China and Gold
The Dollar, oil and gasoline all went sideways.
Gold went sideways too, and held onto its recent gains. It did not break through $1000, so I think it will pull back slightly before trying to assault that value again.
In the news today…..
Unemployment - jumped to 9.7%. This is a 26 year high. Is this good news??? Not if you lost your job. However, the best predictions say that the unemployment will stop growing at the end of this year, and that means an employment recovery is projected for next year. My advice – take this for what it is – a projection, a guess at best. If things get better, then celebrate then, not now. 216,000 jobs were lost in August – the total keeps going up.
Future Trends – since I have talked about this in the previous topic, why not expand it. What type of recovery are we going to have in the US? I believe it is probably we will have a U shaped recovery – where the bottom of the U is about 3 years long, in other words, 2 more years of this misery to go before we see real growth in the US economy. Are there any risks? You bet ‘ya. There is the big risk that all the negatives in the economy going on right now (Housing, Unemployment, declining retail sales) might just overwhelm any recovery, and we could go down deeper in the recession.
Tonight’s Dinner Conversation…. Gold….
You can tell I have been excited about gold recently, and it is because gold has broken out of its trading range to the upside. The best technical description of the breakout is that gold has formed an inverse head and shoulders formation – and that has a strong relationship to predicting the future.
However, I want to bring what’s going on in China with Gold. Here are some facts:
- China has built a large depository in Hong Kong, and will be bringing its gold from London to Hong Kong for storage of its gold. In fact, it will start marketing its repository as a place for other Asian countries to store their gold. This will diminish the role of London in gold storage.
- China has encouraged its citizens to go out and buy bulk gold and silver. This is a major turnaround, as a few years ago, it banned purchases of gold by its citizens.
- China has purchased significant quantities of gold for its reserves, and now holds over 1000 tons of gold, the fifth largest holder of gold reserves.
- China has surreptitiously purchased its gold mining industry output of gold to bolster its gold reserves. Why surreptitiously? Gold purchases from other nations is public knowledge whereas gold additions from mines isn’t immediately reported, but can take years before it becomes known.
- China’s gold mining industry has now passed South Africa as the biggest producer in the world.
Why is this happening? You know as well as I that China plans decades and centuries ahead. What are they planning? One very public opinion has been that China wants the US Dollar to stop being the Reserve Currency of the world. To aid in that direction, China has entered into bilateral and multilateral agreements that allows its currency to be used for trade – there by weakening the US Dollar as reserve currency.
What do you think China has on its mind? That’s the topic for tonight.
Here are the last numbers for today (about 40 min before closing):
Dow Jones 30 Industrial – 9441 (up 97 points)
10 Year Treasury Bond – 3.44% (down 0.11%)
Euro – $1.4293
Gold – $997 (down $1)
Oil – $68.02 (up $0.06)
Gasoline – $1.78 (down $0.02)
