Where Is Gold Going In This Market

[PCA]

[q

Agreed. Good call.

I would rather say head off, LRB you probably did not match time and price of the call. AUD went against him 350 pips and Gold 35 bucks. He said to be on leverage so definitely both trades were a hard kick in the balls.

[jcon]

It wasn't the AUD nor the Au trade that almost caused problems, it was the Ag trade! I put it in my gf's O_da account (I don't have one, I think I brought this up with Paulo about a month or two ago - where is he btw), and I didn't really check the balance as it was only a relatively small trade - I figured I'd transfer more into the account but at T+2 for the transfer, I woke up on the morning of my birthday to see that if Ag would trade to about 40.6 I would be closed out of that position due to their ''margin closeout'' feature.... I would have had some 'splainin' to do had that occurred . It was a nice b-day present to not have gotten to that point. Now it's in-the-money and a balance transfer should hit tomorrow just to make sure that doesn't happen again......

I'm not a fan of leverage, but small positions with leverage in a relatively large account can work (as opposed to large leverage in a small account - the path to destruction).

All 3 trades are still on. I think gold is going to get hit as per my options-collar-post a few pages back. Silver will gyrate, but it's going to get crushed IMO - I think it's worth throwing some money at a spec short even now, but time and price will be huge.

edit: clarity.

Edited May 12, 2011 by jcon

[flying]

It was a nice b-day present to not have gotten to that point.

Happy Belated Birthday

[RedFxTrade]

Another Bullish Argument for Metals?

'Taking a step back, the monetary policy arguments for gold and against the USD remain the following:

i) FOMCs consistently dovish remarks regarding muted inflation;

ii) Fed's downgrading of growth and;

iii) Fed's planning to reinvest mortgage securities payments, which is a form of passive easing as the balance sheet is prevented from shrinking. Externally, the USD remains challenged by the contrasting monetary policy picture involving a tighter ECB/BoE/RBA relative to the Feds continued quantitative easing. This remains the yield differential driver to USD weakness. Any periodic reverberations regarding peripheral Eurozone debt concerns, equity market pullbacks disappointing earnings have proven -- and will likely to continue proving an opportunity for buying the dips in EURUSD, AUDUSD, gold and silver.

It will take the removal of the aforementioned fundamental dynamics in order for the USD to mount any credible rebound of more than 5% ie above 75 for at least 3-4 weeks. Such a strict requirement is necessary in order to avoid the several short-lived rebounds in the US currency, such as those seen in June 2009, August 2010 and February 2011.'

http://www.ashraflai...-for-metals.asp

This is certainly one side of the coin. I was calling for a USD rally in a post made on here last week. While I agree with the above reasons that Ashraf puts forward for a weaker USD, I believe that there is also the other side of the coin. I think the monetary policy of the FED is structural in nature, ie, it will be persistent and it is not going to change over the coming months. It will be in place for years. Yet the whole world knows this. Anyone who takes the markets seriously, knows the FED are going to continue the current policy. This has led to every at the moment being on the one side of the trade. While I hold my medium and longer term view that the USD will under go a "persistent" erosion in value, and will drop below the 71 area on the USD Index, I think we are now in and entering a USD positive period of time.

As I said monetary policy expectations for the FED are already priced in. Everyone is short the USD. Even the retail traders have flipped to net short the USD, right at the USD Index recent bottom. They had been long USD for 6 months, while the large futures traders were short. Now the large traders have eased off in their USD short positions, and the retailers are now net short, as they probably burnt all their capital looking for a bottom in the USD. An important shift in sentiment in my view.

On the other side of the coin I mentioned above is other countries. Interest rate expectations are mis-priced. The next move from the RBA is down. The employment report from Australia this week was dire, mortgage defaults are on the rise, mortgage approvals are falling, private sector debt is enormous. Mortgage debt as a percent of GDP in Oz is higher than it was at the peak of the US bubble. Oz banks are reliant on over seas funding. The next move is down in OZ rates. This mis-pricing in interest rate expectations for the AUD, once it is realised that rates will not go up, but down, will lead to a large unwind in the carry trade. At the moment it is a game of "known expectations" with US monetary policy versus "mis-priced expectations" regarding AUD and other central banks. Add to that the weakening Chinese economy and the rampant credit expansions there. Once property prices come down in China, and the contruction mal-investment is exposed, that credit expansion will go into a sharp reversal. As China is customer to about 28% of Oz exports, this is a double whammy for the Australian economy.

The same goes for the BoE and the ECB. Trichet much more dovish at last meeting. BoE continually talking how inflation will reach 5%, in other words they are telling the market expect higher inflation without higher rates. See Kings speeches, especially the one at the end of February. Recent data from the UK has been dire too. I don't believe central banks should be in charge of money, how can they possibly know the quantity of money for 60 million people. Nine people to know this for everyone. However, I m looking at it from the mindset of Keynesian central bankers.

Thats not to say the AUD will not make another new high in the very short term, but above 1.1000-1.1200 will be met with powerful selling. Perhaps the USD will spike lower again. However, it looks like a bottom for the next few months is in place. The mood has changed. Markets were continually rising on good news and bad news for 8 months straight, more or less. The market is selling of hard now on bad news and struggling on good news to gather momentum. I think this is due to QE ending. The markets will correct here, are correcting and the economy will weaken. Then expectations will increase for the FED to do something. I would not be surprised if QE 3 muttering begin by the end of the summer.

[churchill]

'The same goes for the BoE and the ECB. Trichet much more dovish at last meeting.'

Strong growth figures out of Euro Zone today will give Trichet more room to raise rates / The US on a longer term low interest rate policy and with continuing weak unemployment and the IMF ? ( I thought I heard ) suggesting more QE - So a stronger Euro vs USD ?

As I previously said - I think this is a USD rally but in a downtrend -So is The rock star is starting to buckle at his knees - Will he get up or fall on his face !

Edited May 13, 2011 by churchill

[RedFxTrade]

Guys highly highly recommend this lecture by Heurto De Soto. It was through GoldMoney. Fantastic explanation of the crisis in a historical context, going back to 1844, and the Peels Act, and how credit expansion from thin air leads to false signals being to business and entrepreneurs and society at large about the levels of savings in a society and how this leads to mal-investment.

Here is a pdf of the book he is talking about....not an easy read, but you will be much better informed by the end of it....Money, Bank Credit and Economic Cycles

[churchill]

Guys highly highly recommend this lecture by Heurto De Soto. It was through GoldMoney. Fantastic explanation of the crisis in a historical context, going back to 1844, and the Peels Act, and how credit expansion from thin air leads to false signals being to business and entrepreneurs and society at large about the levels of savings in a society and how this leads to mal-investment.

Here is a pdf of the book he is talking about....not an easy read, but you will be much better informed by the end of it....Money, Bank Credit and Economic Cycles

Thanks very much RedFxTrade will take time to listen over the week-end

[RedFxTrade]

'The same goes for the BoE and the ECB. Trichet much more dovish at last meeting.'

Strong growth figures out of Euro Zone today will give Trichet more room to raise rates / The US on a longer term low interest rate policy and with continuing weak unemployment and the IMF ? ( I thought I heard ) suggesting more QE - So a stronger Euro vs USD ?

As I previously said - I think this is a USD rally but in a downtrend -So is The rock star is starting to buckle at his knees - Will he get up or fall on his face !

For sure, it is a long term down trend in the USD and in all paper currencies for that matter, and owning gold and silver is prudent to say the least, accumulating small amounts, often. The positive news from the Eurozone regarding GDP is what has already been, and is only at the core, ie Germany The problems and risks to the core banking system is at the periphery, Spain, Ireland, Greece, Portugal. I do not think recent data, not factored into these GDP figures is so good. Oil Imports as % of GDP is at levels that has preceded previous recessions for instance. I don't believe this is fully factored in yet. The large wave of liquidity has played a huge part for nominal GDP gains. Yes Irish, Greece and even Spanish GDP is not a huge part of total Euro GDP, but banking liabilities and exposure of the whole banking system to Sovereign debt is large relative to the equity of the banks, and I think this trumps GDP.

It is an interesting idea of a higher EURO against the USD. I think this is possible, after all Greece is only 3% of EU GDP. It would be good for the Euro if Greece bankruptcy was acknowledged, in fact if all the bads debt was acknowledged. I m actually planning to play it through a higher EURAUD.

The chart shows a downward slopping trend is still in place. A weekly close would be needed above recent highs to allow for the potential for a stronger Euro, however, the weekly trend is till up on a medium term basis (although that looks in danger), with a short term negative bias.

[absolutelyBangkok]

Here is a very good analysis - it's too early to buy the dip in gold, but still, gold is the natural hedge for long portfolios. Read the whole thing:

http://www.the.me/hello-stagflation-buy-on-dips/

[flying]

it's too early to buy the dip in gold, but still, gold is the natural hedge for long portfolios.

Agreed that gold is still as good a hedge as anything for the thrashing going on worldwide.

As for timing a dip....If I had none I would buy anytime... dip or not...

That I had extra cash not needed for living expenses.

As for this being too early in the dip....Here in the USA physical coins premiums have raised accordingly so not much of a dip.

I wont even use eagles as an example as they have their own thing going but using Maples for instance ....

A 1oz gold maple is $1,569.69 ($70 premium)

A 1oz silver Maple is $42.27 ( $6.68 premium )

Even if one wants generic rounds & bars the premiums are all up & still selling.

I have distanced myself from silver recently through swaps for more gold the latest at 39.2/1 this past Monday here in the US.

Not because i don't think silver is still a good hedge but because

I feel better about gold which is more widely held as a a form of wealth by sovereign nations.

Watching the CME raise margins & cause volatility in Silver paper just has me disillusioned with it.

Not that I attribute the thrashing in the paper metals to reality of the physical markets in the long run

but, it is still disgusting to watch in the short run. So where I once sat at 55/45 valuation wise in metals

I now sit at 90/10 in favor of gold

Edited May 14, 2011 by flying

[midas]

We are certainly living in interesting and historic times ..

I never thought i would see the day that Zimbabwe would turn their noses up

at the US dollar.

But then again i was in Myanmar 2 weeks ago and they

clearly wanted Thai baht from me rather than accept US dollars

RBZ urges gold-backed Zim dollar

http://www.newzimbabwe.com/business-5127-RBZ+urges+gold-backed+Zim+dollar/business.aspx

Edited May 16, 2011 by midas

[sailor1x52]

There is an informative and interesting article concerning this subject on BBC news-Gold Rush.

[flying]

Long View: Why Jim Rogers stays in gold

May 13 2011 Jim Rogers, veteran investor, talks to FT's head of Lex, John Authers, about the value of gold and silver, the strength of commodities, Federal Reserve chairman Ben Bernanke and Treasury yields plus the housing bubble in China. He was interviewed at the CFA Institute Annual Conference in Edinburgh. (10m 12sec)

http://video.ft.com/v/942996330001/Long-View-Why-Jim-Rogers-stays-in-gold

[RedFxTrade]

Long View: Why Jim Rogers stays in gold

May 13 2011 Jim Rogers, veteran investor, talks to FT's head of Lex, John Authers, about the value of gold and silver, the strength of commodities, Federal Reserve chairman Ben Bernanke and Treasury yields plus the housing bubble in China. He was interviewed at the CFA Institute Annual Conference in Edinburgh. (10m 12sec)

http://video.ft.com/...s-stays-in-gold

Watched that yesterday Flying. Always a sane voice in amongst the madness. A true long term investor. I m bearish on China for the next year or so, maybe longer, but when Rogers talks about China, he doesn't care about the next 2-3 years, or even the next 10 years, and the same with his commodity positions. I think it is always important to know what time frame people have on things before judging their decisions. I m pretty short to medium term, but like core longer term holdings also. I m liking Silver at these levels, not as a bottom, but accumulating small amounts. I think we will consolidate between $26-$35 range, and volatility will begin to come down in this area.

[flying]

Watched that yesterday Flying. Always a sane voice in amongst the madness. A true long term investor. I m bearish on China for the next year or so, maybe longer, but when Rogers talks about China, he doesn't care about the next 2-3 years, or even the next 10 years, and the same with his commodity positions. I think it is always important to know what time frame people have on things before judging their decisions. I m pretty short to medium term, but like core longer term holdings also. I m liking Silver at these levels, not as a bottom, but accumulating small amounts. I think we will consolidate between $26-$35 range, and volatility will begin to come down in this area.

Agreed RedFx

Rogers is consistent....

I am not a trader but went into physical back in 08 so would fall into the long term group

I think or should say my guess is your correct about Silver. I also think it will have a floor at $28/oz

Good Luck

[churchill]

Up or down ?

http://globalmarketwatch.biz/extwebs/gold-d-17may11.png

[RedFxTrade]

Up or down ?

http://globalmarketw...d-d-17may11.png

I think we are still in correction mode. I have linked a weekly heikin Ashi candlestick chart that are very adept at catching the trend. The $1450 area looks as if it could be hit. I hope so. It could perhaps could below here, but best to wait and see how price reacts at this level if it gets there. I will personally wait until a weekly close green candle appears before the possibility of a push higher. My bias is still to the downside though.

Edited May 17, 2011 by RedFxTrade

[churchill]

Up or down ?

http://globalmarketw...d-d-17may11.png

I think we are still in correction mode. I have linked a weekly heikin Ashi candlestick chart that are very adept at catching the trend. The $1450 area looks as if it could be hit. I hope so. It could perhaps could below here, but best to wait and see how price reacts at this level if it gets there. I will personally wait until a weekly close green candle appears before the possibility of a push higher. My bias is still to the downside though.

Yes - this is what many seem to be expecting - But Gold does not always play the charts or rules - and there are many many who are STILL waiting for the dip to buy /

US Runs out of Money, Portugal Death Postponed – La la land Economics

http://sharecrazy.com/beta/daily/5275/us-runs-out-of-money-portugal-death-postponed-la-la-land-economics

[Naam]

George Soros, who called gold "the ultimate bubble," dumped almost his entire $800m stake in bullion in the first quarter.

Soros offloaded the stake well before a commodities slump blamed partly on reports he was liquidating his holdings, according to Reuters.

Gold bull John Paulson held his ground, but Soros was joined in the retreat by several other big names, including Eric Mindich and Paul Touradji, according to 13-F filings with the U.S. Securities and Exchange Commission.

Soros, who has been bullish on gold in the past several years, cut his holdings in the SPDR Gold Trust (GLD.P) to just $6.9m by the end of first quarter, compared with $655m in December.

He also liquidated a five million share stake in the iShares Gold Trust (IAU.P), the filings showed. His total holdings in gold-backed ETFs was $774m as of December.

Gold rose for a tenth consecutive quarter in the three months to March, hitting record highs above $1,400 an ounce, buoyed by political turmoil in the Middle East and North Africa and lingering worries about indebted European countries.

The gains accelerated in April, but peaked at the start of this month, reaching a record $1,575 an ounce on 2 May.

Prices have since fallen more than 5% amid the biggest commodities slump since late 2008, a move partly triggered by a Wall Street Journal report that Soros' $28bn fund was selling precious metals, and fears other big funds were also seeing a peak.

[churchill]

Yes Naam -But What about US pension funds buying ++ , Central banks buying , Pimco ...

These are not short term traders - For all you know Soros is back buying again today ....

I think better to place ones bet on the long term trend - Which at this time seems to be UP

and until the US / Europe sort out their problems the chances are that interest rates will stay lower than REAL interest rates which means the pressure for PM's is up at this time /

I won't mention the East ........

Edited May 17, 2011 by churchill

[churchill]

'should Soros and his fund think that inflation is now a greater risk than deflation then it is curious that they would sell all their ETF holdings. It is also curious as Soros is on record regarding having serious concerns regarding the outlook for the euro and the dollar and the dollar as reserve currency of the world.

There is of course the precedent of other hedge fund managers , such as David Einhorn, who have also sold their gold ETF holdings but bought physical bullion in allocated accounts due to a concern about counter party and systemic risk.

It is quite possible that Soros’ fund has adopted a similar strategy.

This would allow Soros to discreetly accumulate bullion away from the public and media spotlight that result from SEC filings.

Paulson & Co., the $36 billion hedge fund founded by John Paulson kept its largest holding - $4.41 billion in the SPDR Gold Trust. Paulson’s belief in gold is seen in the fact that those who buy his fund can have their stakes denominated in gold rather than in dollars, meaning the value of their investment rises and falls with the price of bullion – lessening exposure to the dollar.

Paulson, unlike Soros, is on record as having purchased gold to protect against inflation.

PIMCO, the largest bond fund in the world, are also increasingly allocating funds to gold in their global equities portfolio. “The largest position in [our] fund is gold, which we think is a very good form of protection against what can go wrong,” said Anne Gudefin, PIMCO’s global equities portfolio manager, told Fortune magazine May 12.

The Soros sale may lead to selling at the margin today by guru driven sellers reading simplistic articles.

However, Soros ETF sale is of far less importance than the much less reported upon and analysed investment demand, pension demand and central bank demand from Asia and internationally.

This demand is coming from a very low base and is sustainable. It is prudent diversification, store of value, safe haven buying and not the rampant speculation involving over allocation and leverage one would associate with a bubble.'

http://www.zerohedge.com/article/soros-sells-gold-etf-while-paulson-buys-pimco-favour-gold-“protection-against-what-can-go-wr

Edited May 17, 2011 by churchill

[Naam]

Yes Naam -But What about US pension funds buying ++ , Central banks buying , Pimco ...

i don't care who is allegedly buying or selling Churchill. according to the zillion citations in this thread, not to mention the "daily gold news" presented by Mrs Naam , who all is "buying" the price of Gold should be 20,000 dollars an ounce today.

i look at facts and fact is that Gold yielded via price increase 10% in the last 6 months when calculated in USD. using other currencies as a basis the picture is different. Gold shows a performance of 2-4% and in some cases, e.g. AUD the performance for that period is negative.

[RedFxTrade]

Soros has a "habit" of being duplicitous. He was talking of of a gold bubble in 2008-09 and then again in 2010. To quote Soros,;

- Record gold prices may soon reverse and disappoint the bulls, said George Soros, the billionaire investor and legendary currency speculator.

"Gold is the ultimate bubble," Soros said at an event in New York sponsored by Reuters. "It is certainly not safe."

Soros Gold Bubble

Yet we seem to find out a few months later that he has been buying the "bubble".He is certainly a canny investor, and one where you need to read between the lines always. I think not owning some gold at least is much more risky than having done. To not own gold is like putting all your faith in the integrity of governments and central banks in the world. I try to be dogmatic. A lot of people think a 30-50% drop in gold is out of the question. I happen to think it is possible, although I do not necessarily think it will happen.

I would love to create or at least find a global measure of global money and credit supply. Some talk how we are in a deflationary environment, others an inflationary. In the US total credit market debt is barely growing. I wonder if we could see a measure of global money supply and credit how it would look? If we add in China, Canada, the recent expansion in Oz, throughout Asia, Japan and then the Euro area, and then central and south America.

If we could aggregate such a feed of information, and then look at asset prices in those countries under going credit expansion/contraction we could then possibly gauge the if total world credit and money supply is expanding/contracting...We could also see if we are near a tipping point. For example, China is running a huge credit expansion and so has Australia. Mortgage debt in OZ as a percent of GDP for example is higher than it was at the peak in the US housing bubble. I think yes money and credit has been growing in these two countries, China and Oz, but if you look at asset prices (that have benefited from that expansion) namely construction and real estate assets we could make an argument that the expansion in these countries is going to go into reverse before long. These sort of events could have a dramatic impact on measures of global money supply and credit inflation. The old adage was that if the US catches a cold, the world gets a flu. I think in the next 12-36 months, we might see that if China catches a flu, never mind a cold, countries like Japan, Brazil, especially Australia (30% of Oz exports go to China) could catch a full blown bout of flu also. This would have global ramifications for credit expansion.

What are the chances that China will slowdown? Highly, highly probable. Never has a country been able to grow GDP year on year ad infinitum. China has been growing year after year at near 10%. Anyone aware of the exponential function knows this cannot continue. Something will stop it. So rather than asking will China slowdown, the more approproate question should be, "When?" Has any country ever continued to grow forever without a negative GDP print? Again the answer is no. Yet many talk of a slowing in growth to 5% in China is a major slow down. How about China going into negative growth, ie, a recession? Never entertained, nevermind talked about. But yet there is no precedent in history where this has been the case. So what will make China different that it can buck the trend? Timing has been elusive so far, but it is not a question of "if" but "when"

The reactions to such events are of course predictable. There will be G20 meetings and what have you and all the talk of coordinated actions, the printing presses will be set running again, stimulus will enacted, interest rates will cut etc etc, then there will be a re-liquefaction of the system. The money however, will not go to where it is meant to. It will go to where the fundamental are favourable. That place will still be commodities in my view, and stock markets to a certain extent. However, in my conclusion though, in a deflationary environment I still see gold as a beneficial asset to hold. The real price will still go up, for the simple reason, that a deflationary environment leads to the unwinding of over bloated carry trades. Currencies like the AUD, GBP, CAD will sink. I hold gold/silver, but I am incredibly bearish on the AUD, so I m short the AUD. I think this should provide a good hedge against deflationary shocks. In the end I think we will swing between periods of both. Who will win in the end? Both will win in my view. It just depends what order that will happen in. Are we on the verge of another huge deflationary shock that no one can see coming, that will wipe out all mal-investments, and take stock markets down 70% from here? Who knows.Or will we continue to get deflationary corrections with prices settling each time at higher lows, and then injections of monetary stimulus like QE, that will mean we make new highs in asset prices each time, and then finally the ultimate deflationary bust? Again, no one knows. However, being aware of the broad spectrum of possibilities no matter now idiotic or impossible they might appear now is useful as it means we can always take "insurance" in advance of any black swan. I love playing the "what if" game. Regardless of what way I turn it though, having gold, silver,, land in some capacity is good in either situation.

Edited May 17, 2011 by RedFxTrade

[churchill]

I am always interested in currency traders talking about weak and strong currencies - They never mention Gold - It seems to be an unaccepted topic - but a few days ago on CNBC Foley - I forget her 1st name mentioned that Gold was a trade against the Euro given that the USD was in such a bad state /

So is Gold becoming an accepted currency trade ?

[12DrinkMore]

What are the chances that China will slowdown? Highly, highly probable. Never has a country been able to grow GDP year on year ad infinitum. China has been growing year after year at near 10%. Anyone aware of the exponential function knows this cannot continue. Something will stop it. So rather than asking will China slowdown, the more approproate question should be, "When?" Has any country ever continued to grow forever without a negative GDP print? Again the answer is no. Yet many talk of a slowing in growth to 5% in China is a major slow down. How about China going into negative growth, ie, a recession? Never entertained, nevermind talked about. But yet there is no precedent in history where this has been the case. So what will make China different that it can buck the trend? Timing has been elusive so far, but it is not a question of "if" but "when"

The answers to that paragraph are key to the the next phase of the development of the world's economies. If the answers were clear we could be very rich in a few years. As regards the exponential function, this applies to all "year on year" figures. All economies are planning for never ending exponential growth. As you say, either something must give, or more likely the metrics used will be manipulated until some real resource limit is hit. A convenient way of doing this is to play around with the inflation figure.

China, and indeed Asia, is a fascinating topic.

There is still a huge amount of hubris in the west about western superiority. But don't forget it is only since the late eighteenth century that west led development in the world due to the industrial revolution, leading to a couple of centuries of growth and development, escalating western countries to the forefront. Somehow I don't think the Chinese have forgotten this and I also doubt whether the Chinese will allow the trade and manufacturing advantage they now have and are developing to slip through their hands again.

As the west rapidly improved their standard of living by manufacturing and selling goods to their own people (this was not export driven), why shouldn't the Chinese, now standing on the shoulders of western development with a huge amount of cash to spend (they don't have to keep buying up Tim's bits of paper after all), not be able to develop their own internal markets to drive up their own standard of living to equal or surpass that of the west? They have a huge undeveloped internal market. And then add in India and the other Asian countries. All focused on education and technology development, and very keen to take on the quality standards that successful western countries such as Germany are showing them.

To write off the Asians as being limited in their future growth must surely imply that at that point the western countries are well into decline, as all the resource factors that would limit Asian growth must surely also apply to the west?

[flying]

All this talk by the talking CNBC heads about the crash in commodities on Television here in the US....

Yet I have to wonder ( as Herr Naam would say ) Where's the beef?

I see Oil at over $97usd/barrel

I see even paper gold at $1485/oz

& paper silver at $34+/oz

[Naam]

Yet I have to wonder ( as Herr Naam would say ) Where's the beef?

the answer to that question is... CNBC

[churchill]

Ron Paul proposes that the US sell gold to pay its debt

http://traderdannorcini.blogspot.com/2011/05/ron-paul-proposes-that-us-sell-gold-to.html

[gregb]

George Soros, who called gold "the ultimate bubble," dumped almost his entire $800m stake in bullion in the first quarter.

Soros offloaded the stake well before a commodities slump blamed partly on reports he was liquidating his holdings, according to Reuters.

Interestingly, someone on Kitco was saying that things are getting worse and could be an indication he is moving into physical. Apparently, they say he would not be required to report physical bullion holdings in his personal possession, only stocks and securities. Don't know the law well enough to know if it is true or not, but it does seem there could be more than reason for his behavior.

Although I personally think it is probably that he simply believes it is time for a commodities correction. I really thought oil would hit $200 this time through though. On the other hand, this could simply be big money trying to control the slide before it becomes an uncontrolled plummet like we had in 2008. Too many factors to guess. The long term trend is predictable enough though. No indications any miracles have occurred.

In any case, I hope it bottoms out in August. That is when I will have some more money freed up and can buy again.

[gregb]

What are the chances that China will slowdown? Highly, highly probable. Never has a country been able to grow GDP year on year ad infinitum. China has been growing year after year at near 10%. Anyone aware of the exponential function knows this cannot continue. Something will stop it. So rather than asking will China slowdown, the more approproate question should be, "When?" Has any country ever continued to grow forever without a negative GDP print? Again the answer is no. Yet many talk of a slowing in growth to 5% in China is a major slow down. How about China going into negative growth, ie, a recession? Never entertained, nevermind talked about. But yet there is no precedent in history where this has been the case. So what will make China different that it can buck the trend? Timing has been elusive so far, but it is not a question of "if" but "when"

The answers to that paragraph are key to the the next phase of the development of the world's economies. If the answers were clear we could be very rich in a few years. As regards the exponential function, this applies to all "year on year" figures. All economies are planning for never ending exponential growth. As you say, either something must give, or more likely the metrics used will be manipulated until some real resource limit is hit. A convenient way of doing this is to play around with the inflation figure.

China, and indeed Asia, is a fascinating topic.

There is still a huge amount of hubris in the west about western superiority. But don't forget it is only since the late eighteenth century that west led development in the world due to the industrial revolution, leading to a couple of centuries of growth and development, escalating western countries to the forefront. Somehow I don't think the Chinese have forgotten this and I also doubt whether the Chinese will allow the trade and manufacturing advantage they now have and are developing to slip through their hands again.

As the west rapidly improved their standard of living by manufacturing and selling goods to their own people (this was not export driven), why shouldn't the Chinese, now standing on the shoulders of western development with a huge amount of cash to spend (they don't have to keep buying up Tim's bits of paper after all), not be able to develop their own internal markets to drive up their own standard of living to equal or surpass that of the west? They have a huge undeveloped internal market. And then add in India and the other Asian countries. All focused on education and technology development, and very keen to take on the quality standards that successful western countries such as Germany are showing them.

To write off the Asians as being limited in their future growth must surely imply that at that point the western countries are well into decline, as all the resource factors that would limit Asian growth must surely also apply to the west?

Just keep in mind when the West did it, there was a cheap and easily available source of energy to exploit. The only way the Chinese or Asian economies are going to be able to repeat that process is by outbidding the West or otherwise stealing the remaining (limited) oil supplies. You can't grow an economy in any meaningful way without increasing energy use by a similar proportion, and the energy simply isn't there to be had.

Sure, Asian economies will continue to grow slightly, but only to the degree that Western economies fall. In the end, the West will realize that nearly all of that miracle of growth was due to cheap and easily exploitable energy. And when it peaks (as it appears to have done), so does that non negotiable way of life.

I don't expect to the Chinese rush to catch up with the Western economies. I expect to see the West fall to meet Chinese standards. And China will be much better adjusted to those conditions.