Remember the old expression, “I wouldn’t do that for all the tea in China.” People used to associate China with tea. Well, now it’s time to associate China with gold, and a lot of it. Because the Chinese recently announced that they control over 33.89 million ounces of gold for monetary purposes. That’s an increase of 75% in Chinese gold holdings over the past six years.
Gold was basically comatose all through Far East and European trading…with what activity there was, beginning [as is mostly the case] once floor trading began on the Comex in New York. Volume was decent in both metals, and both gold and silver’s attempts to go vertical shortly before the London close got firmly stopped in their tracks. The usual New York gold commentator noted that a very large 80,482 gold contracts had traded by 11:00 a.m….with a total of 110,979 for the entire day.
How did it get here, and where is it going? What a difference a year makes. While March lions and April showers were at work in 2008, so were these factors in the U.S. and global economies:
What comes after a trillion? Inflation…and lots of it. Just about one year ago, in the May 8, 2008 edition of the Rude Awakening, your editors asked, “What comes after a trillion?” Today we know the answer: two trillion…and then three…and then four.
Is the crisis really over? Commercial paper spreads have come down dramatically. Libor rates are (hmm – almost) back to normal. Even high yield spreads are narrowing.
“Never in the history of the world has there been a situation so bad that the government can’t make it worse.” -Unknown
Simple question: how do you invest during an inflationary boom? Today, some concrete ideas. And the simplest idea of them all-when you consider soaring government deficits-is to sell government bonds and buy beaten down, world-class equity.
Despite the worry of a flu pandemic, a unexpectedly large contraction in US GDP and a recent prediction by the IMF that US banks’ loan losses would top $2.7 trillion, the world, as Justice Litle puts it in Taipan Daily, “is pounding the table for a V-shaped recovery.”
Gold had about as lackluster a day as possible on Friday, trapped between $880 and $890 from the far East clear through the Globex, with every attempt to break out in either direction quickly thwarted, and it finished where it started, at $885.80/oz., down 40 cents. For the week, gold dropped 3%.
There wasn’t much activity in gold in Far East and early European trading on Wednesday morning. But by the time the Comex opened for business, gold was up a few bucks. However, every time the gold price poked its nose above $900, there was somebody there to take it right back down again.
