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China punters sway gold market

Wednesday, August 31, 2011

Mainland punters have emerged as a formidable force in the international gold market and are one of the main reasons for the ongoing volatility in gold prices, say Hong Kong industry sources.The spot price of gold has lurched between US$1,640 per ounce and US$1,900 in the past month.
From 7.30pm Hong Kong time yesterday the price went from US$1,785 to US$1,840 in a matter of hours in New York trade.
A source in the market saw 7,000 contracts being placed via electronic trading at the start of this period. Heavy volume of bullish bets placed on the gold price by mainland punters also pushed it higher, the source said.
Emperor Financial Services assistant vice president Sam Lee Chun-wai estimates the global trading volume of gold amounts to US$1 billion daily.
Mainland punters by themselves cannot move the market, he said. But Lee noted that an appreciation of the yuan amid continued economic boom in China has boosted the firepower of mainland players.
"Buying commodities with US dollars has proved to be an attractive investment for many mainlanders in the last few years," he said.
According to a report in Yangcheng Evening News last Wednesday, just one city in Guangdong province - Guangzhou - has 2,000 underground investment companies dealing in gold and foreign currencies.
Investors can leverage up to 100 times their principal with such black- market brokers, the daily said. The black market for gold in China sees up to 100 billion yuan (HK$122 billion) worth of trade every year, the report said.
Legal exchanges around the world have acted swiftly to curb volatility in the price of the precious metal.
The US-based CME Group raised trading margins of gold by the most in more than two and a half years last week, leading to a 4 percent drop in the spot price.
CME increased margin requirements on its gold futures contract by 27 percent, the second hike in a month, following similar moves by the Shanghai Gold Exchange and Hong Kong Mercantile Exchange earlier this month.
Mainland punters are taking advantage of the situation, sources say, by going both short and long on the metal.
End-of-month settlement for futures contract has also helped raise volatility, said traders, who also noted that the US$1 billion daily trading volume of the gold market is relatively thin compared with the oil market, which sees a much higher volume.
"Contrary to what many people think, it is not unthinkable that on certain days, mainland punters may emerge as a dominant factor on the international gold market," a source said.
Mainlanders have certainly emerged as the largest players in the Hong Kong gold market in recent years, traders confirm.
Local analysts estimate they now account for up to 70 percent of the daily trading volume on the Hong Kong open market.
The SAR also allows out-of-market gold trading and this is very attractive to mainlanders, traders said. Last night, spot gold was up 2 percent, reaching as high as US$1,822.50 an ounce in New York afternoon trade. 


http://www.thestandard.com.hk/news_detail.asp?pp_cat=30&art_id=114736&sid=33564191&con_type=1

A New (G)old Standard? It's...Academic

Gold prices fell by the most in a year-and-a-half on Tuesday as the quest for safe-haven turned into a quest for securing profits and being the first one out from an apparently extremely overbought market. RSI metrics had been above the 70-mark for more than two weeks while gold vaulted 14% during the very month that is normally price-unfriendly. However, yesterday, the yellow metal at one point came within just $5 of recording a full $100 drop from the most recent high water mark it achieved just hours prior to yesterday’s rout (1,917 versus 1,822).
This morning’s market action showed that some initial attempts were in progress to stabilize the situation somewhat. Spot gold dealings opened with a gain of 1.04% in New York and the yellow metal was quoted at $1,848 per ounce on the bid-side. Overnight, the Shanghai Gold Exchange raised its own gold trading margin requirements for the second time this year, in the wake of recent wild and woolly price action in the metal. The CME already enacted a similar hike just recently.
Silver, on the other hand largely refused to rise with the Wednesday tide in gold, adding only 16 cents at the open and hovering right around the $42 pivot point. A very large unwind battered the white metal on Tuesday, also just hours after panic gripped retail buyers and they piled into $44+ silver. Today, the poor man’s gold threatens to head towards $40…In the background, the US dollar continued flat at just under the 74.00 mark on the trade-weighted index. Jackson Hole “momentary paralysis” is alive and well.
This morning’s feeble gains did not show much longevity however; silver headed into the red (by almost 85 cents) shortly after the market’s opening bell and led the apparently re-emerging selling patterns in the complex. Gold fell to fresh lows at under the $1,805.00 area, bringing the holding of the psychological support thought to reside at the $1,800.00 mark onto trading radars. Futures prices actually did dip beneath that figure at last check. News on the US economic front showed a surprise 4% jump in July durable goods orders and an also surprising gain of 0.9% in housing values. The Dow reacted with…a non-reaction of a 38-point climb. Jackson Hole…etc.
Platinum and palladium showed a similarly more muted recovery in values as the midweek session got underway; their gains were ranging from $2 in palladium (to $760.00 the ounce) up to $5 in platinum (to the $1,868.00 level). Rhodium remained unchanged at the offered quote of $1,975.00 per ounce. Carmaker Toyota is rebounding from the devastating Sendai quake in March with a virtual blitz of new models aimed at the US market. The redesigned Camry (on and off, the best-selling car in the USA) is slated to kick the automakers revitalized assault on the American car shopper’s list of priorities.
Some of the current questions being posed among bullion traders center not on whether gold will find some more solid floor of support, but at what value marker down the road they might do so. Estimates range from yesterday’s lows near $1,825, to $1,725 and down to $1,680.00 an ounce. Expectations of an average quarterly price of $1,600 as at the end of this year were made public by National Australia Bank yesterday. The institution noted that “recent economic events should help to maintain the price of gold at an elevated level until uncertainty begins to dissipate and investor demand for gold unwinds." Looking further down the road, Citi analysts envision gold prices averaging $1,650 next year and $1,500 the year after that.
None of these other projections stopped Darrell Cronk, SVP at Wells Fargo from restating the investment bank’s position whereby it can “confidently state that interest in gold investing has reached the level of a speculative bubble.” To wit, the level of demand that investment has come to account for in the gold market has recently risen to 39% from the mere 4% it amounted to, in the year 2000, according to Citigroup-sourced statistics.
The bank’s analysts recently noted that “this very aspect that provided support for gold over this time [period] may result in its downfall going forward. Even a slowdown-let alone a decline- in net investment can have a materially negative impact on the gold price from current levels.” We have repeatedly noted here that the market has become a complete addict to but one category of offtake; that of investment.
Just a couple of days ago, the SPDR Gold Trust’s (GLD) asset values overtook those of the S&P 500 SPDR –a development characterized as “senseless” and one that can happen only after “periods of euphoric rises” by economist Dennis Gartman. WFC’s Mr. Cronk also observes (with growing) wariness that some investors are over-allocating assets to gold at rates some 2 to 4 times higher than the conventionally advisable 10 percent.
Meanwhile, the traditional pillar of gold’s demand –that which comes from jewellery fabrication- is still relatively flat on its back after having scraped along at 23+ year lows for some time now. Without once again delving into the foggy statistics related to actual tonnage demand that we brought you in recent days on the subject of India, it is worth noting that Reuters has found some fresh news on this front.
Reporters who polled the head of that country’s leading gold trade body (the BBA) envisages dampened festival-related gold demand in 2011 (just weeks ahead, literally) if prices remain at or near present levels, but still expects imports to surpass the 1K tonne level. A separate Reuters poll on the estimates for 2011 imports conducted with the largest firms in the business of gold in India yielded to following results:

http://www.kitco.com/ind/Nadler/aug242011.html

Robin Griffiths - Important Price Targets to Look For in Gold

With the gold market experiencing profit taking, today King World News interviewed one of the top strategists in the world, 40 year veteran Robin Griffiths of Cazenove.  Cazenove is one of the oldest financial firms on the planet and is widely believed to be the appointed stockbroker to Her Majesty The Queen.  When asked about the action in gold Griffiths replied, “The prime trend is obviously incredibly strongly upwards and that’s going to persist for a very long time to come, however in the very short run it’s overbought.  It’s deviated quite a long way above its rising trend line and also in the short run people are not usually good at sitting on big profits.  So you’re bound to see at some stage some profit-taking.”

“I think what might trigger it (profit taking) is I’m expecting equity markets generally in the West to fall some more between now and late October.  In that period people do the wrong thing, instead of cutting a loss on the equity market, the bear market, they tend to take a profit on the only thing they’ve got a profit on.  So in the shakeout in equity markets still to come you might well see some profit-taking on gold.

It could bring the bullion price back to about $1,700.  If it does that, buy that dip because the final highs are going to be hundreds of percent higher than we are currently trading.  I’m in the camp thinking it (gold) will go to somewhere between $5,000 and $10,000 an ounce at a minimum.  There are scenarios that take it higher than that, but it’s got many times up from here.” 

When asked about the US dollar Griffiths responded, “The dollar is trying to make a base and if world markets enter a panic phase, which is entirely likely in October of this year, you would expect a dollar rally.  However, in the meantime if Mr. Bernanke comes up with QE3, QE4 and QE5 or even thinks about them (publicly), the dollar will continue to be weaker. 

In that scenario, the euro with all of its problems stays slightly stronger than the dollar.  But in practice, in the global context, both of these currencies are suspect and really one needs to protect against their downside risks.”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/23_Robin_Griffiths_-_Important_Price_Targets_to_Look_For_in_Gold.html

Precious Metal Margin Warfare Jumps The Pacific, As Shanghai Hikes Gold Margins For Second Time In A Month, Prepares To Crush Silver

http://www.zerohedge.com/news/precious-metal-margin-warfare-jumps-pacific-shanghai-hikes-gold-margins-second-time-month-prepa

Wondering why gold dropped by almost $100 today? Wonder no more: today the Shanghai Gold Exchange lifted gold margins for forward contracts the second time this month to 12% beginning on Friday, in a move that is starting to resemble the CME's vendetta with silver back from May. Should we expect 3 more SGE margin hikes in the next 2 weeks? Or will the CME rightfully accept the baton and do everything in its power to dent the parabolic rise in the alternative reserve currency? We are cautiously looking at what the CME will do today and will advise readers. In the meantime, here is what else happened in Shanghai: "China’s main precious metals exchange will also widen daily trading limits for those gold contracts to 9 percent, up from 7 percent, the SGE said on its website on Tuesday. The contracts to be affected include Au(T+D), Au(T+N1) and Au(T+N2). This is the second time the exchange has raised collateral requirements on gold forward contracts this year — both times in August — as international gold prices hit a series of record highs over the past few weeks, boosted by a flight to safety on worries over a stalling U.S. recovery and crippling sovereign debt in the euro zone. Shanghai Gold T+D contract lost half a percent to 387.8 yuan per gram, or $1,884.47 an ounce, down from an intraday high of 391.9 yuan when the market opened."

More from Reuters:

“Gold prices on the global market have been rallying strongly and at an increasingly faster pace. The margin hike is a pre-emptive move in case prices crashed and caused great volatility in the market,” said Li Ning, an analyst at Shanghai CIFCO Futures.

At a time of market turmoil, exchanges routinely increase the margin requirements to cover the risk of a default.

With the SGE’s margin requirement exceeding its daily trade limit, the hike seems aimed at squeezing some speculative froth out from the market, some traders said.

The Shanghai Futures Exchange could raise margins on its gold futures contract soon too, said Li.

The new margin would require an additional 490.4 million yuan ($76.6 million) to be posted to the exchange.

Trading volume on the most popular gold forward contract hit a three-month high of 26,032 grams on Aug. 11, and eased to just shy of 20,000 grams on Tuesday as the exchange finished the afternoon session. The average volume so far this month stood at 14,999 grams, compared to a daily average of 9,138 grams in 2010.

The exchange also said it was closely eyeing silver contract price movements and would consider raising trading margins, transaction fees or costs of rolling over forward contracts should volatility persist.

Merkel Rejects Seeking Collateral in European Bailouts as Splits Emerge

German Chancellor Angela Merkel rejected demands that Greece provide collateral for emergency loans as splits emerged in her Cabinet, reflecting euro-area divisions on the issue.

Merkel told lawmakers from her Christian Democratic bloc that a call by Labor Minister Ursula von der Leyen for countries to put up gold as security for bailouts is “not the right way,” Ulrich Scharlack, a spokesman for the parliamentary group, said yesterday in Berlin after they were briefed by Merkel on the region’s debt crisis.
The disagreement at the top of Europe’s biggest economy underscores risks over a second Greek aid package after the Finnish government said Aug. 16 that it secured a collateral arrangement to ensure its contribution would be repaid. Austria and the Netherlands, which both share Finland’s AAA rating, called for similar deals, as did Slovakia and Slovenia.
“We expect other euro-area members to ultimately reject the Finland-Greece deal,” Moody’s Investors Service said. “But the message sent by the calls for such agreements confirms that Europe is conflicted over the very decision to provide financial support to its members, not just the amount of support.”

German Confidence Falls

German business confidence fell in August to the lowest in more than a year, the Ifo institute in Munich said today, a sign that economic growth may lose pace in coming months and dampen the tax-revenue growth that’s helping Germany to trim its own deficit.
Merkel’s coalition aims to get bills through parliament by October that strengthen the euro-region’s rescue fund and facilitate more aid for Greece, Norbert Barthle, her Christian Democrats’ budget spokesman, said in an interview today.
“Industry’s telling me we may be experiencing just a dip in economic growth,” Barthle said. “But, sure, it’s a blessing if we can get these bills passed fast.”
At the Berlin meeting late yesterday, Merkel was told that lawmakers from her bloc will provide a majority to approve the July 21 overhaul of the euro bailout fund, the European Financial Stability Facility, the caucus leader, Volker Kauder, told reporters.

Collateral Call

Money from the rescue fund should only be made available if the recipient provides collateral, Von der Leyen, deputy chairwoman of the Christian Democrats, said earlier in the day on ARD television.
“Several countries are making huge efforts to service their debt,” Von der Leyen said, according to a transcript of her comments. “This should be acknowledged. But in order for these efforts to be pursued over the long term, collateral is needed.” Her ministry confirmed the comments.
Kauder also dismissed the suggestion. “The discussion started by the Finns is not one we should continue,” Kauder told reporters when asked about Von der Leyen’s comments.
Finland is open to adjusting its collateral arrangement with Greece after several euro members criticized the Nordic country for securing the bilateral deal to protect its commitment, Prime Minister Jyrki Katainen said Aug. 22.
“It’s a well-functioning technical solution, but if this particular model isn’t possible, then we have to try to find another model,” Katainen said in an interview in Helsinki.
Merkel emphasized the need to impose strict conditions on bailout recipients. She suggested the Court of Justice of the European Union could be given jurisdiction over violations of the treaty that sets limits on debt and deficits, according to Scharlack.

http://www.bloomberg.com/news/2011-08-23/merkel-ally-von-der-leyen-calls-for-gold-as-bailout-collateral.html

 

Gold settles at record, $2000 within sight 

http://www.perthnow.com.au/business/gold-settles-at-record-2000-within-sight/story-e6frg2r3-1226118650020GOLD futures surged to another record overnight as investors held a dim view of global growth prospects and sought instead the perceived safety of the metal. 

 

Gold for December delivery advanced $30.20, or 1.7 percent, to $1852.20 an ounce on the Comex division of the New York Mercantile Exchange. It traded as high as $1,881.40 an ounce, an intraday record for the metal.
"We could hit $2,000 as early as next week sometime at this rate, certainly in the next weeks," said Matt Zeman, head trader and strategist at Kingsview Financial in Chicago.
Gold's fast rise has been of some concern, he added. It could end with a selloff that would shave $200 to $100 off current prices, although underlying fundamentals for the metal are favorable, Zeman said.
"It is starting to look a little bit bubbly," he said.
Gold added 6.4 percent in the week. It has gained 14 percent this month, having ended July at $1,631.20 an ounce.

Friday's record supplants the previous high-mark hit on Thursday, when gold ended at $1,822 an ounce.
Investors have flocked to gold as a slew of recent macroeconomic reports pointed to a wobbly US economy and very little reason for optimism -- including Thursday's downbeat reading on factory activity in the Philadelphia region.
Investors have also worried about the health of European banks and the eurozone's ongoing sovereign-debt crisis.
Earlier this week, a meeting between French and German leaders failed to assuage markets the eurozone in on the mend.
Even news that Venezuela intends to nationalize its gold industry and repatriate its overseas gold reserves is unlikely to dent gold's appeal, said strategists at Capital Economics.
"Venezuela is running desperately low on dollars, suggesting that the repatriation of the gold reserves would be a precursor to their sale," they said.
However, "we suspect that Venezuela would find some very willing buyers elsewhere given the continuing high demand for gold as a safe-haven," the strategists added.
Most metals traded higher Friday, with silver for September delivery adding $1.74, or 4.3 percent, to settle at $42.43 an ounce.

Gold to shine on 40th anniversay of Nixon Shock

http://www.telegraph.co.uk/finance/commodities/8687368/Gold-to-shine-on-40th-anniversay-of-Nixon-Shock.html

As we approach the 40th anniversary of the Nixon Shock, which ended the convertibility of the US dollar into gold, the price of the metal continues to hit new highs.

With S&P's downgrade of the US's credit rating on Friday, the long-term outlook for the dollar is pretty shaky – but prospects for gold continue to sparkle.

On August 15 1971, President Richard Nixon ended the convertibility of dollars into gold as he attempted to battle soaring inflation and a deteriorating balance of payments.

The move brought to an end the Bretton Woods system, which was established after the Second World War. This made the US dollar convertible into gold at the rate of $35 an ounce. Other currencies were then pegged to the dollar as a means of stabilising the system.

However, US citizens were already banned from hoarding gold. Executive Order 6102 was signed by Franklyn D Roosevelt in 1933 which effectively criminalised the possession of gold bullion by individuals and organisation. People had to surrender their gold to the Federal Reserve – or face up to ten years in prison.

"Those who handed in their gold got $20.67 an ounce for it, which was the dollar price under the inter-war gold standard. Then the government fixed the price $15 higher," said Ben Traynor, an economist at Bullion Vault, which holds more than $1bn (£610m) of gold for clients.

It was actually Gerald Ford who finally restored US citizens' right to own gold, with Executive Order 11825 issued on the very last day of 1974," Mr Traynor added.
But Nixon's action in 1971 had paved the way for this to happen, since by closing the gold window he scrapped the fixed dollar gold price of $35 an ounce. This eventually allowed it to trade and the price to rise – to its current $1,663.80 an ounce.
The reason President Roosevelt issued Executive Order 6102 was because the big problem in the depression was deflation.
"Roosevelt – on the advice of economist George Warren – sought to introduce monetary inflation. And the way to do this was to lower the value of the dollar relative to the monetary standard, gold," Mr Traynor said. "In other words, raise the dollar gold price.
"The president's advisers would fix the gold price over breakfast, always making it a very specific number to several decimal points so that it looked scientific and accurate – when all they were doing was just pushing it a bit higher each day," he adds.
The London gold market reopened in 1954, following its closure since the Second World War.
Central banks were trying to keep their currencies in line with the exchange rates agreed at Bretton Woods, and gold made itself a bit of a nuisance. "As we know, it didn't work," Mr Traynor says. "Central banks tried for a while to keep the gold price in line with the $35 peg. They set up the London Gold Pool, whereby central banks co-ordinated sales to keep the price down if it looked like getting too high."
Where this became a specifically American problem is that the US had most of the gold, and it was the US that guaranteed convertibility at $35. With central banks piling up the paper currency they'd got for their gold sales, they started to exercise that convertibility – especially when the world became awash with dollars during the Vietnam War. Also, as the global economy became less US-centric, countries would need deutschemarks and yen, so cashed in dollars for gold.
"This exacerbated the gold drain from the US – as did the existence of a two-tier market after the Gold Pool collapsed in 1968 – and culminated eventually with Nixon closing the gold window in 1971," notes Mr Traynor.
The end of Bretton Woods and convertibility into gold resulted in free floating currencies. Many now argue that the dollar as a global reserve currency is doomed because of the level of debt the country is unsustainable.
China's call for a new global reserve currency over the weekend is a sensible proposition – but until then investors world wide will continue to view gold as the ultimate safe haven to escape devaluing paper money.

FOFOA FreeGold

http://fofoa.blogspot.com/2008/09/freegold.html

Some of FOFOA's excellent blog posts regarding freegold theory.
The FOFOA blog is a recommended read.

Sunday, September 21, 2008

FreeGold

Earlier on Randy's blog I said that I would post the only possible solution to this crisis here tonight. Some people might have thought that Karl Denninger's solution was that post. It was not. This is.

My solution is theoretical. It is a theory called FreeGold. It is not my theory and it is not new. It has been around for at least 11 years, probably many more than that. But I believe it is the inevitable end to our current situation. And it will either come by natural forces after America has been brought to her knees, or it will be "allowed" to happen and America will retain some of her former glory.

Please bear with me as it is hard to explain in one post what should take a whole book. I will be jumping from concept to concept with only a cursory explanation. Each of these concepts would take up one or more chapters in the book.

Right now the world has its hopes riding on the United States Treasury. The Fed has spent its balance sheet on bailouts that didn't work. And now the Treasury will supposedly come to the rescue. But the Treasury is misnamed. It should be called the gaping hole of nothingness. Or at least the gaping hole of debt. Where is the so-called Treasure? Oh yeah, we do have the gold.

According to the World Gold Council the United States has 8133.5 metric tonnes of gold, the largest stockpile in the world. (Forget that some of that might be IOU's. I'll explain later why that doesn't matter.)

As I type, the price of gold is going down in the Asian markets. It is probable that Hank Paulson and the Working Group on Financial Markets, also known informally as the PPT, the Plunge Protection Team, had a hand in the Asian markets taking gold down tonight. It is one of the many things they do. They believe that if gold goes down in price, the dollar gains strength. This may sound conspiratorial, but it's really not. It is simply a tactic that they use.

FreeGold is based on the theory that gold has a value much higher than what the markets say. The Central Banks of the world are aware of this value. They trade gold amongst themselves based on this higher value. The purpose of the lower gold price on the exchanges is to gain oil from oil producing nations at a low, dollar denominated price. So the low gold price has a real use, a function, that is maintained by the Central Banks.

If the price of gold in the markets was real, then why don't we see countries that are in trouble financially simply selling all their gold for some cash? It is because gold is really worth more than $50,000 per ounce in today's dollars. I propose to you right now that gold's true value on the world stage is probably $100,000 per ounce in US dollars. And that is based on the dollars in circulation right now. If they print more (which guess what, they are) then the value goes up proportionately.

So now let's jump ahead of ourselves and look at the state of the Treasury with and without FreeGold. Without FreeGold the Treasury is broke. It is insolvent. It is completely reliant on the future taxes to be paid by an economy in trouble. And its biggest asset, gold, is only worth $226 billion. That's hardly a drop in the bucket. But WITH FreeGold valued at $100K per ounce, that same stockpile is worth $26 trillion dollars. Now THAT is enough to be back in business on the world stage. Gold is, and has always been, the United States Treasury's "ace in the hole".

But is this possible? This $100,000 per ounce of gold? How can gold possibly rise that much if it's only at $865 right now? The answer is, it doesn't have to rise. That value is already there. It only has to be set free.

Think about it this way: All the gold in the world is maybe 5 billion ounces. Yet gold is the only "currency" other than the US dollar which is valued EVERYWHERE on this planet. Also, every powerful central bank in the world holds a stockpile of gold as a foreign currency reserve. Here's the list.

So if there's only five billion ounces, EVERYONE values it, ALL central banks consider it a currency, then how on earth is it only $865 per ounce? Well that can be explained.

If you follow this blog then you know about the deal that was supposedly made between the West and Saudi Arabia in either the late 70's or early 80's. The key to that deal was the ability of the West to basically PRINT paper gold and sell it without limit on the world exchanges. The public was taught that paper gold was as good as physical gold. And the ability to print made gold essentially another fiat currency. So that's where we stand today.

If you hold paper gold you are no safer than if you hold paper dollars. There is an imminent default coming on both.

Now I said earlier that the PPT believes that gold must drop in price for the dollar to be strong. This is not true. Even with FreeGold, the dollar can remain the world's most used currency. Not necessarily the RESERVE currency, but the most used. You see in a world of FreeGold, gold will not be traded. It will be held by those that have it, and desired by those that don't. But only a fool would take a printable piece of paper in exchange for something as valuable as gold.

Now you might give up a piece of your gold in exchange for a house, but probably not for a piece of paper.

Therefore, fiat currencies will still be needed for day to day transactions.

Before gold is set free, we will watch as the exchanges that trade gold as a commodity freeze up. They will remain frozen for a period of time and then all the contracts on those exchanges will be settled in Federal Reserve Notes (also known as dollars). That is all the law requires. No contract can require payment in anything but dollars. That is contract law and that is legal tender law.

Then, after that is done, no gold will trade. Period. At least for a while. Then we will hear about gold being shipped to the Middle East as payment for oil shipments to the West. And we will read about countries exchanging piles of gold to settle trade imbalances. And finally, after a year or so, the true value of gold will be known by all.

So if you have some gold right now, bury it deep. If you don't have any, get whatever you can get your hands on while it's still traded as a commodity. Because believe me... gold is no commodity. It is the only store of value in this world that cannot be easily inflated... and the whole world knows it.

The freezing of the exchanges could happen this week. It could happen next month. Or it could happen next year. I do not know. I only know that this is inevitable. And as ANOTHER says, "It need only be [re]-priced once during the experience of life, that will be much more than enough!"

Oh, and I said I would explain why IOU's in Fort Knox don't matter. Well, those IOU's will be called in when this happens. And they WON'T be settled in dollars. Most of those IOU's are held by Bullion Banks who then hold IOU's from gold mines. If those gold mines cannot produce the physical gold at that time then the mine itself will become the property of the US Treasury. If they CAN somehow provide the gold, that will only give them a temporary reprieve. Soon they will be either "taken" or taxed like you won't believe. In a world of FreeGold you can't have private gold mines out there. That would be like giving a private company the printing press for the dollar.

Gold prices slump 3% on stock bounce, margin hike

NEW YORK: Gold recoiled after tapping a new record on Thursday, heading for its largest daily loss in over a year as an equities rebound and higher trading margins fanned profit-taking from the biggest rally since 2008.

Prices slumped nearly 3 per cent and fell over $80 from their overnight peak in one of the biggest daily swings ever. Yet analysts showed no sign of revising their bullish view of gold, up nearly 20 per cent since June as investors seek safer havens amid global debt crises and a darker economic outlook.

Concerns of a deepening European crisis and the possibility of distress among French banks helped propel gold to a record $1,813.79 an ounce in Asian trading. And while equity investors swooped in to scoop up bargain stocks on Thursday, underlying worries are unlikely to disappear soon, analysts said.

Traders said steeper margin requirements also would not stop gold's long-term advance. Late on Wednesday, the CME Group Inc raised margin requirements for 100-ounce gold futures by 22 per cent, the biggest rise in about 1-1/2 years and the first such rise since January.

"Once again, gold's decline is indicative of a sell-off of safe-haven assets, more of a risk-on type trade today," said David Meger, director of metals trading at commodity broker Vision Financial Markets in Chicago. 

[Continued]
http://economictimes.indiatimes.com/markets/commodities/gold-prices-slump-3-on-stock-bounce-margin-hike/articleshow/9573223.cms

Gold Prices at $1,800: You Ain't Seen Nothing Yet...

 http://www.taipanpublishinggroup.com/tpg/smart-investing-daily/smart-investing-081111.html
Smart Investing Daily reader G.T. writes in with a question. Several, really, but all worthy of an answer. He asks:

With the latest drop in the equity market, presumably because of the U.S. debit, why doesn't the Federal Reserve sell off some of its gold reserves? I understand that it has +/- 7,000 tonnes in stock. Could it not also settle its debts with China where the demand for gold is on the rise?

Am I correct in saying that everyone who is reputed to be in gold decided to sell at the same time there is not enough gold in stock to meet all the claims?

Didn't that happen some years ago when a person tried to buy up all the silver in the world?

The International Monetary Fund reports that the United States is the largest holder of gold, with 8,133.5 tonnes. In yesterday's trading, gold prices topped $1,800 an ounce. Even though the price of gold ended a bit lower, let's use this nice round number to calculate the value of all that gold.
In all, the U.S. holds 286.9 million ounces of gold.

At $1,800 an ounce, that values our gold holdings at $516.4 billion. That's less than half of what we owed China as of May 2011.
But the U.S. has no interest in truly paying off its debt, and it's certainly not willing to sell its gold to do it.
As of July 2011, the world held 30,683.3 tonnes of gold, excepting some countries that did not report their holdings to the IMF. More than 1.08 billion ounces of gold are held by central banks.
But traders looking to cash in their gold futures for actual bullion might have a problem. One analyst from ZeroHedge.com predicts that in six to 12 months, gold futures holders will not be able to get their gold due to lack of supply.

One of the reasons why gold supplies are pinched is because of central banks. Central banks have been buying gold like mad. In fact, according to the World Gold Council, buying in the first quarter of 2011 totaled 129 tonnes... That's more than the combined net total of gold purchases during the first three quarters of 2010!

China has been a huge buyer. As of July, China held 1,054.1 tonnes of gold. That's only 1.6% of the country's total "cash" reserves. Rumors around the water cooler say that China wants to make gold 10% of its reserve portfolio.
It's a massive, massive increase that the gold markets might not be able to handle.
In other words, if you think $1,800 is high, you ain't seen nothing yet...
The demand coming from central banks is nothing new. But the scary thing would be if the government tried to "FDR" regular gold investors. On April 5, 1933, President Roosevelt signed an executive order that made gold hoarding illegal.
"Hoarding" meant anything over $100 worth of gold coin or bullion. That's $1,677 worth in 2010 dollars, and the order exempted jewelers, dentists and other artists.
People had less than a month to turn in their gold, or they could be fined $10,000 and be imprisoned for up to 10 years!
And this wasn't just for individuals. The order extended to partnerships, associations and corporations.
Could you imagine if an order like this was signed in today's market? It would be total chaos... But it's not that farfetched to have the government intervene in some way.
Back in the 1970s and 1980s, the Hunt brothers, William and Nelson, tried to corner the silver market. At the height of their success, these brothers held the rights to more than half of the world's deliverable silver. That sent prices into the stratosphere: silver climbed from $11 an ounce to $50 an ounce in just four months!
And that $50 level is still the price to beat... we're just getting around to topping it in the past few months, and prices have fallen back below that level.
And what happened to the Hunt brothers? The government jumped in and made some key changes to the exchange rules regarding the purchase of commodities on margin. Sound familiar? The CFTC just did something similar.
Silver prices collapsed back down below $11 an ounce in just two months, and the Hunt brothers lost over a billion dollars!
And remember Jared's article about Goldman Sachs buying up warehouses to hold precious and base metals? He told you Goldman could influence metals supplies, artificially keeping prices high. How long before the government steps in there, I wonder?
The long and short of it all is this: precious metals are in hot demand. Central banks are scared witless about the value of their currencies in the event of another global downturn. These kinds of fears are like a pressure cooker, and prices for gold and silver are at full steam.
You can further protect yourself and your precious metals investments by holding them overseas. It's an interesting idea, and one that helped a lot of gold investors keep their wealth when FDR came calling. Many of them shifted their gold to accounts in Switzerland.
You can do this today, and there are companies that can help you. This opens up worlds of wealth security.
And none too soon...
Starting Jan. 1, 2012, gold dealers are required to fill out tax forms for gold coin and bullion purchases over $600. That means gold dealers are going to have to ask for your personal information.
That would make it pretty easy for the government to come collecting gold if there's ever another executive order like the one Franklin Delano Roosevelt signed 78 years ago.
Holding gold offshore is looking better and better.

Mexico ups gold reserves by over 90 tonnes in two months

http://cnbusinessnews.com/mexico-ups-gold-reserves-by-over-90-tonnes-in-two-months/


Mexico massively ramped up its gold reserves in the first quarter of this year, buying over $4 billion of bullion as emerging economies move away from the ailing U.S. dollar, which has dipped to 2-1/2-year lows.
The third biggest one-off purchase of gold by any country over the past decade took Mexico’s reserves to 100.15 tonnes — or 3.22 million ounces — by the end of March from just 6.84 tonnes at the end of January, according to the International Monetary Fund and Mexico’s central bank.

Gold has gained 11 percent this year, driven by concern over euro zone debt and the violence in the Arab world, as well as by the U.S. dollar’s 7.6 percent decline against a basket of currencies .DXY.
Sergio Martin, chief economist for HSBC in Mexico, said the government probably saw gold as a highly liquid asset that would reduce exposure to the falling greenback.

“They’re probably thinking that getting out of dollars and into gold makes sense because we know that the dollar has some trend to depreciate in the near future at least,” said Martin. “I don’t think they’re going to lose money with this.”
Mexico’s foreign currency and asset reserves hit a record $128 billion in April, making the gold purchased mostly in February and March worth nearly 4 percent of that total. Mexican central bank data on gold holdings only exists through March.
The central bank did not respond to a request for comment.
According to the International Monetary Fund, Latin America’s No. 2 economy now owns $4.93 billion worth of gold XAU=, which hit a record $1,575.79 an ounce on Monday.
Other emerging economies such as China, Russia and India have also beefed up bullion reserves over the past few years.
SILVER LINING?
Credit Suisse precious metals analyst Tom Kendall said it was worthy of note that Mexico, whose economy is very closely tied to the United States, had taken this step.
“The size (of the purchase) is certainly pretty chunky to have been accomplished in that space of time. So it certainly gives another sizable layer of support to gold’s position in the international reserves system,” he added.
George Milling-Stanley, managing director of government affairs at the World Gold Council industry group, said Mexico was following a recent trend among central banks to restore a “prior balance between gold and currency reserves.”
“This is further supported by the fact that the May IMF numbers show continued buying by Russia and Thailand of 18.8 tonnes and 9.3 tonnes respectively,” he added.
Mexico’s reserves rank it 33rd among the top official holders of gold. The United States is the largest official holder of gold, with 8,133 tonnes, which account for 73.8 percent of its total international reserves.
China is the sixth largest holder of gold, with 1,054.1 tonnes, or just 1.6 percent of total reserves, while eighth-ranked Russia now has some 811 tonnes of gold, up from 788.78 in January, according to the IMF data.
Silver, which hit a record price earlier this year, may also have been on Mexico’s buying list, said Martin at HSBC.
“I think Mexico has moved from second to first place in the list of global silver producers, so they may have been buying silver to help the price,” he added.

Source: Reuters