A Hong Kong Gold Fix?

http://goldnews.bullionvault.com/Hong_Kong_Fix_090520117


Given time, China could supplant London as the home of the gold market...
SO APPARENTLY China's economy will be as big as America's by 2016. This suggests considerably faster growth than US economists were predicting just two years ago. At the speed China is growing it will dwarf the US by 2020, writes Julian Phillips atGoldForecaster.
The encouragement the Chinese government has given to the development of the gold market in China and the direct incitement from them to Buy Gold tells us that this is a long-term policy.
It also tells us that they would not favor a significant rise in the exchange rate of the Yuan, particularly against the Dollar, because this would lower the gold price in the Yuan. So what will the Chinese gold market look like in 2020?
With the clear move of currencies away from providing definable values for goods and services it is becoming increasingly likely that there will be a rise in global retail demand for Gold Bullion with the objective of protecting wealth, alongside a rising demand from global central banks adding to their reserves of gold. The various currency crises affecting both sides of the Atlantic are reinforcing a trend set in 2007 – when French the Finance Minister suggested that the Euro be sold to push its exchange rate down to protect its exports – where the US and China and virtually all national currencies in between, now use their exchange rates solely to benefit trade positions and not for the assessment of the value of goods and services.
This left a large gap in the monetary system which has to be filled. On the retail as well as the official front, demand is showing that gold is filling that gap. This trend is unlikely to change as the restoration of stable values to currencies is a thing of the past.
Consequently there will continue to be global demand for gold in the months and years to come. This sets the stage against which the Chinese gold market will develop.
Even in China demand from both the retail and the official sectors will grow in the years ahead. It is well known that the People's Bank of China has an agency that is acquiring gold on its behalf. This is not publicized with the exception of an announcement once every five years – or when it suits the government – when this agency delivers the gold it has bought over the previous five years to the People's Bank of China.
It is thought that this gold comes from local production and constitutes the entire gold production of China. Three years ago, when the last announcement was made it was clear that the 454 tonnes delivered matched the local production of the previous five years. Since then local production has grown to reach 430 tonnes last year. We would not be surprised if the next announcement in two or so years covered the delivery of over 1,000 tonnes.
Where does this leave local retail demand? The Chinese government has encouraged its citizens, nationwide, to Buy Gold as an investment for the long-term. The gold distribution system has been developed quickly by the leading Chinese banks to cover all the main cities where new customers can be found. Import licenses for gold have been dramatically increased to facilitate gold imports. As the almost exponential expansion of the Chinese middle classes continues gold demand is rising fast.
In a nation of 1.3 billion people of whom most are climbing out of poverty right now, the bulk of that population become potential gold investors from tiny amounts of a few grams to much larger amounts. This trend is not simply going to parallel the expansion of the middles classes, but find that most of these people will become repeat buyers. All of that demand has to find its gold overseas, not from local production.
We fully expect Chinese demand, together with Indian demand to completely dominate global retail demand and so set the price and the trend of the gold markets of the world by 2020.
Banks likeHSBC will likely feed the bulk of that demand. HSBC is a member of the London Gold Fix, with one of five seats on that panel. It is also the Custodian of the World Gold Council's gold Exchange Traded Funds in the US and the UK. So its hold on global supplies is stronger than other banks. The refineries supply HSBC, who then offers it at the Gold Fix in London twice a day, alongside other suppliers and buyers.
The Gold Price is agreed by the banks at the Fixing, each of which has a telephone line direct to their largest clients – who, in turn, are linked to their largest clients at the same time. When a balance between demand and supply has been reached and a price agreed, all transactions are done at that one price. A bank like HSBC will have been notified by their Hong Kong branch, after receiving orders from their Chinese outlets, to deliver regular amounts of gold for onward sale all over China.
At the moment the average per capita ownership of gold in China is way below the five grams in most other countries in the world. We do expect demand to keep rising to perhaps overtake that amount, in time – it will take more than nine years to achieve that average, we believe. One of the main differences to the developed world gold markets is that the physical gold market of Asia, just as we see in India today, is primarily a physical gold market.
The smaller Asian investor is not convinced by gold derivatives, such as options or futures. He buys the physical gold. Yes, in China there is a futures and options exchange, but these are for the professional investors seeking profits. The average Chinese investor buys gold he can hold for his financial security. He is not keen to let someone also hold it for him. This makes the Asian market an even more significant player in the establishment of the gold price. With this in mind it is easy to see how the Asian gold market will dominate the global physical gold market in the not too distant future.
By 2020 the demand from China may well be far greater than from the amount the developed world buys at present. It is most likely that there will be an equivalent market to the Gold Fix in London but based in Hong Kong, where there already exists a very large bullion vault, next to their huge Airport.
It may even be that the London Fix will then represent a much smaller market than the 90% of physical demand it represents currently or work in conjunction with London. We do expect the Chinese gold market, in time, to dwarf the London Gold Fix, if only because of the size of total Asian demand. Even Indian demand may well be channeled through Hong Kong. What is unlikely to change will be the current membership of the London gold Fixing. The membership may well have grown by then with leading Chinese banks as additional members, so the number of members will rise up from five.
 Just as we see now in the developed world so-called, gold markets are often just financial derivatives of the gold market. Gold Mining company shares, Options and any instrument linked to the gold price do not directly affect the gold price. Only 5% of the gold market on COMEX involves the physical movement of gold. While investment companies do invest in gold through gold Exchange Traded Funds (ETFs), only some invest directly in physical gold that they hold for themselves, like the Texas fund that sold these shares and holds allocated gold in their bank's warehouse.
This number is expected to rise but not to the extent that it changes the developed world's perspective on the gold market [primarily profit orientated]. So the size and variety of these so-called gold markets will not change that much we believe. But the physical gold markets in the developed world will rely less on that demand and become global in that they will incorporate Asian demand in a 24-hour market then.
Compare the physical gold market of the developed world to the potential gold markets of Asia (mainly India and China) and it is easy to see just how fast Asia will dominate the gold market completely.
So will the developed world gold market decline? We doubt it very much. That's because we believe that while the developed world will see a good quantity of its wealth move to the east, it will not lose its ability to buy and use gold. Global wealth as a total will increase with the rise of Asia, not stay a fixed amount. But certainly Asia's gold market will completely overshadow the developed worlds.
Trade gold through BullionVault and you don't need to wait for any Fix – London or Hong Kong. Your order is filled – whether you're buying or selling – in real time thanks to BullionVault's 24 hour live markets...

Julian D.W. Phillips, 09 May '11

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JULIAN PHILLIPS – one half of the highly respected team at GoldForecaster.com – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights toGlobal Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report. 

All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.

Gold futures ended lower on Monday in Hong Kong

http://www.ytwhw.com/2011/0516/Gold-futures-ended-lower-on-Monday-in-Hong-Kong.html

By ZhongYuanWei 2011-05-16 18:47:39 AM GMT +0800

(YTWHW.com) - 　International spot gold prices rebounded slightly, the Hong KongStock Exchange in June gold futures prices Monday (May 16) closed down.
　　
　　Hong Kong Gold futures contract prices in June 2011 closed at 1,495.8 U.S. dollars / ounce, compared with the previous day settlement price fell $ 17.70, down 1.17%; previous day's open interest of 38 hand.
　　
　　Boosted by the euro zone sovereign debt crisis rise against the euro Monday morning Pacific time, the international spot gold and silver declined slightly, showing a narrow range of fluctuation trend of midday period, thin trading, investors concerned about the progress of Greece and the foreign exchange market trends.
　　　　
　　Euro Pacific extended losses in early trading, hit a two-month low against the yen, a six-week low against the dollar. Greek debt restructuring concerns may be dispersed, to suppress the euro. In addition, the International Monetary Fund (IMF) President Kahn (Dominique Strauss-Kahn) for alleged sexual assault at a hotel waitress in New York City, was arrested and charged, but also cause suppression of the euro.
　　
　　Since then, driven by profit-taking operation, the euro recovered earlier by the International Monetary Fund scandal and the fall of the losses, but traders expect the event will continue to be weighed on the euro.
　　
　　A senior Greek official said the arrest of Oliver Kahn will not affect the implementation of the EU / IMF rescue plan, but may cause some delays, because the crucial meeting was canceled.
　　　　
　　Mitsubishi Tokyo UFJ Bank (Bank of Tokyo Mitsubishi UFJ) Mitsuru Sahara, senior trader said the upcoming European trading session, traders were concerned about the IMF Chairman of the alert for suspected sexual abuse Kahn was arrested in New York, the latest incident, for example, whether he will be further charges and so on.
　　　　
　　At the same time, the euro zone finance ministers will meet on Monday to discuss the financial rescue plan for Portugal.
　　　　
　　Germany's "Le Monde" (Die Welt) Saturday edition cited unnamed sources as saying the EU, the International Monetary Fund and the German government was prepared to accept the Greek soft debt restructuring, because the sharp deterioration in the situation of Greece, the European Central Bank (European Central Bank) and France continue to oppose the move.
　　　　
　　The paper said that the latest economic forecast in Greece after the data, IMF, European Commission and the German Government has proposed to postpone the Greek government bond maturity.
　　
　　optionsXpress, said in a recent commodities sell-off encounter, gold is relatively steady, as gold in addition to the properties of goods, there is no substitute for the hedged notes.
　　
　　The agency said the dollar's recent strength of commodity markets led to a collective decline, however, in view of continuing concerns about the euro zone debt, investors will seek to hedge channels other than bank notes - the gold, so long-term trend of gold is still rising.
　　
　　The world's largest gold exchange-traded fund ( ETF ) - SPDR Gold Trust, said as of May 13, the ETF gold positions to further reduce the 0.91 tons to 1,192.25 tons of levels, act as a drag on the price of gold.
　　
　　The world's largest silver exchange-traded fund (ETF) - iShares Silver Trust, said as of May 13 of their silver positions only 18.2 tons, to 10,534.41 tonnes.

Write to ZhongYuanWei   edit-zhongyuanwei@ytwhw.com


All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.

What Is The IMF, Anyway?

http://www.npr.org/blogs/money/2011/05/16/136341873/what-is-the-imf-anyway?ft=1&f=1017

by JACOB GOLDSTEIN

Jose Luis Magana/AP

Dominique Strauss-Kahn, the head of the International Monetary Fund, was arrested this weekend for allegedly sexually assaulting a maid in his hotel room. He has denied the allegations. For more on the criminal case, see this AP story.

Strauss-Kahn's arrest leaves a vacuum at the top of the IMF at a key moment for the global economy. I'll get to that in a minute, but it's worth pausing here to answer a more basic question: What is the IMF, anyway?

 

I spoke this morning with Eswar Prasad, a former IMF economist who now works at Cornell and the Brookings Institution.

You can think of the IMF sort of like a credit union for countries, Prasad told me. Its members — countries from around the world — put money in. And the credit union lends that money out to members that need it.

This makes the IMF sound all warm and fuzzy. And for several decades after the IMF was created at the end of World War II, it was pretty warm and fuzzy.

At that time, the world's major currencies were fixed — a dollar was always worth the same amount of British pounds, the same amount of French francs, etc. (This is a bit of an oversimplification, but it gives the basic idea.) This was known as the Bretton Woods system.

During this time, the IMF made short-term loans to help countries keep the value of their currency fixed. The biggest recipient of IMF loans during this era was the UK, according to Prasad.

But Bretton Woods was dismantled in the 1970s, and the world of money changed profoundly. In the new world, the value of global currencies changes constantly. (A year ago, one British pound bought you $1.45; today, it buys you about $1.60.)

So in the 1980s and 1990s, the IMF took on a new role: Lending to developing countries in that were going through major economic crises. During this era, the world's opinion of the IMF became decidedly less warm and fuzzy.

The Fund is based in Washington, and it's largely controlled by the U.S. and Europe, which contribute a big chunk of the fund's loan pool. What's more, IMF loans always come with strings attached — recipients typically have to make big spending cuts, among other things.

Not surprisingly, having an institution controlled by rich countries dictate harsh terms to poor countries during times of intense crisis created a lot of tension and resentment.

So in the past decade, developing countries that didn't want to be beholden to the IMF started saving up their own rainy-day funds, full of dollars and euros.

"What the Asian financial crisis [of the late 1990s] did was it gave emerging market economies a very strong desire to stay out of the clutches of the IMF," Prasad said.

The total value of foreign-exchange reserves held around the world has risen from $2 trillion in 2000 to $6 trillion now, according to Prasad — and almost the entire increase has come from countries in the developing world.

But as developing countries like China, India and Brazil were stashing aside money for a rainy day, countries at the edges of Europe were heading for fiscal disaster.

And so, over the past year, the focus of the IMF has shifted back to Europe.

The IMF has been a key player in the bailouts of Greece, Ireland and Portugal. For one thing, it has contributed a significant chunk of the money. For another, the presence of the IMF has also made it politically more palatable for the recipients to agree to the terms of the bailouts.

But, in the past few weeks, a big, new problem has arisen: It's become clear that Greece is so far in the hole that it probably won't be able to pay off all its debt on time.

Strauss-Kahn's arrest means Greece's day of reckoning — and the potentially widespread fallout — may be coming sooner, rather than later.

Strauss-Kahn has been pushing for Europe and the IMF to be lenient, and to lend Greece more money, Prasad said. German leaders, on the other hand, have been resisting lending more to Greece.

What's more, the IMF has been accused of maintaining a double standard — of being more lenient with countries in Europe than it is with countries in the developing world.

"Given the fact that Greece has missed virtually every target, if it was an emerging market, the program would not be going forward," Prasad said.

So without Strauss-Kahn running the IMF and pushing for leniency, Greece's immediate future is less secure.

Greece is a relatively small country. But if it declares to the world that it can't pay off its debts, the ripple effects could be big. Banks in other European countries that hold Greek debt could suffer losses, which could in turn affect the broader financial system.

What's more, a Greek restructuring could spook investors, and make them less willing to lend money to other troubled European countries. That could lead to broader, deeper financial troubles around Europe and, perhaps, beyond.

All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.

Warnings Signs Caution

Warnings Signs Caution the Next Crisis Is Coming

http://www.minyanville.com/businessmarkets/articles/precious-metals-stocks-secular-bear-market/5/16/2011/id/34559?camp=syndication&medium=portals&from=yahoo

By Toby Connor May 16, 2011 9:15 am

The stock market suffers a major correction about every four years. In a secular bear market that cyclical trough arrives as the economy sinks into recession and a stock market bear bottoms out.

It is been my belief that stocks and the economy have been locked in a secular bear market since March of 2000. During that period we've had two recessions and two cyclical bear markets. One of those recessions was the worst since the GreatDepression and the last bear market in stocks was the second worst in history.

I've said all along that printing money will not cure the problem we've gotten ourselves into. It's never worked in history and it's not going to work this time either. We can't solve a problem of too much debt with more debt. All we will accomplish is making the problem bigger. 

We are now fast approaching the period when the next crisis should arrive. 

On average the stock market suffers a major correction about every four years. In a secularbear market that cyclical trough arrives as the economy sinks into recession and a stock market bear bottoms out. 

The last four-year cycle bottom formed in March of '09. That just happened to be the longest four-year cycle in history. I've noted before that long cycles are often followed by a short cycle that compensates for the extended nature or the prior cycle. If that's the case then the next four-year cycle low is due sometime in 2012. (My best guess is in the fall.)



As we are still in a secular bear market then the move down into the four-year cycle trough should correspond to another economic recession and cyclical bear market for stocks. Bear markets tend to last about a year and a half to two and a half years. If the next four-year cycle bottoms in the implied timing band then the current cyclical bull should be topping soon.

As a matter of fact the stock market is already flashing warning signs. Three of the largest and most important sectors in the S&P have not confirmed new highs.







Another warning sign; Despite record earnings the market has only been able to move to marginal new highs and is now in jeopardy of reversing the recent breakout.

I've noted in the past that this is how major tops and bottoms are often established. Smart money sells into the breakout, or buys the break down in the case of a bottom. The trend then reverses and a major turning point is formed. Both the '02 bottom and the '07 top were put in this way.



The market is now at risk of a similar event as we've experienced a marginal breakout to new highs that is threatening to fail. Don't forget this is happening against a backdrop of record earnings.



When a market can't move higher on good news something is wrong. And don't forget bullmarkets don't top on bad news, they top on good news.

If the market can recover and move to new highs the cyclical bull will be confirmed, but if the market continues to fade and drops back below the March 16 "tsunami" bottom it will constitute a failed intermediate cycle. If both the Dow and the Transports close back below that level we would have a Dow Theory sell signal and that would confirm the next leg down in the secular bear has begun.

It would also be a signal that the economy was unable to handle the spiking food and energy costs that were the direct result of Ben Bernanke trying to prop up the financial system with his printing press. 

Like I said, printing money has never been the answer. Every empire in history has tried this approach and not one of them has ever succeeded with it. We won't either.

Editor's Note: Toby Connor is the author of Gold Scents, a financial blog with a special emphasis on the gold secular bull market.

All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.