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Friday, 30 December 2011

The gold price: my opinion

The gold price is now falling significantly.  I believe the long term trend remains upwards.  The current retracement might provide an opportunity to accumulate more gold and gold stocks, but only after a low is confirmed.  The price of gold tends to

Financial risk continues to grow astronomically

"Banks globally sold $707.6 trillion of over-the-counter derivatives as of June 30 [2011], about 18 percent more than the $601 trillion at the end of 2010, according to data published by the Bank for International Settlements last month."

Tuesday, 27 December 2011

Would the US print dollars for a third Greek bail-out?

The US Fed may well be forced into underwriting a third Greek bail-out.  A Greek sovereign default may well be more seriously harmful to the US economy than to Europe or Greece, because

China warns of Iranian iron ore import risks

See the article: "China warns of Iranian iron ore import risks".

March 20 deadline for Greek bail-out resolution

Greek sovereign debt default remains possible;  financial insurers remain gravely exposed.  Greek bond holders threaten legal action over the possible increase to their agreed 50% haircut limit.

Friday, 23 December 2011

Yuan denominated international trade increases thirteenfold

Use of the Chinese yuan for international trade settlement is now thirteen times larger than in 2010.  Diversification away from the US dollar is increasing, as its role as the global reserve currency starts to decline.

Tuesday, 20 December 2011

Gold price supported by long term fundamentals

The price of gold is supported by a number of factors which should tend to underpin rising gold prices over the longer term.

Saturday, 17 December 2011

G20 bestows "too big to fail" honour upon twenty-nine banks

Twenty-nine banks have been declared "too big to fail", gaining G20 priority for survival.  That embeds into their corporate decision making psyche that they should be specially immune to market forces, like Greece is. 

"If the only way Europe can save the Euro is via the printing press, it's not worth saving"

- David Bassanese, p33 Australian Financial Review, Dec 17-18, 2011.

Friday, 16 December 2011

Indian households' $1T gold stockpile growing

Indian households hold 11% of all the gold which has ever been mined

IMF confirms crisis escalation

Christine Lagarde, the managing director of the International Monetary Fund (IMF), stated that the financial crisis is "not only unfolding but escalating", according to the Financial Times article:  "IMF chief warns over 1930s-style threats", in which she warns of rising global protectionism and economic depression.

Euro bail-out facility acknowledges risks of Euro ceasing

In working to protect the Euro with financial instruments to insure troubled countries against default, the European Financial Stability Facility (EFSF) has explicitly identified the risk that the Euro could break up, or cease to be lawful, according to the Financial Times.

Wednesday, 14 December 2011

"Gold bull market on last legs - Gartman"

For my refutation of "Gold bull market on last legs - Gartman", see this recording. Gold may well decline to $1475 as he predicts, but a 20% fall is only one criterion for a bear market as he claims: more criteria are required to confirm a bear market. Gold's 30% fall during 2008 did not end the bull market.

Perth Mint makes one tonne gold coin

Chinese gold imports increase

Chinese demand for physical gold increases with widening prosperity across the population whose culture has valued gold highly for millennia.  In September 2011 China started installing 2000 gold bullion vending machines.  I believe the central committee has a policy to encourage popular accumulation of private gold holdings to complement central bank and other government holdings, to strengthen China's gold backing, and their global economic and political clout, and to

Monday, 12 December 2011

Eurozone banking crisis unresolved

The Euro banking crisis remains unsolved according to "Eurozone banking system on the edge of collapse".  The last crisis summit only produced another plan.  Gold is being sold heavily again, suggesting possible co-ordinated central bank selling to contrive confidence in the Euro.  I acknowledge JSMineset.  Join us for Free Live Stock Market Briefings

Legislation allowed MF Global client funds to be "invested" in European bond derivatives

A sequence of US regulatory relaxations permitted US client funds to be held in progressively more risky investments than US treasuries.  See:  Tiny Rule Change at Heart of MF Global Failure: William D. Cohan.

Sunday, 11 December 2011

Germany's latest dilemma

Either Germany:  leaves the Euro currency;  or accepts Euro money printing with serious inflationary consequences.  Euro money printing now appears inevitable.

Central bank gold sale announcement retracted

Co-ordinated central bank selling of gold on Thursday, 8 December, to support the Euro and US dollar, has been reported.  That report, by Deutsche Boerse owned MNI, has been deleted from the internet. I acknowledge Goldseek Radio for this news.  See "[MNI] retracts report about central bank gold sales".  Go here to understand the gold price in terms of currencies.

Saturday, 10 December 2011

Germany's EU summit backdown raises many questions

Germany has submitted to US demands that sovereign debt holders be immune to "haircuts" if sovereign debt be restructured.  Private sector involvement in debt restructuring is now officially over, according to "EU Summit Clarifies Fiscal Union...".  Haircut risk has been transferred away from sovereign debt holders, banks, and bond insurers.

EU blueprint can't yet solve Euro crisis

The latest EU crisis summit produced only a blueprint which can't yet guarantee the tighter fiscal union announced. Neither the EU, nor the summit attendees, has authority to "embed" fiscal or deficit controls in "national constitutions", as announced. The intended tighter fiscal union can only be achieved after significant constitutional, legislative, political or cultural changes in each and every Euro-zone nation. And it will take much more than a Greek constitutional amendment to reduce entrenched corruption and inefficiencies, and to guarantee Greek fiscal responsibility.  I acknowledge Deutsche Boerse Group's article.

Friday, 9 December 2011

How to control ETF risk

Investing in ETFs, ensure that the fund owns the underlying asset outright, and does not create synthetic holdings constructed from derivatives.  Regularly check that the ETF price accurately tracks the underlying asset price.  Type "USO:$WTIC" or "GLD:$GOLD" into to check. I acknowledge Chris Waltzek of GoldSeek for this advice.

The great re-hypothecation credit bubble

Banks and other financial institutions might now own MF Global clients' funds, through re-hypothecation loopholes, which have leveraged the European debt crisis fourfold.

MF Global failure impedes US farming

Some farmers are unable to buy seed and feed because their funds have been frozen by MF Global's bankruptcy trustee:  see the CBS news clip or the Chicago Tribune article.

Futures broker slams CME for destroying confidence in system integrity

Futures broker Ann Barnhardt describes how the CME's failure to act as the clearing house backstop amplified the destructive MF Global aftermath, and destroyed confidence in the futures market leading her to close her brokerage. Barnhardt claims the CME did not fulfil fiduciary duties to ensure counterparty obligations were met.

Thursday, 8 December 2011

PIGS acronym ensures Euro's demise

One can't demand fiscal discipline of those one labels PIGS.  The "wit" does not outweigh the insult of the expression.

How the gold price is fixed

The price of gold is being influenced by: declining confidence in the Euro, the global reserve currency and other western fiat currencies;  gold's traditional role as reliable money;  and growing Chinese popular wealth.  I found this article "How gold is ‘fixed' and what drives the real price" interesting.  Disclaimer:  I am not in a position to verify the accuracy of any of the assertions made in the article.  I acknowledge Mineweb for this article.

For an overview of the fundamentals of the gold price, viewed as a currency, see this recording.

Euro needs confidence trick, or, "You Can Kiss Me on a Friday"

No EU summit meeting, nor Merkel or Sarkozy, can guarantee that Greece will actually implement the tighter financial controls needed to save the Euro. Market confidence needs to be manipulated into trusting Greek national finances. That sentiment will depend upon collective belief about future Greek behaviour, as opposed to the actual reality of Greek behaviour. Shifting global belief is always a mammoth task.

Friday, 2 December 2011

Don’t let another MF Global ruin you!

In trading futures, forex, gold, CFDs or commodities, you must strictly control all risk of potential loss. This article describes how I minimise my trading risk.

Thursday, 1 December 2011

Euro survival rests on too many dilemmas

Either: every Euro-zone nation agrees to surrender some national fiscal responsibility; or the Euro will disintegrate. Survival of the Euro requires complete market confidence in the individual fiscal responsibility of every Euro-zone nation and its sovereign debt. That dilemma ostensibly ensures Euro dissolution.  But there is a greater dilemma.

German bonds are the test of Euro currency confidence

The test of successful IMF support for Europe will be measured by German bond yields.  Re-established confidence in the Euro currency will be apparent only after Germany can again borrow at traditionally low yields, and with successful bond sales. 

Wednesday, 30 November 2011

Japanese diversifies rare earths suppliers

Japanese manufacturers continue to form alliances with non-Chinese rare earths miners to reduce dependence upon unreliable and politically controlled Chinese monopoly supply. Mitsubishi and Daido Steel have now formed a joint venture with Molycorp of California, after Sojitz Corporation formed a strategic alliance with Lynus Corporation of Western Australia. I acknowledge the article Molycorp, Daido, Mitsubishi form next generation rare earth magnets JV. Disclosure: the author holds Lynus Corporation stock.

Tuesday, 29 November 2011

Beating a path to a Euro break-up

I thank Garry Sladden for bringing this article to my attention:

Beating a path to a euro break-up
Gavyn Davies, Financial Times, Published 6:41 AM, 29 Nov 2011 Last update 10:00 AM, 29 Nov 2011

It has suddenly become respectable to ask the question: what would happen if the euro broke up? Last week’s rise in German bond yields signals that a euro break-up is being taken more seriously by investors.

The Web of Debt

The diagram at Eurozone debt web - BBC summarizes clearly the web of debt which underlies the western world's financial problems:  not only for Europe, but for the US also.  I thank Keven McAfee for drawing my attention to this.

Sunday, 27 November 2011

Euro disintegration seems inevitable

The Euro is a currency out of fiscal control. The Euro will likely come apart well before any Euro fiscal control can be implemented. Greek protestors, waving Nazi flags, won’t surrender fiscal control to a centralised Europe. Neither would Greece, Germany or other nations within the near future. Survival of the Euro requires centralized European fiscal control, but the surrender of national fiscal responsibilities would require years of negotiation and referenda.

Saturday, 26 November 2011

Eurobonds won’t solve crisis either

Financial communities appear to be keener to restore positive market sentiment than to fix the financial problems.  The proposal to issue collectivised eurobonds will only exacerbate Europe’s problems.  The problem is that some countries borrow and spend too much. Eurobonds will not fix spendthrift nations.  Eurobonds will only make it easier for them to continue borrowing, deepening the problem.  Henry Ergas has clearly outlined eurobond difficulties in comparison with Australian borrowing after federation.   That Eurobond solution would mask market signals to spendthrift nations, in the form of high interest rates, that they need to borrow less.   Widespread media has been persistently calling upon Germany to agree to that and other “solutions”, such as European QE (money printing).   None of those proposals would fix the problem, and all have potentially very serious consequences.   Market sentiment can only be restored temporarily at best.

I acknowledge the following sources: “Eurobonds anything but a panacea”, Henry Ergas, p16, The Weekend Australian, Nov 26-27, 2011; and National Leaders Pledge Closer Integration .

For more market commentary join our free live market briefings, or read more, at; or follow my colleague Paul Wise's blog

Continued erosion of US dollar’s global reserve currency status

China will now permit trading of the yuan against the Australian and Canadian dollars.  This reconfirms the continuing gradual erosion of the US dollar’s status as the global reserve currency.  That will simplify trade between China and those nations, reduce the need for US dollars, and increase yuan usage outside mainland China.  China already permits the yuan to be traded against the US dollar, euro, sterling, yen, Hong Kong dollar, Malaysian ringgit and Russian rouble.

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Thursday, 24 November 2011

Failed German bond sale reconfirms US Vs German Euro stalemate.

The inability to reconcile the threat of European inflation with those who want to print Euros will probably lead to an inevitable third outcome:  dismantling of the Euro.  The US advocates money printing, euphemistically known as quantitative easing (QE), because they do not fear inflation; whereas Germany has a profound abhorrence of inflation.  Germany strenuously resists European QE, for fear of letting inflation consume Europe, with the risk of political extremism and potentially ominous consequences.  The US strongly advocates QE for fear of bankrupting their large financial insurance institutions if called upon to cover a Greek or other sovereign debt default.

Tuesday, 22 November 2011

China "throws" rare earths monopoly

Some non-Chinese rare earths producers look attractive.  China damaged its own reputation as the global virtual monopoly supplier of critical rare earths in 2010 by withholding rare earth supplies to Japan in an attempt to amplify "fishing boat intrusion diplomacy" pressure upon Japan at the Senkaku Islands, in their projection of Chinese political power, not only over the South China Sea, but also over the East China Sea to test Western responses.  By casting doubt upon their own Chinese reliability of supply, naturally Japanese and other western market electronics manufacturers have been prompted to diversify their field of rare earth suppliers away from the long serving Chinese monopoly.

Clearly, the Chinese Central Communist Party Committee holds projection of power eastward beyond Taiwan and the Japanese island chain to be more important to their national strategic interests than maintaining their Chinese monopoly dominance of the critical global rare earths market.  This is significant.

I acknowledge the article below, which I think is interesting particularly from the viewpoint of those interested in the rare earth metals market and suppliers:  Proposed German industrial alliance aims to secure critical metals supply. Disclosure:  the author holds stock in a rare earths producer.

If you are interested in learning how we trade, visit Options Mastery Mentoring.

Self responsibility for retirement unintendedly exacerbates economic slowdowns

Some nations have encouraged individual self responsibility for retirement savings.  That is wise policy because it insulates government budgets from growing baby-boomer pension liabilities;  or, to put it another way, it reduces the burden upon the young to pay for the retirements of a growing number of old people who are living longer.

But, that policy has an unintended negative side effect:  the exacerbation of the economic slowdown.

Monday, 21 November 2011

China re-uses 1960s ocean floor mining ruse

China is reported to have gained Indian Ocean floor mining rights for mineral “nodules”.  The US hid secret plans to retrieve a sunken Cold War Soviet submarine under the false pretext of mining the ocean floor for “nodules”.  Mining of ocean floor nodules is unusual, if not impractical and commercially unviable.

China seeks to assert naval power over most of the South China Sea; and Japanese, Taiwanese, Vietnamese, Philippine, Bruneian, and Malaysian waters; and East Timorese; and beyond into the Indian Ocean.  It is possible that China’s rights to Indian Ocean territory are not for mining purposes.  China needs to secure import channels for mineral imports from Chinese controlled African mining projects. 

For more market commentary join our free live market briefings, or read more, at; or follow my colleague Paul Wise's blog.

China's undersea mining deal troubles India

I find this interesting: China's undersea mining deal troubles India. "China has secured exclusive rights to explore 10,000 square kilometres of seabed in the southwest Indian for polymetallic deposits; India is concerned (sic)"
Author: Shivom Seth

Sunday, 20 November 2011

Is Germany being covertly pressured?

I wouldn’t be surprised if the USA and other western nations are putting immense pressure, behind the scenes, upon Germany to continue to bail-out broke European nations.  Large financial institutions have sold financial insurance over Greek and other sovereign debt, in credit default swaps (CDSs) and other financial instruments.  In the event of Greek default, those institutions guarantee to cover any losses incurred by holders of Greek government bonds.  Those institutions are exposed to very large losses should a nation default on its sovereign debt.

Friday, 18 November 2011

G20 elevates gold's currency status

Would you prefer gold or sovereign debt as financial backing?  In November, 2011, the G20 asked Germany to use Germany's substantial gold reserves to back the European Financial Stabilization Facility (EFSF).  Germany rejected that proposal.  That proposal, and more significantly Germany's rejection of that proposal, elevated gold's status as a valuable international currency.  By declaring their wish for gold backing, the G20 inadvertently enhanced gold's status as currency.  And, in a subtle sense, the G20 also betrayed deteriorating sentiment towards sovereign debt.

I acknowledge Greg Hunter's USAWatchdog for this observation.  For more see "Case for gold in Eurozone bail-out".

For more market commentary, go to or follow my colleague Paul Wise's blog at Paul Wise's Blog.

Hitler and today's Europe

I think we have the really interesting situation now that for six decades the world has internationally collectively through various means imposed upon Germany the national collective responsibility never again to allow another Hitler; yet now, on the other hand, the world is collectively calling upon Germany to support money printing to help fix Europe's financial problems. That solution, upon which the world calls, risks resulting ultimately in European Weimar Republic inflation: the precise cause of Hitler's assumption of dictatorship.