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Might open a Bullionvault account...or Gold Money...think I prefer Bullion for small purchases (when the time is right!) think they used to do a refferal fee (like a gram or two of gold) for recommending a friend ... anyone want to share?

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Published in the Standard on Aug 31st : 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.

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Strictly speaking, they are not theories but facts that need to be explained by a theory. That central banks are diversifying reserves into gold, and then that treasuries and gold are moving together as an "asset" class suggest gold needs to be thought of as a form of liquidity [a currency] and not merely an asset [or inflation hedge].

 

A theory interprets phenomena, but will break down in the face of "anomalies" that problematize of falsify it. The crucial fact today is that gold is performing well in a deflationary environment [low interest rates/ performing treasuries]. A new theory is needed to "save all the phenomena", one which puts forms of liquidity at the centre... not assets, or inflation hedges. Consider Exter's reverse liquidity triangle: assets are predicted to deflate in value against currencies, and then currencies* in turn deflate against gold. A theory, with explanatory and predictive power, can be formulated with it in mind. I've termed it hyper-deflation. Theory should be as universal as possible... and the beauty of this theory is its ability to escape from a focus on particular prices [say of consumables] within particular economies.

 

 

The developments in China will also need to be accommodated in any theory with better explanatory and predictive power.

 

http://www.youtube.com/watch?v=6d9WbjEmfQY

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Has this interview been posted yet?

 

http://maxkeiser.com/2011/08/30/ned-naylor-leyland-talks-to-james-turk/#comments

 

Subscribe to our newsletter at http://www.goldmoney.com/goldresearch. Ned Naylor-Leyland (http://www.cheviot.co.uk ) and James Turk, Director of the GoldMoney Foundation, talk about how the new Pan Asia Gold Exchange (PAGE) will change the price discovery mechanism for gold. Ned explains that the futures market currently takes the lead in price discovery over the much larger spot market and how this may change once PAGE starts to operate.

PAGE will provide a valuable alternative because its fully backed, allocated gold contract will provide a better title, closer to physical, than unsecured unallocated contracts.

This interview was recorded on August 5 2011 in London.

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Has this interview been posted yet?

 

 

:blink:

 

Err, Joe, do you perhaps have images turned off? :unsure:

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The developments in China will also need to be accommodated in any theory with better explanatory and predictive power.

 

http://www.youtube.com/watch?v=6d9WbjEmfQY

The theory views China in terms of a bubble [along the lines of Jim Chanos, Hugh Henry]... a crack-up boom running on a hyper-inflation of credit. The theory is universal/ global and allows for differing economies/ currencies to move contrary to the dominanting principle of a macro-deflation at times. This contrary "upwards" move in liquidity is caused by stimulus.... but it can only be a temporary holding measure, a rear-guard action, in the face of overwhelming deflationary forces.

 

That China's decoupled from the west smacks of a comforting myth... it's still tied at the hip to the US, for the immediate/ short term anyway. When China slows down and reverses, commodities could be very volatile.

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The developments in China will also need to be accommodated in any theory with better explanatory and predictive power.

Keep in mind also that unbalanced trade between the US and China was/is a primary cause for the financial mess. This enabled excess Chinese reserves to be recycled into US assets, massively inflating their prices.

 

Bringing it back to gold, the old gold standard [in the previous era of globalization] operated practically as a balancing mechanism for international trade.

 

Here's David Hume's theory on it:

 

The price-specie-flow mechanism is a logical argument by David Hume against the Mercantilist (1700-1776) idea that a nation should strive for a positive balance of trade, or net exports. The argument considers the effects of international transactions in a gold standard, a system in which gold is the official means of international payments and each nation’s currency is in the form of gold itself or of paper currency fully convertible into gold.

 

Hume argued that when a country with a gold standard had a positive balance of trade, gold would flow into the country in the amount that the value of exports exceeds the value of imports. Conversely, when such a country had a negative balance of trade, gold would flow out of the country in the amount that the value of imports exceeds the value of exports. Consequently, in the absence of any offsetting actions by the central bank on the quantity of money in circulation (called sterilization), the money supply would rise in a country with a positive balance of trade and fall in a country with a negative balance of trade. Using a theory called the quantity theory of money, Hume argued that in countries where the quantity of money increases, inflation would set in and the prices of goods and services would tend to rise while in countries where the money supply decreases, deflation would occur as the prices of goods and services fell.

 

The higher prices would, in the countries with a positive balance of trade, cause exports to decrease and imports to increase, which will alter the balance of trade downwards towards a neutral balance. Inversely, in countries with a negative balance of trade, the lower prices would cause exports to increase and imports to decrease, which will heighten the balance of trade towards a neutral balance. These adjustments in the balance of trade will continue until the balance of trade equals zero in all countries involved in the exchange.

 

The price-specie-flow mechanism can also be applied to a state's entire balance of payments, which accounts not only for the value of net exports and similar transactions (the current account), but also the financial account, which accounts for flows of financial assets across countries, and the capital account, which accounts for non-market and other special international transactions. But under a gold standard, transactions in the financial account would be conducted in gold or currency convertible into gold, which would also affect the quantity of money in circulation in each country.

That gold is continuing to appreciate against currencies could reflect the unconscious and informal [within the free-market] "re-booting" of this system [remember gold is the most powerful symbol of money]... a system where gold reserves act to ballast international trade. The more unstable the world economy becomes, the more likely the old system will be re-instituted [of necessity] in order to stabilize both currencies and economies.

 

If this were the way it was to go, there'd be no need to worry about a "blow-off top".... or an exit plan.

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Here's a few must read paragraphs from Ted Butler's latest report;

 

"Restating what I feel is the obvious; the dramatic gold rally was caused by aggressive buying by the group of speculative traders which are classified as commercials by the CFTC. Many make the mistake of assuming that just because these traders are classified as commercials that means their trading is purely for legitimate hedging purposes. Nothing could be further from the truth, as the bulk of their trading is speculative in nature. Therefore, while it would be technically correct to say that the gold rally has been caused by speculative buying, most would assume that meant new buying of long positions by easily-identified speculators such as hedge funds and momentum traders. That is definitely not what has transpired in gold recently, as the “normal” hedge fund and technical fund speculators have been selling COMEX gold contracts, not buying them. Instead, the big COMEX gold speculative buyers have been the commercials who were previously heavily short. Correctly identifying the true speculators driving a market is a distinction that makes all the difference in the world. That so few see it is amazing to me."

 

"There is little doubt that the commercial gold shorts have taken a horrific beating in buying back their short contracts. My guess is that the collective loss on the covered gold contracts so far [since early August - Ed] is on the order of $1.5 billion. Such a loss, even when spread equally among the roughly 40 traders classified as COMEX commercial gold shorts, amounts to a hefty per entity average loss of $37.5 million each. And I’m speaking of closed out losses only; there is still a large number of open gold shorts that the commercials are holding whose resolution remains to be seen. Those “open” losses run to an additional $8 billion at current gold prices. It is imperative to recognize the unprecedented magnitude of these closed out and open gold losses. It’s not enough to say that these commercials lost big-time; having never lost before on such a scale, the turnabout for these commercials must be shocking to them."

 

Still think we are going sub $1500 DrBubb?

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I posted this at HPC soliciting comment in regard to a statement made by _w_ that most newsletter writers and providers of subscription research were playing their clients for "suckers". HPC link

 

Hi Erewhon, I just clicked on the HPC link and noticed you've posted my comments there. I don't mind you cutting and pasting those comments, but if you do a link should be provided, or the source acknowledged.

 

Cheers,

Romans.

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Hi Erewhon, I just clicked on the HPC link and noticed you've posted my comments there. I don't mind you cutting and pasting those comments, but if you do a link should be provided, or the source acknowledged.

 

Cheers,

Romans.

Yes, normally I do that but my understanding is that HPC delete any comment with a link back to GEI so I put the link to HPC in the first GEI post ("here") and gave enough context in the HPC post to enable a Google search back to "here". With less sensitive protection of the differing sites of interest we could have better hyperlinked discussion. I find interesting research on GEI, 24knews, HPC, tfmetalsreport and many other sites. Having used "the Internet" since the late 70s I don't have this concept of "here" and "there" with communities protecting their "members" who might be tempted to stray off to "the other places".

 

It's actually more interesting than that if you look at the precedent setting legal cases and the interpretation of the intention of hyperlinking but that is a very long discussion.

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Just noticed that two posts above your HPC reply to _w_ there is this:

 

There were other posts here that are now gone.

 

I dont know how many but the ones that I saw were not offensive or in need of moderation/deletion.

 

WTF is going on here?

 

How much else is missing?

 

I didn't see those posts but assume someone made the connection to GEI and made the mistake of putting a link or making a reference with a GEI interpretation?

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Oh dear, it looks like someone is going to get disappeared at HPC soon.

 

Anyway, Gold just made a break through 1840 dollars, the high of the past few days. Surely it is too early for another go at 1900?

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Bull trap in gold coming in my opinion, sucking people back in thinking we will go up to 1900 again. H&S forming right now. Prepare for deep medium term correction back to 200+ dma in long term bull trend. There are strong signs in US that in the short term there will not be QE3 (yet). This will surely kill POG for a while.

(ouch - already got a bashing from bugs).

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Well I certainly agree with you that we are due a proper correction but I don't think it will reach the 200 DMA, over the past three years the 150EMA has been the far better indicator. Indeed over the past six months it has barely managed to go below the 50 day EMA. I could be wrong certainly but I would be buying at the 50 EMA.

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Well I certainly agree with you that we are due a proper correction but I don't think it will reach the 200 DMA, over the past three years the 150EMA has been the far better indicator. Indeed over the past six months it has barely managed to go below the 50 day EMA. I could be wrong certainly but I would be buying at the 50 EMA.

Double top in GBP.

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“We had our $120 smash down last week, so that’s over and this is what we expected in our last interview. So I think gold is very clearly heading past $2,000 this time.”

 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/2_Jim_Rickards_-_Investors_Fleeing_GLD_into_Physical_Gold.html

 

and

 

“We’re seeing things right now on the political stage that we have never, ever seen before and I believe this is tremendously bullish for gold and for silver. I would say gold is going to blow through $2,300 to $2,500 by the middle of next year.”

 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/2_Barron_-_Theres_Not_Enough_Gold_to_Go_Around_Right_Now.html

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Sinclair:

 

Yes, gold is going to become part of the monetary system, most likely by 2016.

 

Few people understand how. It is not going to be convertible. It will be tied to a Western World type M3. It will be part of a virtual reserve currency that you cannot buy or sell.

 

http://www.jsmineset.com/

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For those who haven't got a copy, I highly recommend Jim Sinclair's 'A Pocketbook of Gold'.

 

A Pocketbook of Gold gives you, in one easy handbook, the reasons why you should own Gold, the timing of when you should own Gold, and the types of Gold you should (and shouldn't!) own. A Pocketbook of Gold also explains the true role of Gold in every individuals financial planning as well as Gold's place in the world monetary system. Its an all-in-one, carry-size Pocketbook that answers your questions and guides you through the world of Gold as a personal form of investment and financial insurance, in today's increasingly uncertain financial outlook. A Pocketbook of Gold is A Survival Manual for Monetary Mayhem.

 

You can order here - http://apocketbookofgold.com/

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http://www.bloomberg.com/news/2011-09-05/gold-rises-above-1-900-an-ounce-as-growth-debt-concerns-enhance-demand.html

 

Gold surged to a record above $1,920 an ounce on speculation that Europe’s debt crisis will worsen, damping economic growth and driving investors to protect their wealth. Futures in India and China, the world’s two largest consumers, touched all-time highs.

 

Gold for immediate delivery gained as much as 1.1 percent to $1,921.15 an ounce, surpassing the previous peak of $1,913.50 reached Aug. 23. It was at $1,919.85 by 2:12 p.m. Singapore time. December delivery futures in New York also touched a record $1,923.10, up 2.5 percent from their close on Sept. 2. Floor trading in the U.S. was shut yesterday for Labor Day.

 

“Europe has the capacity to drive gold higher as it looks unlikely to have its problems resolved very soon,” said Darren Heathcote, head of trading at Investec Bank (Australia) Ltd. “I don’t think investors are really convinced that European governments have got what it takes, got the political will to sort out the crisis and also do it sooner rather than later.”

 

Gold is in the 11th year of a bull run, the longest rally since at least 1920 in London, as investors seek to diversify away from equities and some currencies. It climbed to records priced in euros, British pounds and Canadian dollars today

 

Money is a useful social fiction. When the going gets tough for the monetary value of assets [even more fictional] then the toughest symbol of money gets going.

 

Why should gold be expected to correct back to where commodities and assets have been left behind when the divergence is due to its re-monetization as a currency. Commodities and assets are not currencies.... but have a monetary value as priced in currencies. Apples and oranges.

 

Failure to recognize this [gold as a currency], by the bubble callers, is a failure of imagination.... where one is habituated to the norm of one's own currency [money illusion]. Prices may look high, but it's all a matter of perspective. Doesn't preclude gold consolidating a bit from these levels though.

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gold has been all over the place. two step forward & one back!

 

lets see how long this intervention work, its not been fun watching yoyoing for some.

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