese imports have been exaggerated, maybe not. But the comex warehouses are being depleted still - and remain vulnerable to default
sw, thanks for your post. there are many inconsistencies in this article.
I f China's gross imports since 2011 is 2614 Tons then how the hell does the PBOC officially only hold 1054 tons at the end of 2013? Or am I missing something out of the numbers? Am I to believe that all of the buying is for personal use and not official? what am i missing
http://en.wikipedia.org/wiki/Gold_reserve
the chinese govt doesnt update that figure regularly. 2009 was their last official advice. plenty of room for supposition there...
But supply and demand is the oldest and most proven way to determine the value of a... Oh never mind.
So we await the great unwinding ... whence gold will stutter for a bit then after burners Kick in and cause it to accelerate out of sight
The banking elite use FRAUD (financialization) in whatever nation they are in to commit treason against their nation.
Long the rule of law. Short Glodman Sachs. Especially so since we are in the process of de-globalization.
Time for the Hula Hoop dance.. Love that Black Gold.
What pool are you panning?
How Banking Works
http://www.youtube.com/watch?v=ie-WwlxxtAI
I can't say that I understand all of the monkey business that goes on here. I've been pointing my finger at the Chinese here on this blog for about a year. It seems obvious that if the Chinese were the largest buyer then they would have the greatest incentive to bomb the price.
Maybe. But if you look at the gold price crash last year, it happened in April, after China was reported as buying 230+ tons in March. Why would they crash the price after making their largest ever purchase of AU. Doesn't make sense to me, unless the figures are total BS.
One day we will again see some sort of 'credit event' in the rest of the (ex-China) gold market and demand for physical there will rise quickly. Perhaps India. Perhaps North Americans, faced with price inflation, will get religion. Who knows who or where...
But when that happens these Chinese game-players will find that short-selling futures as a hedge to their buying of physical quickly become unprofitable and they will lose control of the game.
Asian housewives wont be dumping gold to think so is to not understand why it was bought. Only a Wai guo ren would think this way.
Gold for the individual is insurance against predatory governments political or economic chaos and distrust in the purchasing power of their fiat.
HHousewives will probably look for more gold the more uncertain things Seem.
Oh yeh and the production cost is around 1200
Blythe has been vindicated then? After all that's been said about her, it was actually the Chinese who crashed the gold price to load up on the cheap?
Possibly so.
But then again, I just remembered that a) China is well known to fake everything including first and foremost any official data and that b) Blythe really is a certified cunt who was in charge at JP's commodities trading arm and largely responsible for the collapse in gold and silver prices from their peaks.
Tyler will correct me if I am wrong, but an arb doesn't create value in and of itself; it merely captures the mispricing between markets. The price moves, if they are to happen, would occur during the actual accumulation phase (such as what happened with copper) of the asset against which financing deals will take place, and only if the accumulation creates physical scarcity. Also, most of these deals---as the article notes---are short term funding methods. Thus, the offsetting future would have a tenure matching the tenure of the financing. One need only look at Open Interest on the futures exchange to see that this is the case. One might get a look into the scope of any possible position close-out by just looking at futures OI. It doesn't look especially large, so any price impact from a close-out (which itself assumes this sort of financing will stop) is not much. In fact, maybe GS has it correct in that if the entire mechanism is taken off, physical selling would be a result (unless the Chinese choose to keep the physical). If a majority of these deals were purely OTC, that is, no use of public exchanges, then maybe a great unwind could impact physical, but that would mean that the COMEX/LME action was meaningless when the deals were being put on, which would negate most of the arguments made by those who claim COMEX/LME are the stomping grounds of the manipulators.
The article carries an assumption that an arb itself can move prices, when the entire point of an arb is to drive markets into theoretical alignment, wherever that price happens to be at any one time. The price level is meaningless (except in relation to carrying cost/position limit); it's the discrepancy between the underlying physical and the derivative that counts. An arb merely takes advantage of the fact that one side of a market got ahead of itself, thereby creating opportunities for the swift. Taking arb out, then, what seems to have happened (since you can't clap with one hand) is that "record physical demand" was met with record physical supply.
If such a scheme really could manipulate the price of a commodity downward for a sustained period, I suspect China would be much more interested in doing this to drive oil and natgas lower.
Another point: when I read and re-read the article LINKed above that talks about gold market manipulation being bigger than LIBOR, all I see is jiggling of the fix, sometimes up and sometimes down. This has an effect for a few hours and doesn't affect the trend. While illegal, the motivation behind it is that on any particular day, it might benefit one party to have the price a little higher or a little lower than it might otherwise be when the daily snapshot is taken. In thinly traded equities---especially at quarter ends---this is done by large holders of the equity. In LIBOR, the illegality was carried out because massive derivative portfolios could show hundreds of millions of dollars of difference with just a few pips up or down. Of course, if the terms "manipulation" and "gold market" are written anywhere near each other, there are many willing to assume that means both "long term" and "down".
Finally, if this article is correct and the "paper" short side of the market was largely related to China, does this mean somebody, or a lot of somebodies, owe Blythe Masters an apology?
The TIMING of this ZH article is amazing. Isn't it?
Timing is important right?
I will add...if China really is interested in accumulating, they certainly would not expose themselves to a situation where those on the other side of the futures contract could stand for delivery, forcing China to hand over everything it accumulated, and at a price much lower than in 2011-2012, when China did much of its buying.
The more I consider this, the less I agree with any of the article's conclusions.
By the way, are all those here who spouted off about stringing up Blythe now going to go to China and string up Xi and his cohorts?
What is your conclusion?
Did I not state it? Okay, then my conclusion is that this article does not explain gold's fall last year, because it suggests the arb drives prices rather than just compressing spreads.
What does explain last year's fall---as it explains every non-temporary market move since Eden---is that one side of the asset was more anxious and less patient than the other side. In gold's case, sellers were more anxious and less patient, so they swamped "record physical demand" with "record physical supply".
i think the implication of the article is not necessarily that china drove the price down, rather, china bought gold in such a fashion as to suspend the 'demand' impact of their purchases.
Thus the price dropped in the capacity that any sales effected the price downwards but only those non-chinese purchases affected the price upwards
am i close?
Bravo chindit13. As always, I thank you for your contributions when I manage to see you drop by.
***
But, to apologize to Blythe, why I could that no easiser than to apologize to Hillary...
@chindit13
I believe you have missed a critical point.
When you say, "The article carries an assumption that an arb itself can move prices, when the entire point of an arb is to drive markets into theoretical alignment, wherever that price happens to be at any one time.", you are correct. What you miss is the entire reason these CCFDs exist in the first place. These are FX carry trades facilitated by commodity deals, NOT commodity arbitrages.
Further, the FX carry is due the difference in interest rates between onshore and offshore Yuan. With China's current capital controls in place this trade remains profitable because the rates stay out of alignment.
The difference regarding gold is the physical movement into China. (see: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013... vs: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014... )
Keep in mind imports probably originate in Hong Kong, where as exports probably only make it into (onshore) bonded warehouses.
Well, that's my take on it all anyway. I hope it helps.
Huh? That first link again:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013...
Should I cry?
or
Cry hard?
/dup
Those who live in the GS forest, cannot see the tree's and that is the big problem here.
These type of articles should be written by outsiders, folks that have never work at JPM or GS, or any other Kleptocratic ZIO corporation.
Sort of like 'education' once they fuck your mind, ... your fucked, a solid education at a penitentiary would clear any any of these ex-zio employees of this type of GS-CENTRIC thinking.
*
Gold goes up and down, the western hairlip in fear of "USD collpase" blew GLD to its highest in history, now the bitch deflates. Now the USD is looking stronger than any other worthless paper on the planet, and given that FIAT is backed by MURDER, who on earth has MURDER better 'nailed' than the USA? Nada
So the GOLD trade slowly unwinds and the ASIAN's pick up the slack.
On the other hand the US citizen quit BUYING US debt long ago, and now the foreigners have quit, it only leaves the FED, but the FED can pass trillions to brussels and israel forever, so fucking what. The USA as a killing machine is well oiled with FIAT to INFINITY.
Oh, and the FED can pass secret FIAT to GS as well, so GS will never die but they will get fatter and dumber, cuz only the lean&mean get stronger & smarter.
In the meantime the cyber-space must be filled with articles like this to keep the mushrooms well fed with shit and in the dark.
Good point Chindit, it is unlikely that an accumulator would expose its hoard to delivery.
But the various articles I have read about the technical side, indicate that such is not how it works. It really is not much different than the Eddie Murphy scene in "Trading Places" or the Russell Crowe scene in "A Good Year."
Rather, massive shorting triggers an avalanche of stop loss orders. It is not just the 100 orders of the initial short seller that cause the hammer. It is the 1000 orders of the stop losses that continue the price fall.
Chindit the likely possibility that you overlook is that the initial short seller is able to cover at or near the same time he crashes the market. (Again, not much more complex than the movies cited above). That is, the person who crashes the market, does not retain any exposure after the episode. He sold high and bought low.
Like you, I still doubt the fundamentals of GS article - the import/export data seems to be a fact made up from wholeclothe, and the ZH article is sorta all over the map.
Of course some traders love to run the stops. They do it both to the upside and downside. The impact, however, is temporary. If there is genuine demand---either to buy or sell---then the run of the stops brings in the real buy or sell orders. Everybody trading size today has an expert system, and they are monitoring markets 24/7. The kind of price move that occurs when stops are run triggers order flow from those waiting for such an opportunity, but who did not want to show their hand by having an order already on the books.
Twenty years ago a trader could run stops and be pretty confident of doing the round turn and booking a win. It isn't as easy today, with hundreds of funds monitoring 24/7.
Regarding this article, another poster made a point about the entire thing being a way to arb money rates. Of course it is. That doesn't obviate the fact, however, that part of the thing is the arb related purely to the underlying physical. It is that which my posts tried to address.
One needs to begin with an assumption when considering the mechanism described and its possible effect on gold price. The assumption is either that 1) China doesn't really care to own gold, or 2) China actually wants to own gold.
If it is 1), then China's "demand" is meaningless, because it suggests it is all about the financing/collateral aspect. If it is 2), then China (or privates in China, since this financing mechanism is private sector, not government) would be exposing itself to losing what they accumulated by having a short futures position. A big HF could just be the other side of China's short and stand for delivery. The Chinese side would then have to scramble to cover, allowing the HF to cash out, or deliver against the expired contract. As I noted elsewhere, it is unlikely China would have done this in 2013, since the POG was below where China supposedly loaded up in 2011-2012.
Then there's the problem of rollover. If China (or anybody) really did represent a sizable percent of the futures short, they would have to cover the front month and sell the back month at some point. When a single party represents a major percent of one side of the market, it is not so easy to close it out. JPM certainly found out the hard way in CDX IG9s.
I think the article mixes apples and oranges. When people speak of China buying gold, that usually means the government building its reserves. The accumulation referred to in the article is talking about the Chinese Government. These financing/collateral schemes, however, are in the private sector.
Finally---and I repeat---if this sort of trading scheme is possible, China would be using it to manipulate oil and natgas prices, General Mills would do it to drive grain prices lower, Toll Brothers would use it to drive lumber prices lower, etc.
Fucking amazing commentary Chindits. Your post begins astring of brilliant and succinct analysis of the POG. Simply the best stuff I've ever read about what's up with gold. This is why I read ZH. Thank you.
Looks like the mad serial junker is back...please disregard downies.
"... then, what seems to have happened (since you can't clap with one hand) is that "record physical demand" was met with record physical supply."
What is the situation if/when the record physical supply is tapped out? What will China do with its position then?
I would like to see the Tyler respond to the points Chindit raises.
" all I see is jiggling of the fix, sometimes up and sometimes down. This has an effect for a few hours and doesn't affect the trend."
What happened in the 1H of 2013 was not simply a "jiggling of the fix". Several times there was a massive dump to the downside which took out stops and caused a major market route. Your memory may not be intact from those days but mine sure is.
I remember it well, but the conclusion most seem to have reached is not necessarily the correct one. Frankly, if I had to move size, and I was anxious about a move against me before I had a chance to act, I'd be quite happy to only take out 1-2% of the price by hitting existing bids. Certainly the folks who held Au from $1925 and Ag from $48.50 are in no position to criticize somebody who was willing to take a 1-2% hit, when the still-holding crowd took a 35-60% hit to purchasing power, no matter where they bought (caring about purchase price is of import only to the tax authorities and the ego). By the way, there were some very large longs who had ridden much of the decade long PM move. There came a time to get out, especially after the frothiness of 2011.
If one considers that not everyone thinks "gold is money", and that it is merely just another asset choice, then such moves are understandable. When I was a member of the Dark Industry, I sold when the volume was there, not when the market reached my price. If it's close enough, and volume is there, it's best to unload.
Now in contrast, if I see a large order hit the market and only a small percent of it gets filled, then that is probably an attempt to run stops. It happens in most all markets, both to the upside as well as downside. Such a tactic has only a short term effect, because if there are real buyers in the market, they will fill in the bid side.
It is probably better to be dispassionate about any asset one holds, because then one can be more honest both when the price moves in one's favor or against it. It's not always manipulation just because the market moves against a person, and not always genuine buying when the price moves in favor.
Personally, I think we are on a path to much higher gold prices (silver, I'm not so sure as the market really does seem to be saying that it is now just an industrial metal), but gold won't move much higher until a wider percentage of the populace loses faith in government of all stripes. That might take more time, and gold may hit new multi-year lows before that happens. And if things really blow up, then all I'll want is energy and calories, so it is always about timing.
It has been well explained here on ZH many times that if you want to unwind a long position in gold you would not unwind it all at once in milliseconds causing a huge market shock since that unnecessarily is less profitable. Instead it is more profitable to sell over a period of time. That is the principal reason why manipulation was at work. Tylers have also shown that since the 1H of 2013 various circuit breakers have been placed on markets including gold. That is why the recent drops in price over the last few days are not so readily identifiable as manipulation.
especially in consideration of fiduciary duty obligations
If it's a major HF or large trader, they just sell. If volume is there...boom. Louis Bacon trades that way, PTJ trades that way. It's the functionary types worried about things like VWAP that are concerned about how they rid themselves of a long term position according to how the asset trades on the single day they unwind.
POG had appreciated nicely over ten years. When the bells rung at $1900 it was a matter of who would start to unwind first. The size of the sale doesn't matter that much when your position is several years of age and has appreciated 200% or more.
The case can be made that the price was manipulated downwards and with much vigor as prices looked to breach 2k/oz and silver 50/oz. I would credit the usual suspects with that. China is just a side show.
But in all likelihood it was a quick and fiersome unwind of an asset class that had appreciated alot during the run of 2009 to 2013 and big investors dumped their contracts quickly and at once to capitalize on the strong buying interest. This is a classic pump and dump template just like with any crap stock that gets hyped and then eventually crashes for whatever reason they make up.
Jim Rogers was probably on the sell side at that point and so were many of his group who played the "doom & gloom" and "fear trade" crowd and then offloaded their position into a very strong buy side at the lofty levels.
Rogers et al know full well that there is no price discovery in this market. It's a suckers game and he and others just figured out their niche to play their own game.
I like physical gold and silver and have been buying steadily in weekly increments. No way I'd burn money in a paper game. Can't touch it, don't own it.
I think the biggest fear of central banks is the resurrection of gold, maybe even more than deflation.
Good points chin
China has a vested interest in a low traded price as it enables them to acquire physical gold cheaply. How is this done? The traded price is clearly manipulated. Its easily fixed lower. Price is $1350, just buy and sell to yourselves to knock it down. If there are no third parties to force it higher and no regulation on physical backed contracts, the price can easily be managed.
If there are no third parties to force the price higher, then that means the price is too high. Is that too arcane of a concept?
If what you suggest is truly possible, then why doesn't China drive the price of oil to a penny a barrel? Why? Because there is demand.
While one can argue that such "economic" concepts as CAPM and Random Walk are bogus, that whole supply-demand thing is pretty much accepted by everybody, from Adam Smith to the Austrians.
I've enjoyed the pragmatic approach to your posts.
Except that supply / demand for most markets has been purposely broken for quite a while. Oil is a perfect illustration. When GS / JPM / Macquarie / XYZ Energy Trading Co. owns tankers, storage tanks in OK, etc. then they can take downstream and upstream products on and off line at will in order to manipulate the price of oil in order to maximize their profiit. Supply and demand are mostly irrelevent with most commodites today. The US has been in a full out recession since 2009 and most Americans have cut back on energy use but the price of oil / gas has risen somewhat and then held steady. Now throw in the fact that the technology exists to manufacture cars with over 100 mpg but we still see the average car with 23 - 35 mpg and you get the idea that the Cartels run the show not the "Free Market" whatever that is. Hell, Mercedes makes a car that averages over 200 mpg but it is banned from the US. Now why is that?
Governments and cartels can manipulate the prices for a while, but not iover a longer term. Of course the monkeys you describe can scrape off nickels and dollars for a while. And of course they should be allowed to think about that while in JAIL.
I believe the price of crude approached $140 per barrel IIRC in 2008.
***
SHOW us the the Mercedes that runs at 200 mpg, and show us why it does not sell in the USA. Safety problems?
HYUNDAI would be making all kinds of cars for Peru if they go could get 100 mpg.
Do Chen - I have great respect for your comments and the fact that you run a successful honest business in this environment. I also appreciate your "show me the proof attitude" (this is fight club after all).
I was wrong about the Mercedes part it is Volkswagen and it gets 261 mpg:
http://www.autoguide.com/auto-news/2013/03/volkswagen-xl1-gets-261-mpg-i...
It is said that you could drive from NYC to LA on 1 tank of gas.
Thanks for the link from a fellow junk-ee (I greened you, who´s doing the red?)
DoChen, you are wise "Governments and cartels can manipulate the prices for a while, but not iover a longer term".
But what is your definition of "long term"? Witness ZIRP in US for five years and counting. Or Japan for what... decades?
ZIRP manipulation counts as "long-term", I agree. I was really talking about real value of commodities (say, of gold) not being subject to longer-term manipulation (I dunno, say 5 - 10 years? Shorter if not done by .govs or central banks).
Cui bono? Chinese were the largest buyers of phizz, thus stood to benefit the most. QED.
and Occam is sporting one smooth muthafucking shave
1st rule of fight club. You don't talk about fight club.
Chinese are not just talking, they're literally screaming!
Many gold buyers aren't even whispering.You will be surprised to see where the gold holdings are when all FIAT gets reset against a new gold backed or commodity basket backed currency.
China's massively short paper gold, denominated in USD.
China's massively long physical gold.
It's only a matter of time before those paper contracts are torn up through negotiation as everyone scrambles for anything tangible (the derivatives market will be nullified or not honored in some fashion just as CDS markets were not honored in Greece's default).
And China possesses the true wealth in the end.
That's correct in the long term,
In the short term GS keeps fomenting with these fluffy articles and bullshit to make them appear 'smart', but remember this - do as they do, and not as they say.
All these PAPER PONZI's are going to be fully reset, but before that GS will try to sell these paper to as many suckers as they can.
IMHO you cannot even mention GS & CHINA in the same sentence, as CHINA want's nothing to do with common kleptocrats (GS) whose business model is robbing elderly pension holders.
They played a grand game in the WEST, but now GS has to find a new business model.