CHINA and the GOLD PRICE - POINT OF INFLECTION?!?!

2010-02-26T08:30:00.000-08:00

By Andy Hoffman

Today’s announcement by the Chinese government that they plan to buy the remaining 191 tonnes of IMF gold (if it even exists) is possibly the most important event in the ten-year gold bull market, and perhaps could turn out to be the inflection point from when the public believes the propaganda about gold and starts to disbelieve, yielding the commencement of the latter stages of the PM bull and the early stages of American economic, political, and social chaos.

China is the only entity on earth with the financial backing to take on the U.S.-government led gold Cartel, with the ability at literally any moment to take them out and cause the price to soar to unimaginable levels. Until now, they have been very coy about their statements about gold, as given their huge hoard of roughly $2.5 trillion dollars (largely held in U.S. Treasuries), they are very concerned about a dollar (and frankly all fiat currency) crash. In fact, they were complicit in creating the dollar bubble by pegging the yuan to the dollar and thus creating massive, artificial U.S. consumer demand for Chinese products via the creation of massive U.S.-based debts to purchase Chinese manufactured goods. Thus, no one is more aware of the precarious state of their dollar holdings, and what is likely to occur to them in the coming years.

Given this sensitivity, China has NEVER made public statements about its intentions in the gold market, until about six months ago when it announced (no surprise to us “goldbugs”) that they had acquired 450 tonnes of gold over the past five years, bringing their total holdings to 1,054 tonnes (only about $40 billion worth). That statement spoke volumes about Chinese intentions, particularly when they shortly afterward starting making PSA’s to the Chinese population encouraging (no, URGING) them to buy physical gold and silver. The Chinese are quite aware that “REAL MONEY” was getting ready to break away from the U.S. government-led rigging that has suppressed them for years (and thus propped up the dollar), and you can be sure they do not want their population stuck in fiat dollars (not to mention pounds, Euros, etc.) when “REAL MONEY” retakes over its historic role.

When the IMF announced that it would sell 403 tonnes of gold in December (only a measly $12 billlion worth), it was widely believed the Chinese would swoop in and take it all, as the last remaining “large chunk” of gold available for sale anywhere. Whether the IMF actually owned any gold (I still believe it is not real), or whether they really intended to use the proceeds to help poor countries (Bu—s—t, the goal was to try and scare the gold price lower) didn’t matter. The key point is that it probably is the “last remaining large chunk” of available gold, real or imaginary. Gold supply worldwide has been declining for a decade thanks to a combination of capital starvation (care of the Gold Cartel suppression) and supply challenges (care of Peak Gold), and now that the Washington Agreement signatories (France, Italy, Germany, etc.) are no longer sellers, there is simply no way of buying that kind of size without pushing the market significantly higher and causing an avalanche of fear about the future of fiat currencies. Trust me, if the Chinese put in a market order to buy 200 tonnes of physical gold today, the price would be $1,500+ by tonight.

Thus, when the Indian government outflanked them and bought 200 of the 403 IMF tonnes (at an average price of $1,049/oz), that must have really ticked them off, and likely shows that they were too conservative in their bidding given the rising amount of competition for that gold coming into the market (India, Russia, Middle East, etc.). So when an article surfaced yesterday stating that the Indians would be happy to buy the other 191 tonnes (Sri Lanka and Mauritius already bought 12 tonnes), you can bet the Chinese government had an emergency meeting and decided it was time to be more aggressive, for the first time ever. With their $2.5 trillion horde, there is simply no way they will let themselves get outbid for the last chunk.

As the great Jim Sinclair notes, IMF gold sales were major catalysts of the final gold move from $100 to nearly $900 in 1980, and once again, contrary to what was intended, this dopey announced IMF sale (made solely to knock the gold price down before the February COMEX options expired) could be what once and for all puts gold “in play” among retail investors, corporate investors, and central banks alike. Do you think George Soros, who announced last week that he now owns $600 million of gold, is going to lose out on this trade, after fighting and eventually beating the U.K. government 20 years ago on his short pound trade? I think not.

Ladies and Gentlemen, the fabric of the U.S. is collapsing rapidly, economically, politically, and socially. The only thing that has kept it from turning REALLY UGLY has been the U.S. government’s fraudulent activities centered around manipulating the stock, bond, currency, and commodity (read: gold and silver) markets to maintain the PERCEPTION that things are manageable.

But they are most certainly not, and all you need to do is read the paper to see. Just this week, it was announced that foreclosures hit an all-time high, consumer confidence a multi-year low, new home sales an all-time low, and the PPI (inflation) a near record monthly high. Not to mention an additional $1.9 trillion increase in the Federal “debt limit” to $14 trillion, which will likely be surpassed by year-end.

Please PROTECT YOURSELF, and do it AS SOON AS POSSIBLE. The situation is becoming more dire each day. Paper currency is going down in value (gold at an all-time high against nearly all currencies), and REAL GOODS and REAL MONEY are going up in value.

NOW!

Andy

-- Posted Thursday, 25 February 2010

China - Gold - Crisis

CHINA and the GOLD PRICE - POINT OF INFLECTION?!?!