End-of-week top gold stories

Friday, 11-Sep-2015

Henny Sender (FT) Quantitative tightening It is neither the sell-off in Chinese stocks nor weakness in the currency that matters most. It is what is happening to China’s FX reserves and what this means for global liquidity. China’s actions are equivalent to unwind of QE or, in other words, Quantitative Tightenting.

MK Note: Remember, it was the prospect of a drop in the yuan that drove gold higher a couple of weeks ago. Since then the market signals have been mixed at best until today’s announcement – coming on a day that the U.S. markets are closed. In the unlikely event that China continues with the reserve sales, our own Federal Reserve will need to confront a bond market being flooded with U.S. Treasury paper – quantitative tightening in the extreme and a conundrum to which Fed chair Janet Yellen would probably rather not have her name attached.

(MarketWatch) China stimulus hopes send U.S. stock futures sharply higher “The latest data reflect soft domestic demand at the time when external demand is also relatively weak, which puts pressure on the government to step in and increase spending and on the [People’s Bank of China] to potentially inject another dose of monetary policy stimulus and/or allow the yuan to weaken,” analyst at Rabobank said in a note.

Note: It seems like China is prepared to do whatever it thinks is necessary to underpin stocks. With the flush PBoC prepared to throw billions in support of the market, it has been risk-on for stocks. Gold is cheap right now, so pick up your insurance in anticipation of the inevitable market backlash.

Lawrence Williams (LawrieOnGold) Chinese central bank now reporting buying gold on monthly basis Of importance to gold investors is that the PBoC is now continuously buying gold for the reserves and at this rate will acquire 210 tonnes over the next year. But the opaque nature of China’s gold policy does not tell us that this was from local sources or from overseas. When it raised gold reserves initially it stated that the gold came from overseas as well as from local sources. We are of the opinion that the tonnage bought now on a monthly basis was from overseas not from the 430 tonnes produced annually inside China.

Note: While China is seemingly being more transparent with regard to their gold holdings, they are still very likely understated to a significant degree. Once thing seems certain: China is still aggressively acquiring gold.

James G. Rickards (Darien Times) Rickards: It’s important to allocated part of your portfolio to physical assets Traditional stocks and bonds are digital assets that can be hacked, wiped-out or frozen with a few keystrokes. It’s important to allocated part of your portfolio to physical assets that cannot be wiped out in financial warfare. These assets include silver, gold, fine art, land, rare stamps, cash (in banknote form, not bank deposits) and other physical stores of value.

Note: We here at USAGOLD have always viewed it as an imperative to hold a portion of one’s wealth outside the traditional banking and financial services realm. Rickards’ op-ed drives home the point.

Mehreen Khan (Telegraph) Juncker: Greece cannot be kept in the euro at all costs Jean Claude-Juncker has warned Greece’s third government in four years that it will have no flexibility over the terms of its new €86bn bail-out plan and could still face the prospect of a disorderly eurozone exit.

Note: Juncker fires a shot across the bow of the next Greek government . . . reneging on the terms of the bailout deal will not be tolerated. Don’t think for a second that the Greek crisis is behind us.

Tyler Durden (ZeroHedge) Something Just Snapped At The Comex This means that what was already a record dilution factor, with over 200 ounces of paper gold claims for every ounce of deliverable gold, just soared even more, and following today’s 8% drop, there is now a unprecedented 228 ounces of paper claims for every ounce of deliverable “registered” gold.

Note: The chart accompanying this article just screams “take delivery”! If you don’t, one of the other 227 “owners” of that same ounce of gold will . . . and you’ll be out in the cold without your gold. Or you can just buy physical in the first place and there will be no questions as to ownership.