Maxe Paul's  Instablog

We have had some large developments in the commodities market today with the biggest news being that China has agreed to accept Rio Tinto's iron ore contract prices of a 33% cut rather than the 40% to 50 % China were looking for.

Surely this is another "loss of face" for china, infact you almost feel they are now red in the face from being slapped down again.

Yesterday we read online about China kicking "own goals" on their play on Aluminium, and how their plan to support the industry has led to a massive stockpile and China now dumping Aluminium back on the market and lowering revenue for the companies they were trying to save.

"I knew it, gold is manipulated" you say, well i hate to burst your bubble folks, but the smoking gun is nothing but a plastic water pistol, sorry to hose down your theories, if you will excuse the pun.

The follwing is a story posted by John Nadler, senior analyst at Kitco, i hope it helps some people get over the "complex" they have with the gold conspiracy.

As John points out though, some people are just too far gone at this stage to save, but here goes anyway.

Lately i have changed my investment outlook to one of supply and demand over trading profits. When the market was at it lows in March i loaded up with Maquarie Bank at any price under $20 AUS, which given at the time it was the only investment bank in the world not going bankrupt or bleeding money or in many cases both! It also managed to secure an AUS government backed AAA rating for it's borrowing, which if you thought about it meant it could borrow at the worlds lowest rates and lend to companies in trouble at loan shark rates. One month later the shares had more than doubled.

After having a bit of a think and doing some research i noticed a few things, China are buying massive amounts of copper, even from a domestic point of view, China are buying uranium, and are planning multiple nuclear reactors, and China are buying loads of gold for their reserves.

In April/May i started to look into the mining sector, as it was becomming apparent that China was hoarding commodities, especially from Australia. On further study i found China could not get enough copper, so in we went, shares in Equinox, which has a large deposit, around 30 years supply, plus some uranium mixed in. Shares in OZ minerals, another fantastic copper play, and a few speculative stocks for good measure. One that stands out particularly is a company named EXCO resources which has a large unmined copper resource and a gold deposit.

I have always wanted to put up some links to some of those crazy folk on youtube, so here's my first attempt, this guy is a "gold bug" doing what they do best, fondling their assets!

http://www.youtube.com...

My second piece on Gold is about the herd mentality. Anyone who has spent even a remote amount of time watching or playing the markets knows that the old adadge of "most of the people are wrong most of the time" is a pretty sound bet. Which is why being a contrarian pays the big bucks.

Noted Australian economist Alan Kohler from  http://www.businessspe... has made a very interesting observation about the withering green shoot of a massive iron ore oversupply developing in China.

This backs up my belief that this is just a restocking of metals and divestment of $US by China at the market low in March, when we saw record low commodity prices and $US strength combine for a China buying spree of epic proportions and the catalyst of the commodities (and stocks) bear market rally.

Here is the article published today on Business Spectator.