Tuesday, June 10, 2014

What's Up With Gold?

It has been pretty quiet on the gold front. Quiet on the front pages. Russia bought 28 tons of gold in April. Those economic sanctions have been wicked tough on them. Modi won an election in India with a friendly view of the gold industry, which should change global demand. QE still exists, albeit in smaller form with ZIRp still in effect. Gold just trucks along around $1300. Sometimes up, sometimes down. Maybe a mystical force is playing with it. Better clues are in Germany receiving only five tons of its gold since the FED's announcement they would send it back in seven years. Even better is what is happening in China.

The Chinese want to turn Shanghai into a global financial center on par with the world leaders. Schemers can spot a scheme, and the Chinese seem to be onto the COMEX. The COMEX has turned into a pure paper market for metals, with cash settlement often and little gold delivered. How else are the boys going to play on Wall Street on behalf of the FED? The Shanghai Gold Exchange is positioning itself to become a global player. They are reaching out to producers, not just banks. This is yuan based, so this helps push the yuan into the global convertibility realm further. It is a physical market with trades involving delivery. No naked selling, which might have been a hindrance years ago but now, in this era of skinning sheep on Wall Street, has a value. This is all on top of Indian demand that will most likely spring back with a vengeance this summer.

But why bother? The stock market is at all time highs. Is not the economy in year six of the recovery? The jobs market has rebounded... or not. As long as Yellen keeps the printing press going and rates at 0%, the game can be played internally. The problem is the amount of dollars outside of US control. All countries have their problems, but only one is the center of a monetary global order. External actors will ask for what they consider their earned seat at the head of the IMF-World Bank table. Collapse may not come, but change will and how much the American elite is willing to endure to remain captains of the world will determine how harsh the great reset will be. As much as the dollar price of gold is being capped, I'll put my faith in the people buying gold. Forget the Russians buying 28 tons in April, year to date 787 tons have been withdrawn from Shaghai. That is nearly six times Chinese mine output. Their economic data may be dodgy, just like America's, but moving nearly a thousand tons of gold in 5 months will make me think gold has higher values coming in the near future.

1 comment:

Klejdys said...

I'd argue all commodities will be rising in price, with AG followed by AU leading the way. But we shall see.