The inverse trade to the USD is gold.

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

By Shigeki Nozawa

Oct. 15 (Bloomberg) — The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

“We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency. Hossein Ghazavi, Iran’s deputy central bank chief, said on Sept. 13 the euro has overtaken the dollar as the main currency of Iran’s foreign reserves.

Elliott Wave

The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.

The Elliot Wave was developed by accountant Ralph Nelson Elliott during the Great Depression. Wave sizes are often related by a series of numbers known as the Fibonacci sequence, pioneered by 13th century mathematician Leonardo Pisano, who discerned them from proportions found in nature.

Uno said after the dollar loses its reserve currency status, the U.S., Europe and Asia will form separate economic blocs. The International Monetary Fund’s special drawing rights may be used as a temporary measure, and global currency trading will shrink in the long run, he said.

Original Article

Problem is that its measured in dollars…so if you factor in the rate of money creation and assume that affects buying power you get a DOW thats worth about 5000 in buying power.

When measured against gold however, it looks more like this:

DOW / GOLD Ratio Chart - 10 Yr

That tiny little uptick is what all the Wall St cheerleaders are excited about.

If history repeats and the DOW and Gold meet at a 1:1 ratio at the top of golds run up, and the DOW keeps rising (due to inflated dollars more than anything else) , then where is that meeting point going to be? Maybe these guys calling for a 20,000 DOW are right…but what also does that mean for gold? What also would that mean for the buying power of the dollar?

To me that looks like a buying opportunity in a major trend.

China - Hungry Dragon

I have been saying for a long time that China has been aggressively stockpiling commodities, buying mineral rights all over the globe, and buying up companies that produce products of the earth.

This signals a new tactic for the Chinese: outright unsolicited offers for mining companies.

Normally the Chinese are more reserved, tactful, willing to be patient and win via masterfully executed maneuvers – much like Sun Tzu’s Art of War.

It seems their patience, as well as their willingness to depend on the dollar retaining its value (and thus the buying power of their portfolio) is coming to an end.

I think this is the beginning of an ever more aggressive stance towards purchasing commodities and raw materials. They know the dollar is going to the deadpool of currencies, and want to buy while it still commands the value it does.

Gold will again reign as the king of currencies.

China makes unexpected grab for Canadian miner

State-controlled Jilin Jien launches a surprise bid for Canadian Royalties, a stark change in tactics for the Asian superpower

ANDY HOFFMAN

From Tuesday’s Globe and Mail Last updated on Wednesday, Aug. 12, 2009 02:44AM EDT

China’s insatiable hunger for natural resources has officially turned hostile.

State-controlled Jilin Jien Nickel Industry Co. Ltd. launched a surprise $148.5-million unsolicited takeover bid for Canadian Royalties Inc. yesterday, marking one of the first times the Asian economic superpower has gone after foreign resource assets without first winning a friendly agreement with management.

China has become an active acquirer of foreign resources amid the global economic crisis, investing in copper, oil and iron ore needed to fuel its fast-growing economy. But despite massive financial resources and a mandate to diversify its $2-trillion (U.S.) in foreign exchange holdings into so-called hard assets such as commodities, most of China’s resource deals have been friendly.

The hostile offer comes as federal Finance Minister Jim Flaherty is in Beijing on a trade mission to encourage Chinese investment in Canadian companies.

“China has a need for resources. China has … substantial U.S. dollar cash reserves,” Mr. Flaherty told reporters yesterday. “China is looking for investments abroad. Commercial investments, subject to proper governance, are welcomed in Canada.”

Mr. Flaherty wants China to invest in publicly traded Canadian companies. His comments suggest that, despite political and security concerns, Ottawa is comfortable with such an investment structure. Mr. Flaherty plans to meet today with Lou Jiwei, chairman of China’s $200-billion sovereign wealth fund.

The unexpected bid for Canadian Royalties, which is developing the Nunavik nickel project in northern Quebec, marks a significant change in tactics for a Chinese state entity. “This is new. … This could be the tip of the iceberg,” one mining investment banker said.

Glenn Mullan, chairman and chief executive officer of Canadian Royalties, said the takeover offer blindsided his company. Neither Jien nor its Canadian partner, Goldbrook Ventures Inc. of Vancouver, which has a 25-per-cent stake in the company created to make the bid, contacted Canadian Royalties’ management before launching the offer.

“This one has a long way to go. I think you’ll see lots of interest in Canadian Royalties going forward,” Mr. Mullan said in an interview.

Canadian Royalties was a market darling during nickel’s heyday in 2007, when the price of the metal used to make stainless steel soared above $20 a pound.

However, the commodities crash and the credit crisis last fall resulted in a sharp reversal of fortune for the Montreal company. Financing for the $500-million Nunavik project collapsed and Canadian Royalties was forced to put the operation on care and maintenance.

Mr. Mullan said Jien and Goldbrook are taking a run at the weakened company in an attempt to pick up its valuable resources on the cheap. The Nunavik project contains approximately 20 million tonnes of ore, grading about 1 per cent nickel and 1 per cent copper. Because of its small size, the bid would not require Ottawa’s approval under the Investment Canada Act.

“At the end of the day, this is all about assets, commodities – nickel specifically – and China’s appetite for commodities,” Mr. Mullan said.

The company has hired advisers and expects to officially respond to the bid soon.

In 2004, a bid for Canada’s Noranda by state-backed China Minmetals Corp. fell apart amid pressure from Canadian politicians to scrap the takeover. In 2005, China National Offshore Oil Corp. pulled an $18.5-billion offer for Unocal Corp. following a firestorm of opposition from U.S. legislators. Australia recently blocked a $1.7-billion bid for Oz Minerals by Minmetals, citing national security concerns. The deal had to be restructured to exclude a key mine asset near an Australian military site.

In a more typical, friendly, deal struck last month, sovereign wealth fund China Investment Corp. (CIC) agreed to invest $1.74-billion to become the largest B-class shareholder in Teck Resources Ltd., Canada’s biggest base metals miner.

Original Article

First investors are the contrarian sophisticated investors. We have clients who were selling tech and buying gold and silver in 1995.

Next comes the institutional players. The price action from this causes the final wave.

Mom and pops pile in last, usually ending in a blow-off top, but by then all the money has been made.

Gold fast becoming asset class in every investment portfolio – Gold Fields

By: Martin Creamer
7th August 2009

Nick Holland - CEO Gold Fields

JOHANNESBURG (miningweekly.com) – Gold is fast becoming an asset class in virtually every fund manager’s investment portfolio, which is going to take the gold price to the next level, says Gold Fields CEO Nick Holland.

Holland, who visited 60 fund managers in the last year, says that virtually every one of them is seeking the best investment entry point into gold.

“They have conceded that gold needs to be an asset class,” he says.

Historically, the gold price has been supported by jewellery demand, but Holland says that investment demand may match that support.

“Within three to five years, you’ll find that investment demand is probably the same as jewellery demand,” he predicts.

He sees no impediment in the way of continued demand for gold exchange-traded funds (ETFs)

“When the ETF was launched, the World Gold Council thought that demand of up to 500 t would be an absolute ‘blowout’ performance and that it would take five years to get there. Today, ETF volume is at nearly 2 000 t, and I don’t see anything that is going to stop it from keeping on growing.

“Some would have you believe that it’s all going to end up in tears, and that the ETF gold is all going to have to be sold, and that it’s all going to come back on to the market. I’m not sure that’s right. People will always be selling, yes, but there will be people buying and probably buying more.

“So, if you believe in the gold price, your investment thesis has got to be based on investment demand. That’s what’s going to take the gold price to the next level,” he adds.

He sees a widespread demand for capital preservation: “People are not even talking about getting a return. What they’re asking is how they can save their capital, that’s why they’re going into gold, and that’s going to be the mainstay of the gold price going forward,” Holland predicts.

The other factor is the possibility of reflation in the US. Holland sees US reflation as being inevitable reasons, because of the unlikelihood of the US government being able to raise the taxes of US consumers, who are already in debt.

He sees reflation as the only way of getting out of that debt, and reflation leading to inflation: “We’re going to get serious inflation again. It may take another year to arrive, but when it does, I think you are going to see some interesting action in the gold market,” Holland predicts.

The World Gold Council calculates that only 0,5% of the total worldwide funds under management are currently invested in gold and, if that has to double to 1%, there would be insufficient gold in the vaults of central banks to accommodate the increase in demand.

“That gives an idea of the potential growth in investment demand for gold,” Holland says.

Original Article

Unjust weights and Measures are an abomination unto the Lord.

The Lord delights in just weights, all the weights in the bag are his.

It took me a long time to figure out that last part. Do you realize that out of the thousands of various types of paper currencies to paper derivatives of every imaginable stripe and color, that only gold and silver were here before man?

Traders Profit With Computers Set at High Speed

July 24, 2009, 4:10 am

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets, writes Charles Duhigg in The New York Times.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage.

Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.

“This is where all the money is getting made,” William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund, told The Times. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.”

For most of Wall Street’s history, stock trading was fairly straightforward: buyers and sellers gathered on exchange floors and dickered until they struck a deal. Then, in 1998, the Securities and Exchange Commission authorized electronic exchanges to compete with marketplaces like the New York Stock Exchange. The intent was to open markets to anyone with a desktop computer and a fresh idea.

But as new marketplaces have emerged, PCs have been unable to compete with Wall Street’s computers. Powerful algorithms — “algos,” in industry parlance — execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds.

High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there.

High-frequency traders also benefit from competition among the various exchanges, which pay small fees that are often collected by the biggest and most active traders — typically a quarter of a cent per share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss.

“It’s become a technological arms race, and what separates winners and losers is how fast they can move,” said Joseph M. Mecane of NYSE Euronext, which operates the New York Stock Exchange. “Markets need liquidity, and high-frequency traders provide opportunities for other investors to buy and sell.”

The rise of high-frequency trading helps explain why activity on the nation’s stock exchanges has exploded. Average daily volume has soared by 164 percent since 2005, according to data from NYSE. Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades. To understand this high-speed world, consider what happened when slow-moving traders went up against high-frequency robots earlier this month, and ended up handing spoils to lightning-fast computers.

It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.

The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.

Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.

The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.

Multiply such trades across thousands of stocks a day, and the profits are substantial. High-frequency traders generated about $21 billion in profits last year, the Tabb Group, a research firm, estimates.

“You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”

http://dealbook.blogs.nytimes.com/2009/07/24/traders-profit-with-computers-set-at-high-speed/

They also say that no further sales are planned for the foreseeable future.

That is a whopping 127.78 tons per year LESS supply to the worlds demand.

Is this bullish for gold?

Swiss to sell 127 tons less gold this year

Original Article: http://www.20min.ch/finance/news/story/Schweiz-verkauft-kein-Gold-mehr-30046438

Translated from German to English via Google Translate: http://translate.google.com/translate?hl=en&ie=UTF-8&sl=de&tl=en&u=http://www.20min.ch/finance/news/story/Schweiz-verkauft-kein-Gold-mehr-30046438

I can already hear the argument versus gold and silver as money starting up..the barbarous relic theme…instead of addressing this argument which has gone on for as long as man has wanted to control issuance of currency, let me just point out one simple fact: you cannot build a stable house with a measurement of value that changes all of the time. If the inches on a slide rule a carpenter used changed its size constantly, the house would be a catastrophe waiting to happen. That is precisely what the US Dollar is, a measure that changes value constantly. It would take you almost $100 to buy in raw goods what $1 would buy you 100 years ago. These are simple, indisputable facts, and have nothing to do with the idea that people do not want gold coins clinking around in their pocket. The point is money must have a stable measure or it cannot be the foundation a financial house is built upon.

Evidence of this is pretty obvious and widespread in today’s economy.

The US government literally borrows money from the Fed then taxes US citizens to pay the interest, then the Fed, which is a private bank, then uses your tax dollars to buy garbage out of the market and off the books of financial firms, cleaning their books and padding everyone’s pockets in the process, once again at the cost of the american taxpayer.

Lets be clear here: I am not trying to get you mad at the government, I am trying to point out that you can either trust the paper system with your money, or you can put your money in gold. History proves that parabolic debasement of the money supply that is occurring now, has led to the demonitization of that particular form of money, every time.

Get safe. Gold is the Money of Kings.

***

Wall Street profits from trades with Fed

By Henny Sender in New York

Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”

The central bank’s approach to securities purchases was defended by William Dudley, president of the New York Fed, which is responsible for market operations. “We believe that opting for transparency is a greater good,” he said. “If we didn’t have transparency, we’d be criticised on other grounds.”

However, another official familiar with the matter said the central bank “has heard that dealers load up on securities to sell to the Fed. There is concern, but policy goals override other considerations.”

Barney Frank, chairman of the House financial services committee, said the potential profiteering may be part of the price for stabilising the financial system.

“You can’t rescue the credit system without benefiting some of the people in it.” Still, Mr Frank said Congress would be watching. “We don’t want the Fed to drive the hardest possible bargain, but we don’t want them to get ripped off.”

The growing Fed activity has coincided with a general widening of market spreads – the difference between bid and offer prices – as the number of market participants declines. Wider spreads enable banks, in their capacity as market-makers, to make more profit.

Larry Fink, chief executive of money manager BlackRock, has described Wall Street’s trading profits as “luxurious”, reflecting the banks’ ability to take advantage of diminished competition.

“Bid-offer spreads have remained unusually wide, notwithstanding the normalisation of financial markets,” said Mohamed El-Erian, chief executive of fund manager Pimco in Newport Beach, California.

Spreads narrowed dramatically during the years of the credit bubble.

Brad Hintz, an analyst at AllianceBernstein, said he doubted that spreads would ever return to those levels, a development that could be pleasing to the Fed.

“They want to help Wall Street make money,” he said.

Additional reporting by Brooke Masters in Washington

Original Article

Gold will hit $1,000 again

Gold will revisit $1,000 as investment demand and jewellery purchases rebound and supply decreases annually, a senior World Gold Council official said.

On the supply side, gold mining production has been decreasing at a rate about 4 to 5pc per year after reaching a peak production in 2001, Jason Toussaint, managing director of exchange traded gold, said today. “Even if demand stays the same, prices must go up.”

Gold, traditionally a popular hedge against financial turmoil due to its store of value, has risen 5.7pc this year and briefly traded above $1,000 in February. It reached a record $1,032.70 on March 17, 2008.

“Investors are much more focused on wealth preservation than upside returns because they are much more focused on risk management within portfolios,” Toussaint said. “We will see that continue. Demand for gold will also rise as pension funds, sovereign funds and other asset managers seek to preserve their wealth against inflation. Only 3pc to 5pc of assets at large institutions are allocated to gold, he said.”

Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, fell to 1,072.87 tons yesterday, the lowest since March 17, according to the company’s website.

Gold for immediate delivery was up 0.2pc at $931.63 an ounce.

The Chinese are pretty smart cookies. Ya, I know, I go on and on about the Chinese, but why shouldn’t I?

In many ways, they are taking the exact same path the US took in its rise to dominance.

The US used to have strategic stockpiles of virtually everything, from base metals to rare metals used in military applications, to silver, gold, oil, etc. Today, those stocks stand depleted, or completely sold off.

China on the other hand is buying raw materials hand over fist. The copper consumption of the Chinese is off the charts for example. This is a simple and expedient way for China to diversify their massive stockpile of USD denominated foreign reserves (roughly $2Trillion) and buy up commodities while the USD is still retaining its value, as well as position themselves in the investments that will hold the greatest value moving forward.

If I were diversifying out of my reserves I would also buy US Treasuries, not because I thought they were worth anything, but because it maintains the buying power of my other $2Trillion USD…call it the cost of doing business. Keep in mind, the Chinese have also found a means of using their USD Treasuries as collateral for direct exposure to the commodities markets via hedge funds…this puts a backstop in place that if the US wanted to slam commoditites prices to prop up the dollar it would do so at the potential risk of devaluing the Treasury instruments the Chinese are using as collateral for their margin calls. Quite brilliant.

Then, when the fiat system resets, China will be holding the aces…commodities…both in raw form and the companies that produce them.

Gold and silver will be much more relevant as money moving forward, do not forget there are 1.4 QUADRILLION dollars worth of OTC derivatives currently in the process of blowing up…it is the biggest paper market on earth..that virtually no one knows about or talks about. As the current fiat currency cycle hurtles towards a reset, people will rush into ‘honest money’.

China to deploy foreign reserves

By Jamil Anderlini in Beijing

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.

Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.

Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy … to directly support corporations to buy offshore assets.”

China’s outbound non-financial direct investment rose to $40.7bn last year from just $143m in 2002.

Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.

“This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”

State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis.

China Investment Corp, the $200bn sovereign wealth fund, has been buying stakes in overseas resources companies and has taken a 1.1 per cent stake in Diageo, the British distiller.

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies.

“Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

“India’s gold demand as reflected in imports have fallen drastically in the first six months,” Harmesh Arora, vice president of the Indian association said today in a phone interview from Mumbai. “There are still no signs of demand picking up as global prices are moving higher,” said Arora, who also believes China could overtake India in gold consumption.

Still, India meets most of its demand from imports, some of which are brought in through unofficial channels and are not represented in official data, said Mukul Sonawale, partner of Mumbai-based Narrondass Manordass Co. and a past president of the Bombay Bullion Association.

“China can emerge as the world’s biggest consumer only on paper,” he said. “The official figures of imports will be quite deceiving as they don’t capture all the imports. With India doubling the import duty on gold, the unofficial channel is bound to increase.”

There is an ancient saying of ‘He who has the gold, makes the rules’. This isnt just a cliche, but rather proven out by historical evidence. Wherever the largest stocks of gold were, the nations who have held it were usually the most influential nations of their time period.

Egypt, Rome, Byzantium, Western Europe and England, then the USA.

The US gold stocks have not been audited since the 50’s, and many analysts believe that what is claimed to be there is alot more than what is actually there.

China is still making strong strides to make the Yuan a fully convertible currency. When the veil spun by the mass media comes off, people will run to whats ultimately safe, which is gold and silver.

China May Overtake India in Gold Demand, Council Says

By Sophie Leung

July 24 (Bloomberg) — China may overtake India to become the world’s top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession.

Jewelry demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said today at a conference in Hong Kong. Chinese gold demand will keep rising, he said.

China’s economy grew 7.9 percent in the second quarter after a 4 trillion yuan ($586 billion) stimulus package spurred record lending and consumption. India’s gold purchases slumped 54 percent in the six months ended June after a decline in the rupee pushed up the cost of owning bullion, cooling demand from housewives and jewelers, the Bombay Bullion Association said.

“There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. “India’s gold consumption is reportedly dropping this year due to the financial crisis.”

Total demand from India in the first quarter fell 83 percent to 17.7 metric tons, from 107.2 tons a year earlier, according to figures from the World Gold Council. Purchases in China rose 1.8 percent to 105.2 tons from 103.3 tons. Total Chinese demand for gold was six times that of India in the first quarter, the council said in May.

‘Consumption Growing’

“China’s consumption is growing and this year’s will surely be more than last year’s,” Hou said.

China consumed nearly 400 metric tons of gold last year, while demand in India was more than 650 tons, according to council data, which cited statistics from GFMS Ltd. Global demand rose 3.8 percent to 3,658.6 tons, or $101.8 billion, the council said Feb. 18.

Bullion prices have gained 7.6 percent this year as the global recession spurred demand for safe haven assets. Gold for immediate delivery was little changed at $949.65 an ounce at 5:39 p.m. in Hong Kong.

China, the world’s biggest gold producer, has increased reserves by 76 percent to 1,054 tons since 2003 and has the world’s fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.

Growing demand in China won’t necessarily boost imports of the metal as rising production may be able to satisfy additional consumption, said the World Gold Council’s Grubb. China’s production of gold has risen at rate of 7 percent to 8 percent annually over the past five to six years, he said.

Imports

“It depends if the demand is rising faster than production,” Grubb said in an interview. “At the moment, they are roughly in balance.” China will seek to boost gold output to 290 tons this year from 282 tons in 2008, the Ministry of Industry and Information Technology said on March 20.

Gold imports by India in the six months ended June 30 plunged to 63.8 tons from 139 tons a year earlier, the Bombay Bullion Association said July 13. Imports may fall further after the government doubled the import duty this month, it said.

“India’s gold demand as reflected in imports have fallen drastically in the first six months,” Harmesh Arora, vice president of the Indian association said today in a phone interview from Mumbai. “There are still no signs of demand picking up as global prices are moving higher,” said Arora, who also believes China could overtake India in gold consumption.

Still, India meets most of its demand from imports, some of which are brought in through unofficial channels and are not represented in official data, said Mukul Sonawale, partner of Mumbai-based Narrondass Manordass Co. and a past president of the Bombay Bullion Association.

“China can emerge as the world’s biggest consumer only on paper,” he said. “The official figures of imports will be quite deceiving as they don’t capture all the imports. With India doubling the import duty on gold, the unofficial channel is bound to increase.”

Original Article