End-of-week top gold stories
Friday, 28-Aug-2015
Ranjeetha Pakiam (Bloomberg) Gold Bucks Commodity Rout as Turmoil Sends Investors to Havens Gold was spared from the global market rout that’s sent commodities to the lowest level since 1999 as investors sought haven assets.
…Mounting concern that global growth is faltering pummeled shares, emerging-market currencies and commodities last week, and the selloff deepened on Monday.
Note: Gold displayed remarkable resilience during the latest “Black Monday” rout as safe-haven demand offset broad-based deleveraging pressures.
Anora Mahmudova (MarketWatch) U.S. stocks plummet at open; Dow drops 1,000 points U.S. stocks plunged to lowest levels since last October after a rout in Chinese stocks triggered a world-wide selloff of risky assets such as equities. The Dow Jones Industrial Average dropped 1000 points, or 6%, to 15,441. The S&P 500 opened 100 points, or 4.9%, lower at 1,874. The benchmark index is down more than 10% from its peak reached on May 21. The Nasdaq Composite began the day down 360 points, or 7.6%, to 4,349.
Note: Monday was an exciting day indeed for investors world wide . . . and generally not in a good way. While stocks recovered later in the week, many worry that the rout was a harbinger of things to come.
Koos Jansen (BullionStar) Theory On China’s Gold Strategy Koos Jansen’s latest study offers initial proof of a speculation we published here when China announced its change in the yuan price discovery mechanism. “China says it wants a say in the gold price and that’s why it established its own fix outside of London and New York’s purview. If the price of gold in yuan goes higher, it adds value to both Chinese gold reserves, which are likely much higher than recently announced, and to the asset structure of the Chinese people and banks that are hoarding it. In fact the low announcement may have been in anticipation of the devaluation strategy.
Note: The number of U.S. investors saving in gold remains disturbingly low. Take heed people! The dollar is part of the “rodeo” too and has dropped about 7% from the high set early this year.
Matt Egan (CNNMoney) Trading was halted 1,200 times Monday The selling on Wall Street was so dramatic Monday that it triggered unprecedented emergency freezes on stocks. Stocks and exchange-traded funds were automatically halted more than 1,200 times, according to Nasdaq.
The high level of trading pauses highlights just how extreme the selloff was in a short span of time. Fears about China’s economic slowdown caused the Dow to plummet over 1,000 points when the market opened. The Dow ended down 588 points, its worst decline since August 2011.
Note: Particularly interesting was the illiquidity of ETFs during the market rout. That should be an eye-opener for every investor, warranting a reexamination of your portfolio diversification. Do you have enough physical gold?
John Crudele (New York Post) Crudele says Washington attempting to rig the stock recovery, recommends “switching off” CNBC One of these mornings — or overnight — some mysterious buyer will suddenly start purchasing an abnormal amount of Standard & Poor’s 500 stock index futures. So we get down to direct intervention — just like China did. Only Washington, with Wall Street as its co-conspirator, won’t be as sloppy as Beijing was. That’ll get the stock market moving higher and everyone will pretend that the buyers are just ordinary people who suddenly think Wall Street is oversold.
MK Note: In this cogent piece written two days ago, the New York Post’s John Crudele accurately predicted events and provided a pretty good summary on the true forces at work. He is not happy about the cozy relationship between Wall Street and Washington nor the coverage at our favorite stock-hyping cable channel (which he says “tens of thousands” have already abandoned). This piece will confirm what a lot of you are already thinking. . . . .
(Bloomberg) China Sells U.S. Treasuries to Support Yuan China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.
Note: Interesting turn of events. Devalue against the dollar and then sell Treasuries to prevent the yuan from falling further against the dollar.
Michael J. Kosares (USAGOLD) Key trade in gold market signals China’s intentions WSJ: “In recent years, China has come to shape the very way in which commodities are bought and sold, traditionally the preserve of financial centers such as London and New York. Late last month, the price of gold fell sharply, to a five-year low, within minutes of Asian markets opening. That came after almost five metric tons of gold—close to $200 million of the metal—was sold on the Shanghai Gold Exchange, according to ANZ Bank. The trade was seen by market participants as a key moment reflecting how China had moved Asian commodity markets away from just following the overnight pattern of U.S. and European trading.”
MK Note: The premise of this article is that China will continue to play a key role in shaping commodities’ markets in the years to come, despite the current slowdown, based on its sheer scale. If you follow this blog, you already know of the infrastructure China is putting in place to influence the gold trade and insert itself as a third gold trading center along with London and New York. We should note that the five tonne trade cited above came after the price had dropped. Keep in mind that Shanghai is a physical market exchange. In other words, someone in China took advantage of the price drop to force the market into a delivery of five metric tonnes of the metal.
