Gold - The Weekly Global Perspective
HIGHLIGHTS from "Global Watch - The
INDEX: - HUI SHARES: - AGT, NEM, AEM, NG, VGZ, DROOY, HMY, FCX, GSS, SSRI
Market Action / Short-term forecasts across the Board! Comex positions. Oil prices, a structural change/ China and the developed world - different structures different strengths / China an its expanding gold distribution network / China no longer a problem but a crisis - Time for PROTECTIONISM / The U.S. - Growth, Inflation & Volatility / I.M.F. Sales effectively opposed! - I.M.F. Gold sales will disrupt the gold market/ Two gold E.T.F. s - Horses for courses / V.A.T. Strike in India Summary: The present Gold Price Drivers.
Technical Analysis of the Gold Price: Long/Short term. - International Gold Markets. - Silver / Platinum
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China and the developed world - different structures, different strengths!
In the West it is convenient to align developments in China to those in the West. But several major and critical differences highlight why such close comparisons cannot be made.
- Down to a basic level that China is a nation of savers, not spenders, so find interest rate hikes increase liquidity, not increase it, as more interest earned flows out to depositors.
- The fragile banking system itself should not be able to support the incredible development that is and has taken place in China, there should have been far more collapses than there are.
- Inflation should not, by Western standards, have dropped last year in response to government policy and tiny interest rate hikes as it has - dramatically.
- The very nature of the Chinese and its government bespeaks a discipline and a control far and away above that known in the developed world.
- The grip the Chinese system has over its people and its economy will ensure that it will continue to be managed effectively and grow at a level the government requires of 8%, in a stable and coordinated manner for a few more decades to come.
- The very absence of democracy and financial self-sufficiency of the general populace, ensures that control will be maintained whilst China grows.
- The size of the economy will overtake the U.S.A. in the medium term [5 years or less].
- Their demand for power, including oil and petrol will race ahead of the growth in the economy, for the % rate of growth of the middle classes will far outstrip the overall rate of growth of the economy. These middle classes look forward to driving just as much as their American counterparts!
We have no doubt that Chinese development will be more soundly based and unstoppable, when compared to its Asian cousins' growth over the last 50 years.
China and its expanding Gold distribution web development.
The China Construction Bank has announced a plan to start its own bullion sale next month in eight of its branches nationwide, including Shanghai. This move will lead to other Chinese banks entering the gold trade. The bank is the fifth major bank to enter the distribution of gold in China. This still leaves a great deal of scope to the growth of a countrywide gold distribution system, one of the restraints on the Chinese gold market reaching its full potential. As it grows, we will see Chinese off-take of gold grow with it, until the demand from China for gold will rank ahead of most in the world, with the possible exception of India.
I.M.F. Sales will disrupt the gold markets!
I.M.F. officials have said 400 tonnes to 500 tonnes of gold could be sold without disrupting markets. This contradicts the survey taken in the gold market amongst the main players, which estimated the tonnage that could be sold in the market without disrupting the market. That figure was 500 tonnes, but what they omitted was that this is the amount the Central Bank Gold Agreement, an agreement amongst European Banks ONLY, was set as a 'ceiling' to their own sales. If they use the entire amount up to the ceiling, then there is no available quantity of gold on top of their 500 tonnes that could be sold without disrupting the market!
So as observers, it seems on the one side we have the hugely appealing emotive issue being put forward against the solid, structural facts defining the I.M.F and the gold it holds.
In the next issue of Gold - Authentic Money we will produce an article on just what gold is now being sold and what could lie ahead for the sales of the signatories of the Central Bank Gold Agreement. Important new information has surfaced clarifying a picture that they have been at pains to camouflage. [We will send this FREE to Subscribers and new Subscribers only of "Global Watch - the Gold Forecaster". To subscribe to either publication - see below]
We repeat a statement made last week here, "few observers see any agreement as likely, at the upcoming meetings of the International Monetary Fund".
You should make sure you are well acquainted with this subject, because it could be a 'trigger' to a higher gold price, if we are right?
The I.M.F. comes out with the recommendations it was asked for.
The I.M.F. was asked to look at ways to raise money with which to write of Third World Debt. It has done so. Asked to look at potential gold sales it has said the International Monetary Fund believes the best way to provide more debt relief for the world's poorest countries is for rich countries to come up with new resources to pay for up to 100% relief on the sums owed to the IMF and World Bank. Please note that gold sales were not on top of the list of options.
Given the political difficulties in coming up with those funds, the IMF says the next best alternative might be carefully planned sales of a small portion of the I.M.F.'s gold. The I.M.F.'s analysis shows that selling a small portion of the fund's gold to pay for the I.M.F.'s share of debt relief need not cause disruption to the market, if the sale is well managed.
And at the board's discussion, on Wednesday, the US director made clear that the Bush administration did not favour gold sales. Few observers see any agreement as likely, at the spring meetings of the fund and the bank in two weeks time.
We hope and expect to see this meeting in two weeks time close the book on potential I.M.F. sales of gold. This will remove the uncertainty the gold market has been undergoing since this proposal was put forward, despite the overwhelming number of issues militating against such sales.
We are about to publish a report on "Zimbabwe - Capital Controls Take it all!" As this was a difficult set of information to source accurately and provides a look at the tyrannical extent to which Capital Controls can go we will send this FREE to Subscribers and new Subscribers only. [To subscribe. Please go to www.goldforecaster.com]. It is the third article on a series on Capital Controls.]
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