January 6-7, Beijing China

Alex Stanczyk will be speaking at THE 5th ANNUAL CONFERENCE ON ANALYSIS OF INTERNATIONAL FINANCIAL MARKETS

Attendees for this meeting will be ministry level government officials, directors or senior managers from Chinese banks, investment companies and state-owned enterprises.

This is event is by invitation only (P.R.C.)

China’s Policy Choices and Overseas Investment Strategies under Threat of New Global Recession
批准单位 国务院发展研究中心
Authorized by Development Research Center of the State Council, PRC
主办单位 国务院发展研究中心金融研究所
Organized by Financial Research Institute of the Development Research Center
State Council, P. R. China
时间地点 2012年1月7-8日 北京国宾酒店
Date and Place Jan.7-8, 2012，Presidential Beijing hotel，China
会议语言： 中文/英文
Language： Chinese/English

Dear Reader,

We are currently seeing a deep correction in the gold price since recent highs this fall. This correction comes as the Eurozone’s credit crisis deepens and capital flees the Euro thereby pushing up the USD.

The strength of the USD gain over the short term has been a powerful driver forcing most commodities downward.

Copper        -20.15% YOY
Cocoa         -28.71% YOY
Cotton      -43% YOY
Lumber      -21.35% YOY
Soybeans      -12.53% YOY
Sugar         -29.8% YOY
Wheat         -20.55% YOY
Natural Gas      -24.17% YOY

One of the few gainers in the commodity space is oil, at +15.33% YOY for Brent Crude.

Globally, major stock markets have also been hit hard this year.

USA S&P 500     -8%
UK FTSE        -13%
France CAC 40    -25%
Germany DAX 30    -21%
Switzerland SMI    -15%
Sweden OMX    -22%
Japan NIKKEI225    -19%
Australia ASX    -15%
Hong Kong     -22%

Gold is one of the few assets this year that is up YOY with current gains of 15.56%.

The current push of the USD upwards to over 80.10 cannot be sustained as the US requires a weaker dollar to stimulate GDP growth through exports. This portends more Quantitative Easing (printing money).

Combine this with the current massive round of QE (Printing) in Europe, and we have the foundation for higher prices of commodities globally over time.

In this edition of our Global Insider, Duncan Cameron and I provide a firsthand view of what is happening in the Chinese gold market as we report from the 6th Annual China Gold and Precious Metals Summit.

From my experience at this conference, the appetite for gold among Chinese investors is just getting started. With China gobbling up close to 750 tons of gold this year, it is proving to be a source of demand that has exceeded annual Gold ETF investment globally. Personal conversations with Chinese Government Officials indicate that the policy direction will be away from real estate and equities, and the Chinese people will be encouraged to buy long-term wealth-preserving assets. This means gold, among other possibilities.

Please enjoy this month’s Global Insider with our compliments, and our wishes for a Merry Christmas and New Year.

You can download this months edition of the AFE Global Insider here: http://www.anglofareast.com/downloads/global-insider/afe_december_2011.pdf

I write to you today from Beijing China, to let you know that issue #34 of the Anglo Far-East Global Insider is now available for download.

Duncan Cameron and myself are in China for the 6th Annual Gold and Precious Metals summit where I will be speaking, and then attending meetings with Chinese Government Officials and heads of Chinese Fund Management companies.

The view from China is one of dis-belief, that it is possible the governments of the western world have allowed themselves to get into such an incredible financial mess. On the one hand, China wants the west to succeed because China’s massive export sector relies upon both Europe and the US to have strong economies and lots of happy consumers to buy Chinese goods. On the other hand, highly placed members of the Chinese government are fully aware that depending on the west may be a fools errand and are actively taking steps to become less dependent on exports and further develop the domestic economy.

It is refreshing to see that instead of un-realistically assuming that a never ending series of budget deficits will somehow pay for retirees for ever, they are taking a very practical approach and advocating their citizens invest in long term wealth protection to provide for citizens future retirement. This is critical to the social stability of what is emerging as the new super-power of the world. There is perhaps the highest level of acute attention to this here in China as anywhere else in the world. The last thing China wants is after 20 years of incredible progress, to have it come unwound because of pie in the sky expectations that stock markets or ponzi scheme government retirement plans will prevent social unrest if these systems fail. The Chinese have seen how the western financial models ends up, and they don’t want to copy them.

In this edition of the AFE Global Insider, Duncan does an excellent job of assessing the Geo-political spectrum. He covers the topics of MF Global, Golds performance versus other currencies, his view on the Sydney Gold Symposium which includes an interesting entry on the “Moses Principle”, as well as the evolving situation in the Eurozone.

You can download the latest GI from this link: http://www.anglofareast.com/downloads/global-insider/afe_november_2011.pdf

This month’s Global Insider looks at precious metals’ recent pull down with the focus on perspective.

Perspective is seeing the bigger picture, not the nuances of daily gyrations.  In the last week we have seen the Vatican call for a world central bank administered by them. They deem nations can’t be trusted to sort out the financial mess; hence, a greater and more worthy administration needs to tell you what to do with your money.

Perspective is seeing 250 billion Euros (that is in itself a derivative of even less real money) leveraged up to create 1 trillion Euros. Yet, in fact, most economists are saying nothing short of 3 trillion Euros will be required to cauterize the failing nation of Greece with its huge exposure to European banks, much less the others in line like Portugal, Spain and Italy. No wonder the Vatican thinks they need to get involved.

Perspective is seeing the global population rush towards 7 billion in number this year while global money supply expands exponentially as well ,and yet being told that tangible wealth like gold and silver are in a bubble with their best days behind them. If anything, the world’s most ancient money is becoming less and less of a percent of population while we struggle to dig it up in any quantity with large discoveries a thing of the past.

At Anglo Far-East we have never said the road up in gold and silver would be a benign curvy line; far from it. It has been violent in the past and it will get even more violent both up and down in the times ahead, thus the need for perspective and a cool head is paramount.

With compliments,
Duncan Cameron
Senior Relationship Manager
The Anglo Far-East Company

You can download this edition of the AFE GI free of charge here:
http://www.anglofareast.com/research/global-insider/gi-archives/?did=58

In this issue of the Global Insider we review global factors and gold fundamentals including active “Currency Wars”, Central Bank activity, Bubbles, Systemic and Structural Issues, and finally how gold may be used in a modern portfolio.

You may download the report free of charge here: http://www.anglofareast.com/research/global-insider/gi-archives/?did=57

Great short video explaining what Fiat Money is.

In an incredible development the Swiss Central Bank has released a press statement that it will “No longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20″.

This is in effect a policy statement of a Franc to Euro peg at 1.2.

Further, the SNB has stated “The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.”

With the Swiss Franc no longer the last currency safehaven, the short term effect we are witnessing is a massive rush into USD, however over time as the Eurozone’s financial situation continues to deteriorate capital will flow strongly into gold.

Gold is now the LAST MONETARY SAFEHAVEN. It will of course be interesting to see if the SNB can actually pull this off. This statement of “Prepared to buy foreign currency in unlimited quantities” may be the equivalent of a massive bluff at the poker table. Should the Eurozone collapse, the Swiss may be absorbing huge currency flows.

You can download the original press release here: http://www.anglofareast.com/downloads/swiss-pegs-to-euro-at-1.2.pdf

Gold seems to be moving opposite of general markets right now.

This is a pretty important development, as the last market crash of 2008 took gold down with it. This time around, it seems that regardless of damage in the markets gold is still rising.

Gold performance today so far is high of $1902.70

DOW -253.31 -2.20%

S&P 500 -30.45 -2.53%

FTSE -189.45 -3.58%

Nikkei -166 -1.86%

The gold price, as a reflection of the increasing amount of investors who are moving towards a safe haven, is at record levels. From Colombia to Russia emerging markets are increasing official holdings of the precious metal. Gold has risen by nearly 30 percent this year alone, fuelled by a sagging dollar, waning confidence in the resilience of the global economy, and purchases by central banks (particularly emerging market countries). As Duncan Cameron points out in this issue, investors from all over the world are starting to follow those with “Unshakable Belief.”

You can download a copy of the AFE GI at no charge here.

Recently the State of Utah has passed a new law that recognizes gold and silver as legal tender for transactions. So far, at least 11 other states are in the process of passing similar legislation.

The following interview with Ken Ivory who is the Utah Representative who spearheaded the “Utah Legal Tender Act” is an excellent summary of the principles behind this initiative, and touches on the words of the Founders of America who recognized that States were in fact Sovereign, and it would be the States own fault should they surrender their sovereignty to the Federal Government.

I highly recommend this interview to anyone who has an interest in how gold fits into a moral and just framework in a free society.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/8/22_Ken_Ivory.html

Gold has been behaving well with the pullback bottom being $1704 last week. This week so far we are watching a sideways (albeit choppy) consolidation. This is building a pretty good foundation for a move higher going into Sept.

Gold price swinging $40-$50 a day in either direction is starting to look normal.

Long term fundamentals for gold continue to look strong moving forward.

Keep an eye on the Eurozone over the next week. Should no accord be reached, a failure to continue QE in Europe will virtually guarantee major sovereign debt crisis at some point.

Euro bail-out in doubt as ‘hysteria’ sweeps Germany

Mrs Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country’s constitutional court rules on the legality of the EU’s bail-out machinery.

If the court rules that the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union.

The seething discontent in Germany over Europe’s debt crisis has spread to all the key institutions of the state. “Hysteria is sweeping Germany ” said Klaus Regling, the EFSF’s director.

Full Article

I have observed over years that during certain time windows (see 9am to 10am New York time) gold takes a hammering. This has happened with such commonality that you can *almost* set your watch by it. When I say almost what I mean is that in the last year or so the pattern has been intermittent, yet this morning it has come back with a vengeance.

This is the hardest smash down of the gold price within 10 minutes that I have ever seen in several years of watching how it behaves every single day. $42 in the space of 10 minutes is pretty impressive. I will not be surprised to find another margin rate hike by CME has been announced by end of day.

This was the same tactics used when silver took its 30+% hit in May.

Once margin requirements are set to 100%, there are no more tools in the chest to use for this type of thing. No doubt we will see that in time, both in gold and silver.

Temporary bottom is in as of last Thursday 25th with gold hitting $1703.40.

Gold could retest the 50DMA at or near $1638.92, but I wouldnt count on it. I remember having a discourse with some of my colleagues regarding when silver took its 30+% whack back in May when it hit $34 – some were thinking it was going to go lower and said as much. I didnt think so. I am getting the same signals re gold this time.

VIX came down on Friday after the Jackson Hole but is still above 35.

For the last month silver has performed with very little strength compared to how it usually behaves when gold moves. Silver is still extremely undervalued today and its fundamentals are excellent for the long term.

After Jon Stewart’s recent hammering of the general media over Ron Paul’s “blackout’ – it looks like the kind Doctor is finally getting some love:

Obama in Close Race Against Romney, Perry, Bachmann, Paul

Romney has slight edge over Obama, Bachmann slightly lags

by Frank Newport
PRINCETON, NJ — President Barack Obama is closely matched against each of four possible Republican opponents when registered voters are asked whom they would support if the 2012 presidential election were held today. Mitt Romney leads Obama by two percentage points, 48% to 46%, Rick Perry and Obama are tied at 47%, and Obama edges out Ron Paul and Michele Bachmann by two and four points, respectively.

Oh my, did they actually say his name?

Full article here

A little over one year ago AFE sent out our June 2010 edition of the Global Insider in which we discussed the gold supply demand equation and pointed out that the only thing that made up for the gaping 500 ton deficit in gold supply that central banks were no longer selling was the scrap gold supply which had made huge increases, up to 1600+ tonnes per annum.

The 2010 supply demand situation is as follows:
Mine supply of ~2500 tonne
Scrap supply of ~1650 tonne
Total:                    ~4150 tonne

When you subtract the 76 tonnes bought by Central Banks, you end up with about 4074 tonnes supply for the year.

Global Demand for 2010 was ~4000 tonne

When we published our newsletter we pointed out that at some point the scrap supply of “Grandmas Gold” would run out – this appears to have started. If this continues on this trajectory we are looking at a MAJOR portion of global annual gold supply drying up, right when demand is skyrocketing. The potential effect on price moving forward should be obvious.

Article from Reuters 8/12:

http://www.reuters.com/article/2011/08/12/us-global-gold-scrap-idUSTRE77B0HO20110812?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29

(Reuters) – Handing out flyers at the corner of 47th Street and Fifth Avenue in New York City’s Diamond District, Mariabi Peenya is having trouble finding passersby eager to sell their gold jewelry for cash.

In Mexico City, Paulino Luna says fewer customers are coming to his small storefront in a colonial-era building, where he’s been buying bullion for 25 years. And in Chennai, India, Daman Prakash Rathod finds the once-heaving crowd of local gold scrap sellers have all but disappeared.

Across the globe, the latest surge in gold prices — up as much as 20 percent since June as investors seek refuge from stock market turmoil and sovereign debt crises — is failing to lure as many people into selling their gilt mementos, heirlooms and dusty family jewels as during the 2008 financial crisis.

The success of massive cash-for-gold industry over the past three years, urging people to sell their gold, means there are fewer and fewer people with any “old gold” left.

Anyone who cashed out when gold prices spiked in 2008 missed a three-year bullion boom in which prices doubled. Now with the U.S. Federal Reserve having pledged two years of near-zero interest rates, the rally in gold prices shows no sign of slowing. But it seems those people who still have gold may be holding out for even higher prices.

“It’s nothing like it was in 2008,” says Peenya as he flagged passing New Yorkers, promising his price was best. “Either people are waiting till the price hits $2,000, or they are running out.”

The implications of a dwindling supply of “scrap” gold, that which isn’t mined, may hit the global bullion market even harder than it hits local pawn shops. Worldwide, recycled gold usually meets 40 percent of demand. But that share is now declining just as demand for physical bullion surges anew from investors and central banks. That may be yet another reason to expect gold prices to rise even further.

“The fact that scrap is not reacting as strongly as one might have expected to the stimulus of higher prices suggests those higher prices are more sustainable and price growth is easier,” says Philip Klapwijk, executive chairman of respected metals analytics firm GFMS Ltd, a unit of Thomson Reuters.

Gold prices breached $1,800 an ounce for the first time this week, having almost tripled from its 2008 lows of $680.

“The easier-to-let-go stuff has been let go, so it gets progressively more difficult given the move in the price to stimulate the same growth in scrap,” Klapwijk said.

In 2009, scrap supply surged by 30 percent to a record as consumers rushed to sell anything they had, both to turn a fast buck on a booming market and to cushion the blow of recession.

In the years since then, large amounts of recycled gold flooded the physical market. But growth has slowed sharply as people either run out of things to sell, or wait for higher prices. Klapwijk expects recycled gold to grow by only about 5 percent this year.

CASH-FOR-GOLD PART OF U.S. CULTURE

The trend is perhaps most notable in the United States, which contributes about 10 percent of global scrap supply. Last year scrap supply was 143 tonnes — equivalent to more than 10 million wedding bands. Some of that recycled gold also comes from industrial sources such as computer motherboards.

Unlike some nations such as Turkey and India, where recycling jewelry has been commonplace for decades, most Americans had been unaccustomed to the idea of selling off old jewelry. Then a network of cash-for-gold businesses popped up after 2008, thanks to the almost constant television and radio advertisements by pioneers such as Cash4Gold.com.

Now, “We Buy Gold” signs are commonplace in windows of American main street stores.

Gold recycling in the United States reached its climax when a Cash4Gold ad featuring rapper MC Hammer aired during the 2009 Super Bowl, said Michael Toback, a board member of the 47th Street Business Improvement District in New York, who also owns jewelry refiner Myron Toback.

In Manhattan’s bustling Diamond District, many jewelry vendors say Americans may sell their remaining gold if economic conditions worsen. But many interviewed by Reuters agree that business has slowed by as much as a third from past year.

EMERGING ECONOMIES SLOW DOWN TOO

The change in psychology is evident elsewhere too.

“I think everybody is still bullish about the market. They don’t want to sell for the time being,” says Hong Kong-based Dick Poon, manager at Heraeus Precious Metals, a German company that is a leading global metals dealer and refiner.

In the historic center of Mexico City, several streets are crowded with kiosks where people line up to sell gold chains, medallions, earrings or bracelets for cash. Vendors weigh it all on simple scales. But Luna says business is drying up.

“People don’t have their parents’ or grandparents’ gold anymore, they’ve sold it,” said Luna. “We are not seeing the same amount of volume that we saw before, every day there is less, of both gold and silver.”

And in the country which consumes more gold than any other, India, where gold jewelry is a central part of the culture from weddings to holidays, reselling gold has become a rarity.

“The selling crowd has disappeared,” Daman Prakash Rathod of gold wholesaler MNC Bullion said by telephone from Chennai.

Watching friends and neighbors rue their decisions to sell at $1,000 or $1,200 or even $1,500 an ounce, he reckons other Indians have learned a lesson.

“The excessive scrap that used to come a few years ago has stopped, and people who have sold must be cursing themselves for doing so at lower prices.”

Dear reader, we have said in the past that before China would be agreeable to a new version of the SDR, they would probably want a more important seat at the IMF table.

It looks like this may be indeed happening. The newly appointed head of the IMF has recently announced that a new position of Deputy Managing Director of the IMF is being created, and will be held by a former Peoples Republic of China Deputy Governor.

While not conclusive, these moves signal a changing of the guard so to speak, that may make China more agreeable to participate in a future SDR to add liquidity and perhaps provide an alternative to the USD as reserve currency.

http://www.reuters.com/video/2011/07/07/china-to-get-senior-imf-job-sources?videoId=216827266

Modern economics is run by men who have learned from John Maynard Keynes.

A famous quote of Keynes follows:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

I note that there is no mention whatsoever of monetary inflation in the entire article below. History does repeat.

As with other societies going through similar circumstances, the call of the people is to the government to “do something” about the prices continually rising. There is no mention of that something including stop printing money, but rather regulate prices, somehow. Enter price controls, which lead to nothing more than long lines and bare shelves.

Government faces call for action on food prices
Johann Tasker
Tuesday 05 July 2011 09:19
The government is facing increasing calls to curb spiraling food prices.

Farm minister Jim Paice is being urged to put in place a coherent set of policies that address food inflation and food security.

Laura Sandys, Conservative MP for South Thanet and Sandwich, will make the call in an adjournment debate on Tuesday (5 July).

“We need to take the 4.9% food inflation rate seriously as it is impacting all of our household budgets,” she said.

“If left unaddressed, it will also have a detrimental effect on the UK’s growth targets and will hamper consumer spending.

“I am urging government to look at food with the same intensity it has afforded to energy security.”

Food security and food price inflation had hardly ever been debated in the House of Commons, said Ms Sandys.

“It is high time we grappled with the complexities of this issue, as there is nothing that impacts our constituents more than the prices on our local shop’s shelves.

“Food inflation lies at the heart of political and economic instability internationally – we must not let it destabilise our ambition for growth.”

The call comes amid new findings that consumers want government action to curb food price inflation.

Rising food prices are driving a major shift in the way UK shoppers buy and think about food, according to research.

Consumers are changing their weekly shopping habits in response to inflation-busting increases in food prices, it found.

Shoppers are also more concerned about the global factors affecting food prices and the security of food supply for future generations.

More than half of shoppers were worried about the impact of climate change, population growth, water and energy supplies on food availability and affordability.

The independent survey was carried out by Network Research on behalf of the Crop Protection Association.

Most shoppers agreed that the era of cheap food has come to an end, and want the UK to become more self-sufficient in food production. Three-quarters of respondents said the government should do more to prevent further increases in the cost of food.

“For many people, increases in the cost of food are hitting other areas of household expenditure,” said CPA chief executive Dominic Dyer.

“There is an overwhelming view among respondents that the government should be doing more to keep food prices down.”

The survey findings were a wake-up call to policy-makers and regulators that a global food security crisis was urgent and immediate, said Mr Dyer.

Advances in plant science and crop protection would be critical to meeting future food needs, Mr Dyer added.

They should be matched by science-based EU policies that supported, rather than stifled, investment and innovation in agricultural science.

A Defra spokesperson said:

“The impact of food price inflation, and especially spikes in commodity prices, are a real cause for concern.

“We’re leading internationally and at home to feed a rapidly expanding global population in a sustainable way.

“That means we need to increase food production in a way that reduces the impact on the environment, as well as opening up global markets, boosting trade and making reforms that help the poorest.

“Important steps were taken at the recent G20 meeting, but there’s much more work to be done.”

Article Source

A gold exchange center has been established in Kunming on March 31st, which means the city has moved one step forward towards target: becoming an important financial center in Pan-Asia Free Trade Area.

Cultural collections, gold, silver and mines are traded in the center. Precious metals are main products, such as gold. Information consultation and other services will also be provided for traders in the center.

Mayor of Kunming, Zhang Zulin (张祖林) attended the unveiling ceremony of the center.

Pilots for RMB cross-border trade settlement and related financial service centers have been established in Yunnan. Yunnan’s finance has increasingly promoted.