China Commerce Ministry Says Country Should Buy More Gold, Diversify Dollar Holdings

Tyler Durden's picture Submitted by Tyler Durden on 10/27/2010 16:54 -0500

As we wrote recently, in what may become a rerun of the Rare Minerals export cut, after an abnormally long silence, China is finally starting to make noises in the gold market. As Bloomberg reported earlier, according to an article appearing on the website of the Chinese Ministry of Commerce, Meng Qingfa, researcher as the China Chamber of International Commerce said that China should buy more gold todiversify its foreign exchange reserves. “China should increase its gold holdings if the countryaspires to “internationalize” its currency. China has $2.6 trillion of foreign-exchange reserves,mostly in dollar assets, Meng said. Such holdings will put Chinaat a disadvantage when the U.S. dollar depreciates, as isinevitable amid a worsening U.S. debt problem, he said.” While this is not an outright endorsement that the PBoC will begin to warehouse the precious metal, it is certainly an escalation in the war on words that the US and China have been engaging in for quite some time. The bigger problem is what may happen to the world gold market should China, which is now the world’s largest producer of gold, decide to internalize its gold product output. Already the country’s gold demand is surging. Should roughly 340 tons, or the amount of gold China makes each year, be withdrawn from supply, no amount of Goldman contemplation on the matter of physical ETFs will prevent a spike in the metal price.

More from Bloomberg:

Gold demand in China, the world’s largest producer, already gained in the first half of this year as government measures to cool the property market and falling equities spurred investment, the Shanghai Gold Exchange said July 7.

Sales of gold products such as bars and coins by China National Gold Group Corp., owner of the country’s largest deposit of the metal, jumped as much as 40 percent in the first half, Song Quanli, deputy party secretary at the company, said July 7.

China’s gold output may rise to 340 tons this year, from 314 tons last year, solidifying the nation’s position as the world’s largest producer, Zhang Fengkui, section chief of the raw materials department at the Ministry of Industry and Information Technology, said on Oct. 16.

To increase physical gold supply, the central bank also said on Aug. 4 that it will “increase the number of commercial banks who are qualified to import and export gold, based on the market demand situation.” The central bank also said it will support overseas investment plans by “large-scale” bullion companies by backing them financially.

At this point the only variable is the position of China’s State Administration of Foreign Exchange or the custodian of all foreign reserves. In July, SAFE announced that U.S. governmentdebt has the benefits of “relatively good” safety, liquidity,low trading costs and market capacity. 

Gold is unlikely to become a major holding in China’sforeign reserves because of the metal’s big price swings andlack of interest payments, SAFE said then.

Is it time for an update on SAFE’s opinion on US Bonds… and on gold?

h/t Robert

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by tmosley
on Wed, 10/27/2010 – 16:57
#681668

November 3rd will be all the more interesting with this news story.

Login or register to post comments by ATG
on Wed, 10/27/2010 – 17:55
#681791

So gold goes down $-13?

Debt default deflation and palace coups beeches

Login or register to post comments by Goldilocks
on Wed, 10/27/2010 – 18:28
#681827

Gold down $-13 (double negative) … means it’s up $13.

Captcha tells me so …

… regardless, stock up on gold … it’s still a gift.

Login or register to post comments by dlmaniac
on Wed, 10/27/2010 – 20:15
#682103

FT just published a pro-gold story. It’s a warning sign that a rigging might be on the way.

Login or register to post comments by morkov
on Wed, 10/27/2010 – 20:00
#682074

isn’t “…backing them financially.” at the end of the post a kind of new-speak for backing them with labour and re’sources?

what i mean is that “funding” those enterprises is the well established (since egyptian times) sweat and brow of actual people…what else could it be???

…just saying

 

Login or register to post comments by trav7777
on Wed, 10/27/2010 – 17:01
#681682

gord bitchez

Login or register to post comments by Rahm
on Wed, 10/27/2010 – 17:02
#681685

Close, but no cigar.  Nice try, please play again.

Login or register to post comments by tmosley
on Wed, 10/27/2010 – 17:09
#681705

Raht you say, round-eye?

Login or register to post comments by BrosMacManus
on Wed, 10/27/2010 – 20:39
#682152

you no-a frunny.

gohd, beechez?

Huángj?n g?urìde?

Login or register to post comments by Pool Shark
on Wed, 10/27/2010 – 17:37
#681764

Gord tu espensive! No bai dam ting!

Login or register to post comments by Ragnarok
on Wed, 10/27/2010 – 17:04
#681689

OT: JPMorgan, HSBC sued for alleged silver conspiracy

 

http://www.reuters.com/article/idUSTRE69Q5HQ20101027

 

NEW YORK | Wed Oct 27, 2010 5:46pm EDT

NEW YORK (Reuters) – JPMorgan Chase & Co and HSBC Holdings Plc were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.

Login or register to post comments by TheGreatPonzi
on Wed, 10/27/2010 – 17:07
#681697

Lol. These investors don’t know who they’re attacking. Many have lost their lives trying to bring down the Crimex and the Rothschild gold fixing.

Login or register to post comments by tmosley
on Wed, 10/27/2010 – 17:10
#681709

Morgan Stanley was successfully sued some years ago for not holding the gold or silver it was charging fees for.  I don’t see why this lawsuit wouldn’t work.

I mean, other than the fact that there is no rule of law in this country anymore.

Login or register to post comments by TheGreatPonzi
on Wed, 10/27/2010 – 17:12
#681717

Sueing for false services charged is a thing ; directly attacking the gold/silver cartel is another thing. Tens of billions are at stake, and many political ramifications.

Login or register to post comments by EscapeKey
on Wed, 10/27/2010 – 17:16
#681730

There certainly is.

It’s just that it only applies to peasants.

Login or register to post comments by tmosley
on Wed, 10/27/2010 – 19:20
#681981

Morgan Stanley was a peasant?

Truth is, the law only applies to those without “pull” in congress, or rather, so long as no-one else has more “pull” when your interests conflict.

Of course, there are times when your pull disappears totally in an instant, due to political convenience.  People like to think there is a real plan made by the people in control, but the truth is that we are ruled by people who have no clue, no plan, and no understanding of economics, history, or human behavior.

*Sigh*

Login or register to post comments by ATG
on Wed, 10/27/2010 – 17:53
#681790

Most cases against the gold and silver cartel were thrown out of court for no proper standing or jurisdiction

Login or register to post comments by Kina
on Wed, 10/27/2010 – 18:49
#681852

This is big news to go with Chilton comments the other day and those concerning a judge who was quoted as saying he would never rule in favour of a claim. And this is what I said investors should do.

 

If you have lost money because of illegal activities of others and can show that they occured then you should bring a case. You can’t say I won’t bother since the judges will never support a claim against JPM HSBC. That is giving up on rule of law.

 

What should happen is more investors do the same and try and expose the cartel and CFTC.

The heat should be turned up on the CFTC and the manipulating banks. They must know their balls are on the line should there be a strong surge in gold and silver buying that breaks them. The ashes will be picked over and the corruption of the CFTC exposed.

 

This should be a major issue for ZH. Wonder if a forensic examination of silver and gold activity is possible and would expose the obvious?

Login or register to post comments by DCon
on Wed, 10/27/2010 – 17:07
#681699

China makes Gold? How? Can I have the recipe?

 

Login or register to post comments by The 22nd Prime
on Wed, 10/27/2010 – 17:11
#681708

Buy a mine. Smelt. Voila.

Login or register to post comments by lewy14
on Thu, 10/28/2010 – 01:52
#682628

In[1]:= Prime[22]

Out[1]= 79

Just curious… is there something special about 79?

Login or register to post comments by JuicyTheAnimal
on Wed, 10/27/2010 – 17:08
#681703

plus gold is pretty and you can drink it

Goldschläger is a Swiss cinnamon schnapps (43.5% alcohol by volume or 87 proof; originally it was 53.5% alcohol or 107 proof), a clear liqueur with very thin, yet visible flakes of gold leaf floating in it. The actual amount of gold is extremely small and serves as a sort of novelty: there is currently less than a tenth of a gram (0.1 g) of gold flakes in a 750 mL bottle of Goldschläger,[1] which, as of May 26, 2010, amounts to about 4.28 USD on the international gold market

Login or register to post comments by putbuyer
on Wed, 10/27/2010 – 17:09
#681706

Here we go… Faber and ZH on the money

Buy the way, don’t ZH have so many nice clickable advertizers. keep it going bitches

Login or register to post comments by MiguelitoRaton
on Wed, 10/27/2010 – 17:11
#681712

Gold is the Kryptonite of the US, if China builds a credible store of the yellow metal, watch out.

Login or register to post comments by midtowng
on Wed, 10/27/2010 – 18:01
#681802

Every year we here a quote out of China that they are talking about buying gold. Every year there is no follow through. And then couple years down the road China reports that it has bought another 400 tonnes of gold.

I don’t think the quotes make much difference. China is going to do what China is going to do.

Login or register to post comments by Paul E. Math
on Wed, 10/27/2010 – 19:08
#681958

Like Manny Ramirez: it’s China being China.  What’re-ya-gonna-do?

Login or register to post comments by Bartanist
on Wed, 10/27/2010 – 20:15
#682104

Then China will be able to make big yellow boat anchors just like the US … before the US gave away all of its gold to the Federal Reserve.

Login or register to post comments by BrosMacManus
on Wed, 10/27/2010 – 20:59
#682190

The Treasury owns the physical, issuing paper credits to the Fed at 42-ish (FOFOA). As long as the Treasury doesn’t call in the private holdings and ban/limit it’s private ownership, keeping it down until we can swamp the Chicoms with paper is our only protection against the Chicom’s mercantilism. Call me naive, but our goobermint can’t be as derelict and ignorant as we all portray them to be…a sick part of me wants them to be behind the cash-4-gold schemes. Yeah, the US is no shining city on the hill, but imagine the Chicoms being the lone superpower. Every time I hear people say how smart and virtuous the Chicoms are, I wonder if they’ve ever heard of the Cultural Revolution.

 

   

Login or register to post comments by Fred Hayek
on Wed, 10/27/2010 – 23:08
#682415

Exactly.  If only jackasses like Tom Friedman who sigh and get all tingly while contemplating China’s dictatorship could be forced to live under it a little while, but not as Tom Friedman supercilious doofus from the new york times.  No, if only he could experience the Chinese government as just another journalist, one who seems to be prodding the government to change its policies.

Login or register to post comments by Chartist
on Wed, 10/27/2010 – 17:12
#681718

So, is China working with the Fed to hold down the dollar to further prop our stock market so we feel rich enough to buy more of the rubber dog shit they export?

Login or register to post comments by Turd Ferguson
on Wed, 10/27/2010 – 17:14
#681724

A must post every time China v US is mentioned:

http://www.wnd.com/?pageId=116836

Login or register to post comments by sschu
on Wed, 10/27/2010 – 17:15
#681726

There is growing pressure from a number of interested parties NOT to do QEII.  It makes me think that there is are significant power centers lining up against Bennie’s helicopter ride. 

I think Bennie has to punt, wait for things to get worse before they beg him to bail them out.  QEII is a non-event.

sschu 

Login or register to post comments by trav7777
on Wed, 10/27/2010 – 17:30
#681754

I hope you read around here.

Because it’s CLEAR, crystal, that all of the export mercantilist nations are DIAMETRICALLY opposed to a weak dollar!

That means Germany, Brazil, and China predominantly, and Japan to a lesser extent.  They want to preserve the status quo of perpetual export surpluses meaning lots of jobs for their populations.

Of course they are against QE.  The US should just knuckle under and go deeper into debt to buy the shit they overproduce so that they can continue to have massive surpluses.

Login or register to post comments by MeTarzanUjane
on Wed, 10/27/2010 – 17:24
#681742

Confucius say: Smoke more Hopium.

Login or register to post comments by TonyV
on Wed, 10/27/2010 – 18:04
#681805

He also said:

Man who go to bed with itchy butt, wake up with stinky finger

Login or register to post comments by Lux Fiat
on Wed, 10/27/2010 – 17:26
#681745

Gross, Grantham and Orzag, as if on cue:  http://www.oftwominds.com/blogoct10/grand-strategy10-10.html

 

Login or register to post comments by Humpty Pundit
on Wed, 10/27/2010 – 17:29
#681753

Wouldn’t be interesting if China decided to eventually back the Yuan with gold? What a reserve currency that would be. 🙂

Login or register to post comments by trav7777
on Wed, 10/27/2010 – 17:31
#681755

Why the fuck would they do that???

Everything China is about is a perpetually weakening currency in order to maintain export growth.  Pegging to a commodity would destroy their economy.  They wouldn’t be able to do their mercantilist ponzi with a gold standard.

Login or register to post comments by MeTarzanUjane
on Wed, 10/27/2010 – 17:56
#681793

Maybe they do that because price of shiny go down? Maybe this help ahhh, export.

Login or register to post comments by Spalding_Smailes
on Wed, 10/27/2010 – 18:05
#681807

Not enough gold to back world finance …. also …..

 

As my reference to the Japanese yen might suggest, I am pretty skeptical about the likelihood of this happening, at least with some of the more excited predictions.  So, by the way, is the ADB, whose recent report (“The Future Global Reserve System — An Asian Perspective”), suggests that by 2035, the RMB may comprise about 3 to 12 per cent of international reserves.  This is a pretty reasonable prediction, in my opinion, and far from the more feverish claims we see reported almost daily.

If the renminbi ever becomes a major trading or reserve currency, it is going to take a long time for this to happen and will require a radical transformation of the Chinese economy and the role of the government.  This may seem like a surprising statement.  After all nearly every week we see reports about a new breakthrough for the renminbi, and almost every day someone important somewhere speculates publicly about what the world will be like when (never if) the renminbi displaces the dollar.

But away from all “qualitative” arguments about why this is unlikely, and there are many, I think there is a problem with the arithmetic of reserve currency accumulation.  If the rest of the world is going to use the renminbi as a reserve or trading currency, clearly it needs a mechanism by which to accumulate renminbi.  This is something on which a surprisingly large share of people who talk about the future of reserve currencies don’t seem to focus.

Leave aside the fact that foreigners are prevented from having renminbi accounts and that it will probably be many years, if not decades, before the PBoC is willing to allow full convertibility, with limited government intervention and no control over the setting up and trading of its currency.  The world still needs a way to accumulate renminbi in order for it to be a major trading or reserve currency.

http://mpettis.com/2010/10/it-isn%E2%80%99t-easy-being-green/

Login or register to post comments by hamurobby
on Wed, 10/27/2010 – 21:57
#682285

Not enough gold to back world finance …..

 

Okay I will bite,

oh sure there is plenty plenty plenty of gold to back all of it twice, but not at this price.

 

 

Login or register to post comments by Turd Ferguson
on Wed, 10/27/2010 – 21:02
#682195

If a gold-backed renminbi became the new global reserve currency, the Chicoms could jam that fucker right up the ass of every other country on earth, just like the US has done for the past 60 years. They could then deficit spend their way into a nice, little billion-person nanny state.

You’re fooling yourself if you don’t think that this is a possible endgame for them.

Login or register to post comments by Spalding_Smailes
on Wed, 10/27/2010 – 21:20
#682219

Gold can not back a world currency only fiat. Thats why they dump’d gold and with this came forex trading … They could not do this using gold as a backstop.

 

Forex Trading is being called ‘today’s exciting new investment opportunity for the savvy investor’. The reason is that the Forex Trading Market only began to emerge in 1978, when worldwide currencies were allowed to ‘float’ according to supply and demand, 7 years after the Gold Standard was abandoned. Up until 1995 Forex Trading was only available to banks and large multinational corporations but today, thanks to the proliferation of the computer and a new era of internet-based communication technologies, this highly profitable market is open to everyone. The Forex Trading Market’s growth has been unprecedented, explosive, and continues to be unequaled by any other trading market.

Login or register to post comments by Chartist
on Wed, 10/27/2010 – 17:33
#681759

Is the Yuan really propping up the US dollar?…How far would the buck fall if China totally decoupled?

Login or register to post comments by HarryWanger
on Wed, 10/27/2010 – 17:35
#681762

Personally, would love to see my gold holdings rise higher. 

Login or register to post comments by unum mountaineer
on Wed, 10/27/2010 – 18:29
#681865

aha..you an interesting one harry. i like your avatar

Login or register to post comments by Humpty Pundit
on Wed, 10/27/2010 – 17:39
#681766

Trav,

 

I don’t really think they would do that any time soon. By eventually I meant much later.

Login or register to post comments by razorthin
on Wed, 10/27/2010 – 17:43
#681768

Go China!  Love the monetary schooling of our ball-less Fed and Treasury.  Is Mandarin difficult to learn?  How about German?

Login or register to post comments by espirit
on Wed, 10/27/2010 – 17:51
#681788

Pretty (valuable), and you can drink it also.

Login or register to post comments by Spalding_Smailes
on Wed, 10/27/2010 – 17:59
#681797

Guy can’t sell gold coin for $50.00 ??? Wow … Not good for the people that think physical gold is the great wall of china…This is who you will be dealing with if shit hits the fan.

 

Login or register to post comments by unum mountaineer
on Wed, 10/27/2010 – 18:44
#681907

if shtf then the first girl could sell her body in exchange for good and otehr services…see..creative…

Login or register to post comments by RiffRaff
on Wed, 10/27/2010 – 20:35
#682146

Didn’t junk you, but please.

Doubt he could sell a share certificate of Google for 2 goats in the African bush as well.  What does it prove? – That differing estimations of value are what make a market.

I imagine that the majority of ZH readers would love to encounter such people if TSHTF.

People that have demonstrated such poor judgement to so radically undervalue gold will likely have accumulated little of value and will likely only have their “personal services” to trade.

Login or register to post comments by hamurobby
on Wed, 10/27/2010 – 22:07
#682306

Well it proves one thing, gold is definitely in a bubble.

Login or register to post comments by TheGreatPonzi
on Thu, 10/28/2010 – 00:49
#682572

It just proves that the average American is a retard who doesn’t know what gold is. Nothing more.

Login or register to post comments by cranky-old-geezer
on Wed, 10/27/2010 – 18:19
#681845

China is going to put the smackdown on Wall Street, mark my words.

Login or register to post comments by let x equal x
on Wed, 10/27/2010 – 18:25
#681854

Uh Oh…Tonight that wacky, zany madman Cramer was telling his sheep to put 20% of their portfolio in gold…(and AEM).

Login or register to post comments by Snidley Whipsnae
on Wed, 10/27/2010 – 18:31
#681867

It isn’t just China that is accumulating gold, but most of the members of the SCO.

“But what must have really got under the skin of the BIS is that it knows the real value of bullion is considerably in excess of the market price. It knows gold is underpriced, because the BIS and its senior members have been suppressing the price for the last forty years, which has resulted in an acute shortage of stock. But when they embarked on this course in the 1970s they would not have foreseen how gold would be made available to the masses through yet-to-be-invented ETFs; nor could they have foreseen the emergence of Russia and China from deep communism into aggressive capitalist-style development, generating hundreds of millions of new gold-loving savers.  Consequently the old-guard BIS members have lost embarrassing quantities of bullion and cannot confess this to the markets. Presumably they had hoped that by withholding this information they could bluff it out; and they might have succeeded had it not been for the very serious financial and economic deterioration in the global economy, which raises the possibility of a Fed-induced dollar crisis, triggering new demand for physical bullion.

As well as these problems there is growing evidence of disruptive intent behind the gold policy of the ex-communist nations. I recently covered this in an article that tied in the relationships of the Shanghai Cooperation Council. In that article I pointed out that the substantial majority of today’s gold-buying nations are members of, or are associated with this organisation. As if to confirm these fears, in the last few days Iran, which is an associate member of the SCO, announced it is now buying gold. Furthermore, China is restricting the export of rare earth metals, which with the energy policies emanating out of the SCO membership, has the appearance of a coordinated attack on the Western economic system. If such a conspiracy exists, gold is central to it.”

http://www.financeandeconomics.org/Articles%20archive/2010.10.22%20Gold%20unallocated.htm

Don’t know what the SCO is? When the SCO was formed the US requested ‘observer’ status but was denied. Wiki link to SCO. BTW, this list needs updating.

http://en.wikipedia.org/wiki/Shanghai_Cooperation_Organisation

Login or register to post comments by unum mountaineer
on Wed, 10/27/2010 – 18:49
#681918

whupps…you’re scaring people.. “no americans allowed” club..maahmmy?!?

Login or register to post comments by Snidley Whipsnae
on Wed, 10/27/2010 – 18:53
#681927

Just callin’ em like they are! 🙂

Mericans have no clue how big a part gold will play in their futures.

But, they will learn. As Churchill said “Americans always do the right thing…after they have tried everything else.”

Login or register to post comments by StychoKiller
on Wed, 10/27/2010 – 23:19
#682424

Another “round-eye” bites the dust!  Take a hike, Kwai-lo. 😦

Login or register to post comments by Blah Blah Blah
on Wed, 10/27/2010 – 18:34
#681884

My wife likes to wear gold, that’s reason enough to buy it!

Login or register to post comments by Snidley Whipsnae
on Wed, 10/27/2010 – 18:49
#681920

One of the very few observations that Keynes made…that make any sense whatsoever!

“There is the possibility… that after the rate of interest has fallen to a certain level, liquidity preference is virtually absolute in the sense that almost everyone prefers cash to holding a debt at so low a rate of interest. In this event, the monetary authority would have lost effective control.”
John Maynard Keynes, The General Theory

Substitute the word gold for cash…Bingo!

 

 

Login or register to post comments by nuinut
on Wed, 10/27/2010 – 21:53
#682278

Nice one.

Login or register to post comments by seek
on Wed, 10/27/2010 – 18:36
#681887

In other words:

?????

Login or register to post comments by Goldenballs
on Wed, 10/27/2010 – 18:49
#681921

America,s enemies are going to set up their own Gold Standard and buy major assets in the West.

Login or register to post comments by Snidley Whipsnae
on Wed, 10/27/2010 – 19:03
#681952

The WORLD gold standard never went away, but was suppressed by credit based fiat currencies while the world economy was expanding. Future generations will look back, stupified that anyone would consider trading paper backed by nothing for gold or any other commodity.

Contracting debt based fiat currencies/economies weild far less power than they did ten years ago. When contraction/deflation sets in the power of the Fed goes south. Got gold?

The times they are a-changing

Login or register to post comments by Lucius Corneliu…
on Wed, 10/27/2010 – 22:21
#682331

In a deflation it is better to have cash.  Gold will fall in price just like all the other stuff.  IMO, when the house of cards (otherwise known as the US economy) collapses, the FED will not be able to print fast enough to shore up all the defaulting debt.

Login or register to post comments by mt paul
on Wed, 10/27/2010 – 18:52
#681924

long

tungsten bars

Login or register to post comments by Snidley Whipsnae
on Wed, 10/27/2010 – 18:54
#681933

You will soon find that tungsten bars are worth far more than defunct fiat currencies.

Login or register to post comments by nuinut
on Wed, 10/27/2010 – 21:53
#682281

LOL. I’d like to buy this man a beer.

Login or register to post comments by laosuwan
on Wed, 10/27/2010 – 20:13
#682096

If you think the chinese people are going to go out and buy gold think again. here in thailand our per capital gdp is much higher than china and so are our foreign exchange reserves, for that matter. Yet if you look in the gold shops in thailand, they are empty. no one has the free cash to play with gold. its certainly worse than that in china where people are wage slaves. now, yes, the top 1% income earners and the government can buy gold, but dont imagine billions of chinese all buying gold. they dont have the money to buy gold.

Login or register to post comments by Quinvarius
on Wed, 10/27/2010 – 20:20
#682116

A person with $50 can’t afford $50 worth of gold?  Wow.  Things must really be bad if one cannot even afford a small piece of an infinitely divisible metal. 

Login or register to post comments by Quinvarius
on Wed, 10/27/2010 – 20:22
#682120

And BTW, your country greatly ramped gold purchases.

http://blogs.ft.com/beyond-brics/2010/09/13/thailand-whos-buying-gold/

Enjoy.

Login or register to post comments by thermroc
on Wed, 10/27/2010 – 21:10
#682204

I’ve thought again, and I still think Chinese people are buying gold. Any other advice?

Login or register to post comments by TheGreatPonzi
on Wed, 10/27/2010 – 21:27
#682231

I live in Thailand 6 months per year and gold is very popular there. Another “troll”?

Login or register to post comments by nobita
on Thu, 10/28/2010 – 01:13
#682600

i live in thailand too and i have to agree.
people like gold for saving, their currency was butchered back in the late nineties so they know firsthand how fragile fiat can be.

Login or register to post comments by Kina
on Wed, 10/27/2010 – 20:16
#682102

Goodness the manipulation story even makes it onto the front page of MarketWatch. What happened. Hopefully this will bring others out of the woodwork.

 

Did JPM, HSBC fix silver?

J.P. Morgan, HSBC sued for silver manipulation

 

The suit says J.P. Morgan and HSBC in August 2008 together held 85% of the net short position in silver and by the first quarter 2009 held $7.9 billion in precious metal derivatives.

According to the other lawsuit filed by Brian Beatty, who also traded silver contracts, says he was hurt by J.P. Morgan’s alleged anticompetitive acts and market manipulation. Specifically, the suit said Beatty, a Connecticut resident, bought and sold silver contracts on Aug. 14 and Aug. 15, 2008, when the price of silver suffered an 18% drop from $14.86 to $12.23.

Laskaris, a New York resident, also was hurt by the alleged “artificial market in COMEX silver futures” from June 2008 to June 2009, according to the lawsuit.

http://www.marketwatch.com/story/jp-morgan-hsbc-sued-for-silver-manipula…

 

Login or register to post comments by thermroc
on Wed, 10/27/2010 – 21:12
#682209

“Did they” not “Do they”, highlighting past dates.

Disingenuous assholes.

Login or register to post comments by lewy14
on Thu, 10/28/2010 – 02:06
#682636

Old conventional wisdom: Silver price suppression is a crank theory.

New conventional wisdom: Of course JPM suppressed the price, old news, get over it.

Legerdemain.

Login or register to post comments by Kina
on Wed, 10/27/2010 – 20:23
#682122

China is so huge that even a tiny percentage of the population that has becoming the monied class can be the size of a small country’s working population. That is a lot of demand.

I watch exclusively mainland Chinese and HK tv every night and have seen the Chinese buying gold stories a number of times, with vision of them lined up outside gold shops.

The Chinese have always loved bullion and see it as a natural buy. When a told my wife (HK Chinese) that I was going to convert a big bunch of our cash into gold and silver she said OK.

Would be interesting to know what numbers of the Chinese working population would have the capacity/spare cash to buy gold.

Login or register to post comments by Spalding_Smailes
on Wed, 10/27/2010 – 20:35
#682148

It’s China’s turn to pop a world-class asset bubble and smash the global economy

• China tried to pop its property bubble once before but the global economic catastrophe caused the US financial crisis aborted the effort in 2008
• This week China re-launched the crash phase of its Greenspan Credit Bubble with Chinese Characteristics
• Watch out for flying bricks

Why don’t central banks, and the governments they front for, ever learn? The only way to prevent macro-economic damage from a collapsed asset bubble is to not allow a bubble to develop in the first place. Once a government takes the path of winning popular favor with the temporary prosperity that’s produced by asset price inflation, there is no easy way out, as Japan re-discovered in the 1990s, the US found out again in the 2000s, and China will experience soon enough. As part of our project to map out the coming decade, this week we investigate the prospect of the collapse of the Greenspan Credit Bubble with Chinese Characteristics.

Monday China embarked anew on a treacherous program of rate hikes to end a property bubble that took root there in 2005.

Here is a game readers can play at home to simulate the genius of a central bank managing an asset bubble down via interest rate hikes.

Find a cinder block and a bungee chord. Place the cinder block on the far end of your kitchen table. Attach one end of the bungee chord to the cinder block and put the other end between your teeth. Kneel down so that your face is level with the tabletop and pull the chord until it is taught.

Now it’s time to begin “tightening” the way central banks try to, bit by bit, to bring an asset bubble to a benign end, or so they believe.

Pull ¼ of an inch. If nothing happens then pull another ¼ inch. If nothing happens then do it again, and again.

Silly game, you’re thinking. A child can see how this will turn out. Sooner or later that concrete brick will sing across the table and smash your face.

As obvious as the outcome might be to a 10-year-old, the brick-in-the-face lesson remains lost on central banks. They must be slow learners because repeat it over and over. Or perhaps there is a common institutional neurosis shared among central banker’s that compels them to repeat the same mistake, to recreate the experience of concrete on teeth.

For years I’ve referred to China’s asset bubble economy as a Greenspan Credit Bubble with Chinese characteristics. This week we find that not only the policies that created China’s bubbles but even the policy responses to attempt to tame them mirror Greenspan’s.

Democracy or dictatorship, credit bubbles buy political favor… while they last

The beauty of a credit bubble is that while they expand both the creditor and the debtor believes they are getting rich. But unless the asset purchased with debt is appreciating, as might a piece of farmland, in fact only one of the two of them is getting richer, the one who holds the loan has an asset on his or her balance sheet. The debtor may increase his or her purchasing power temporarily, but once the cash is spent — on a car or tuition at a culinary school or a home in the US since 2006 — all they have left is a depreciating asset and a liability.

After a bubble gets big and fearsome enough, and all of the political benefits have accrued – capital gains tax revenues, high paying appointments to influential political posts such as running Fannie Mae or Freddie Mac, large scale wealth redistribution from debtors to creditors, and so on – and a catastrophic crash looms, first governments attempt to slow a bubble gingerly, such as restricting bank credit and raising taxes on particular classes of capital gains.

But speculators are not discouraged by such half-measures. The specter of marginally higher costs pale beside the dreams of quick riches created by the central bank during years of bubble growth. The speculator believes that the wealth and success they have achieved during the bubble resulted from their own genius, and this misguided view undoes all but the most self-aware of investors in such periods. The idea that excess liquidity and cheap credit were the main sources of their good fortune only occurs only to a small number of those who understand how asset bubbles operate, both economically and politically, as iTulip.com readers have since 1998 when we played the technology bubble until April 2000.

Asset versus wage and commodity price inflation: the central banker’s game

If commodity and wage inflation containment policy is all about managing consumer inflation expectations downwards, then the central bank’s policies that produce asset price inflation, to bribe the middle class into accepting insane levels of income and wealth inequality, is aimed at managing speculators’ asset price inflation expectations upwards. Later, affecting an asset bubble policy about-face from encouragement to discouragement is like trying to convince Paris Hilton fans to stop reading her tweets.

The “solution” that the Greenspan Fed devised to quell the technology stock bubble was a program of 25 basis point rate hikes. The theory was that these clearly communicate the central bank’s determination to end the bubble, and cause the speculators to exit the market in an orderly fashion.

The central bankers’ dream is that these tender rate hikes will first slow the bubble, then allow it to deflate gradually to give the macro-economy a soft landing. But that never happens. They believe this despite the evidence that these measures cause the asset bubble to collapse. Every. Single. Time. It’s as predictable as the laws of physics that propel a brick airborne.

 

http://www.itulip.com/forums/showthread.php/17311-China-Crash-2011-Part-…

Login or register to post comments by johngaltfla
on Wed, 10/27/2010 – 20:40
#682154

All we need November 3rd:

 

Fed says they’ll only buy $500 Billion over the next 8 months.

China says FU and says they are liquidating all MBS and demanding par value.

Or Else.

Bernanke’s asshole needs Prep H then.

Login or register to post comments by marty.mcfly
on Wed, 10/27/2010 – 21:47
#682265

What do you guys think about Warren Buffett’s comment on gold:

“Look,” he says, with his usual confident laugh. “You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

http://money.cnn.com/2010/10/18/pf/investing/buffett_ben_stein.fortune/i…

Login or register to post comments by Lucius Corneliu…
on Wed, 10/27/2010 – 22:16
#682312

The current price of gold already factors in a very high inflation speculation premium.  IMO, if China decides to buy in earnest at this time, they will probably pay too much.

Current value of 1913 dollar = .04

1/.04 = 25

Dollar value of an ounce of gold in 1913 = $20

$20 * 25 = $500 per ounce

Current price ~ $1,350

$1,350 – $500 = $850

$850 / $500 = 170% 

Current speculative premium for inflation = 170%

Login or register to post comments by Fred Hayek
on Wed, 10/27/2010 – 23:20
#682425

Of course, even someone like myself who never even took econ 101 would know to ask whether the supply and demand for this item are the same as in 1913. 

The context is not the same as in 1913.

 

Login or register to post comments by Lucius Corneliu…
on Wed, 10/27/2010 – 23:42
#682463

Its a back of the envelope calculation.  The point is that I think there is already a significant speculative inflation premium factored into the price.

Login or register to post comments by Sad Sufi
on Thu, 10/28/2010 – 03:40
#682702

You might be right Lucius, but it is hard to keep the faith in the FRN just the same.  Farmland maybe…

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One thought on “China Commerce Ministry Says Country Should Buy More Gold, Diversify Dollar Holdings

  1. If people have the capacity to BuyGoldAssets, then they ought to do it now. Holding on to this asset means that they have a better chance of selling those assets once the finances go down.

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