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filipo

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  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    Ari,
    "didn't China 'only' produce 400 tons last year? "

    Who said I meant Chinese production ?
    Try to understand that China not only buys domestic production but part of global production too. Global production last year was around 3K tonnes.

    "If they did not move enough treasuries into Au to raise Au price, then it seems like a waste of time to mention it as a catalyst to gold price."
    You must have missed the news of the whacking down of the gold price by some hedge funds, selling 33 tonnes of paper gold the same week China announced its increase in official gold holdings.
    Or else, you simply don't want to know.

    "So, please help me understand which part of "they plan to go out of US treasuries and into gold" qualifies "go out of " mean 'they plan to go move a trivial amount of their US treasuries into gold"? "
    The part where I state "they plan to go out of US treasuries" does qualify for understanding it means "they plan to move a part of their US treasuries into gold".
    Apparently, you don't want to know AND neither understand.
    Aug 19, 2015. 09:18 PM | Likes Like |Link to Comment
  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    Ari,
    Allow me to correct you:
    "but 200 tons Au at $1100/oz is ~ $7B."

    Suppose yearly mining produces 3,000 tonnes.
    From those 3,000 tonnes the Chinese public buys rightaway 2,000 tonnes (2013, 2014).
    Suppose the Chinese public due to the circumstances -the great Chinese unwind- buy less and the PBoC buys more.
    How much more ? Well, suppose 10% of those 2,000 tonnes, i.e. 200 tonnes, year after year, at an average of 16 tonnes a month, which more or less corresponds to what they bought in July (19 tonnes).

    Of course, at nowadays prices, that seems peanuts. But if you look at the weight (200 tonnes), not the price, it's huge. If they do that for 5 years, they'll get 1,000 tonnes over 5 years instead of the paltry 604 tonnes they accumulated over 6 years.

    I did NOT say that they would go fully out of US treasuries. I did say "The "grandeur" of their strategy might be that they plan to go out of US treasuries and into gold." without specifying for how much they would go out of treasuries. They actually already went out for $100bn in June-July.

    If I would have meant to say that they would go fully out of US treasuries, I would have said "The "grandeur" of their strategy might be that they plan to go completely (fully) out of all of their US treasuries and into gold."
    which I did NOT, so don't misinterpret my words.
    Conclusion: you clearly have a problem of understanding plain English.
    Aug 19, 2015. 03:00 PM | 1 Like Like |Link to Comment
  • Gold Loses Bullish Hedge Fund, Tailwinds Are Ahead For GLD [View article]
    Maybe Paulson sold that part to Stan Druckenmiller, who knows ?

    Meanwhile GLD's gold holding has been tumbling from a top of 1,600 tonnes in 2011 to a paltry 637 tonnes in July last.

    If you ask me, there's not so much margin left.
    Aug 18, 2015. 03:04 PM | 1 Like Like |Link to Comment
  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    Ari,
    "that is not possible b/c not even close to enough physical gold available for liquid purchase to convert even a 10th of their treasuries into gold."

    Oh, yes it is.
    If the PBoC only buys 10% of what the Chinese people are buying, roughly 200 tonnes, it would be a game changer.
    With the Chinese economy cooling off and Chinese debtors winding down their debts, it is a plausible scenario that after a 10 years gold buying spree by the Chinese public, the Chinese govt takes over.
    If that swap would be concretized, more than enough gold would be available for liquid purchase to convert a large portion of their treasuries into gold.
    I didn't say they would go out all of their treasuries, just a portion. Even Russia keeps part of its treasuries, but that doesn't keep them from adding tens of tonnes of gold each month.

    "China was hiding $100B of treasury liquidation sales via Belgium, all the while Au price/demand was in the toilet."
    Weird you mentioning that, since the $100B of Chinese treasury liquidation is precisely what I had in mind to prove my case.
    That notwithstanding these T-sales the price of gold did go down, was not proof the Chinese did not buy gold. They did, they added 19 tonnes. Did you notice that at the same time some hedge funds decided it was the right time to short gold for a hefty 33 tonnes, so that for the first time in history hedge funds are net short gold ?
    I don't say they put every single USD they get from their T-sales into gold. They also need the money to prop up their languishing equity-markets, to pay for the broken windows at Tianjin area and to entertain their growing military.
    Conclusion: it's pathetic to suppose China puts every single USD they get from their T-sales into gold. But if they only put a portion of the money into gold, as they did in July -remember, the 19 tonnes ?- it would be a game changer.
    Aug 17, 2015. 11:31 PM | Likes Like |Link to Comment
  • Gold Retraces 50% Of The 1999-2011 Bull Market [View article]
    gel,
    Precaution #1: hang your food on tree branches.
    Aug 17, 2015. 04:46 PM | Likes Like |Link to Comment
  • Gold To Market: Are You Not Entertained? [View article]
    Good old Stan Druckenmiller is coming to the rescue..
    Aug 17, 2015. 04:42 PM | Likes Like |Link to Comment
  • Gold To Market: Are You Not Entertained? [View article]
    How was the weather, QP ?
    Just asking cause in those forests a little rain makes your days dreadful.
    I hope you had marvelous Sunshine and not too many mosquitoes.
    Aug 17, 2015. 04:38 PM | Likes Like |Link to Comment
  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    James,
    "It was clear that the disclosure last month was oriented towards the SDR inclusion so, it naturally follows that they would be disclosing monthly from that moment on."
    I agree and in that sense, it was a surprise, because after 6 years of ignoring the IMF's demands, they suddenly changed tactics and complied. One can only applaud this positive evolution after so many years of secretive conduct.
    It means that even China has understood that to be part of the modern financial world, one has to operate in openness and transparency. There's a growing world of difference between this China and North-Korea.

    However, your conclusion that this proves that China does not pursue a grand strategy sounds premature. How do you know ?
    How do you know they are not up to disclosing massive additions of gold into their PBoC from now on every month ? Their good friend Russia does, why then not China ?
    The "grandeur" of their strategy might be that they plan to go out of US treasuries and into gold. That might come as a surprising disappointment to many, indeed, but not to the kind of people you have in mind, I suppose.
    Aug 17, 2015. 04:29 PM | Likes Like |Link to Comment
  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    James,
    "That is why I don't think one month's worth of data is very significant -- either way."

    Indeed, but you have to admit that the PBoC's disclosure of their gold reserve upgrade followed by the increase in July came as a surprise after so many years of silence.
    You can't go past the significance of that move, unregarding whether it implies the beginning of another eternity of silence or the continuation of more of the same.
    Hence describing that PBoC's move as a non-event is a bit rash in my opinion. Knowing that the Chinese like to talk in riddles, I'm convinced that both the fact and the timing have to have a significance.
    What that significance is might be too early to say, but it sure should put us on the alert and conclusions that the Chinese are NOT interested in gold seem in that regard not very appropriated.
    Aug 17, 2015. 12:40 AM | 1 Like Like |Link to Comment
  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    James,
    "this thesis is entirely driven by empirical observation and logical inference."
    Fair enough.
    We will have to wait what ensues.

    "will you be saying it's bearish if one, two or three months from now they announce zero purchases for the month?"
    Not necessarily. It depends what the tunover at the SGE will have been. All you will be able to extort from me then is that I'll say that the PBoC that month did not show great interest in buying more gold.
    However that it would have to be considered hazarduous if not foolish to extrapolate that no-gold-buying month to the rest of the months remaining and conclude that Official China is not interested in gold.
    Compare that situation with what happens in India. Last year 2014 wedding season was in June-July and lots of gold was bought. This year, because the wedding season falls in November, June-July saw disappointing gold sales. Will you, as almost all journalists in the financial press did, then conclude that India has lost its gold appetite ?

    "And again, if you didn't believe the Chinese announcements regarding their reserves last month, why would anybody even think it was relevant what the Chinese government announced month to month?"
    You must have misread my comments.
    I on many occasions on this forum said that I believed what the PBoC had disclosed, however bearing in mind that there are a lot of State bullion banks in China who must have gold reserves too since they trade the stuff.
    Aug 16, 2015. 04:17 PM | 1 Like Like |Link to Comment
  • Gold To Market: Are You Not Entertained? [View article]
    LT,
    "A truly robust market neutral construct"

    What do you mean by that ?
    Can you give a few concrete examples of the kind of assets you put in this ?

    "Gold to me is another form of risk"
    That is a subjective appreciation that is not being confirmed by 300 years of gold price setting since Isaac Newton for the first time set the gold price in 1717:
    http://bit.ly/wYunOO

    On the contrary, due to the exponential creation of money the last 70 years the world has witnessed ever raising gold prices. It is ONLY by the manipulation of the gold price that started in 2011 that we see a temporary setback. However, the past has taught us that these manipulations never are successful and hence this one will not last much long either.
    Overtime, gold is the best safe haven one can wish.
    Aug 16, 2015. 03:40 PM | 2 Likes Like |Link to Comment
  • Gold To Market: Are You Not Entertained? [View article]
    Ben,
    You sure it's not "seize gold dada", followed by a big "cheese"-smile ?
    Babies often have these weird pronunciations that we as adults have some difficulty to understand.
    Aug 16, 2015. 08:16 AM | 1 Like Like |Link to Comment
  • Gold To Market: Are You Not Entertained? [View article]
    LT,
    I have been talking to a professional risk manager lately and right now he says there's a faint reversal of bankers' mentality in favor of gold.
    The only thing is it's not fashionable yet and bankers when discussing the matter do it whispering.
    Even market neutral portfolios are to be considered as risky since every company can fall out of favor, slowly or suddenly. Ask Apple/Alibaba/IBM/CAT...
    If you look for liquidity, cash is the best.
    If you need yield, it gets trickier and there's a wide variety of possibilities bearing all of them almost daily changing risk.
    If you need security that will outlast every other asset class over the years, only gold comes out first.
    Aug 16, 2015. 08:06 AM | 1 Like Like |Link to Comment
  • Gold To Market: Are You Not Entertained? [View article]
    contrarian,
    Yes, I can see your point.
    But, I see no rational reason why as an investor I should put more trust in US T-bonds than in gold as a safe haven.

    I know Gary Shilling based on what happened in 2008-2009 favors US T-bonds, but I'm still not convinced that what happened then should be literally copied to any situation in the future.
    Extrapolation is good but the caveat is circumstances change, reliability changes, trust changes. After all, we don't use Victorian money anymore either.
    It's all in the definition of "safe haven" since that is the kind of investment that will be needed when all hell breaks loose.

    With all the information I have now, I see Treasuries NOT as a safe haven.
    Aug 15, 2015. 05:40 PM | 1 Like Like |Link to Comment
  • China's Gold Reserves: A Strong Dose Of Reality [View article]
    James,
    I won't comment on other commenters' (il)logical reasonings.

    All I know is that China recently got it's application to join the IMF's SDR's refused by that IMF and that immediately after
    #1 they devalued their CNY
    #2 they disclosed their 608 tonnes of gold hoarding in June
    #3 they disclosed an additional 19 tonnes of gold added in July

    This to me says that the Chinese who quite often have been meeting with Russian diplomats in the recent past and who jointly with Russia are planning the Silk Road Project and the AIIB project, are clearly changing their behaviour towards gold.
    This cannot be a coincidence.

    If from now on the Chinese PBoC, like the Russians over the last 5 years have been doing, would disclose an average monthly addition to their reserves of 15 tonnes, would you still maintain the same bias that China has no unusual interest in gold ?
    Aug 15, 2015. 05:09 PM | Likes Like |Link to Comment
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