Korean Job Discussion Forums

[seosan08]

First, China announces that its going to spend $600 billion on "stimulus" for its own citizenry. Next, it's buying billions of $$$ of gold for it's reserves. For those of you still snoozing, that is "codespeak" for dumping Treasuries and getting out while the getting is good. Combine that with the expectation that the Treasury will have to issue upwards of $1 Trillion in new bonds next year (who knows how much more will be added between now and then) and you can easily see a dislocation in the largest market on the planet...the market for US Treasuries.

The upcoming international Bretton Woods II conference, which if it follows in the footsteps of its predecessor back in the 40's will make its decisions in the weeks that follow the gathering. That in all liklihood will result in a SIGNIFICANT devaluation in the dollar - which will cause a flood of US Dollars to come running home as foreigners dump them in mass.

The Chinese are not stupid and know it's time to get out of those worthless old greenbacks. It's still not too late to buy some gold to keep the value of your money! You can buy gold ingots from your local mom and pop jewelery shop from just about anywhere in Korea.

13 NOVEMBER 2008
China Expected to Shift Reserves into Commodities and Gold
The Standard - Hong Kong
Gold rush
By Benjamin Scent
Friday, November 14, 2008

"Beijing's reserves could easily go up to 3,000 to 4,000 tonnes..."

http://jessescrossroadscafe.blogspot.com/2008/11/china-to-shift-reserves-into.html

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields. (Is it odd that almost everyone in the world EXCEPT Americans can see this coming? - Jesse)

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."

[mises]

The dollar can't be "dumped". Look. If I own a T-bill and decide it isn't a good investment for me I have to find somebody to sell it to. It isn't like taking back a poor fitting pair of shoes. The debt exists and can only be transferred until it is mature. Even if China made the bat shit crazy decision to "dump" or flood markets with their dollar denominated debt, it is still considered among the most safe investments on earth and foreign governments would buy them up so that the stability of the US will rub off on them.

This crises is layered. One layer is the financial crises in the US/UK etc, but the big and rather surprising economic crises is the speed with which the "global pool of money" has abandoned developing nations and found safety in the US.

Now, what China is going to do is slow their accumulation of dollar assets by acquiring gold and commodities. This is highly rational and has been long anticipated. This is part of a shift that is coming in global macro economic structures that may not be pretty. But the current Bretton Woods 2 system will likely survive this crises and be dismantled after.

The current talk of a new Bretton Woods 2 agreement is just annoying because we are already in Bretton Woods 2 and anyways what they are proposing is really just regulatory policy and not the inherent structure of the system itself (aka dollar reserve which is unlinked to gold).

[seosan08]

The bottom line, is the dollar is being dumped and the smart money is getting into gold while the getting is good! The ME countries have been proposing the Gold Dinar fully backed by gold for some time as a regional currency (a la Euro) maybe this is the very star of it.

Peter J. Cooper�s Weblog
November 13, 2008
Saudi Arabia buys $3.5bn of gold in two weeks
Filed under: Gold & Silver � peterjcooper @ 8:55 am

http://arabianmoney.net/2008/11/13/saudi-arabia-buys-35bn-of-gold-in-two-weeks/

welcome21There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: �Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present�.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think.

[bacasper]

If they are buying all this gold, why is the price going DOWN?

[mises]

The price is going down because there is less money to borrow to buy, and leveraged trades are "unwinding". Or so I hear.

The physical and paper markets are apparently at deep separation.

Everything is crazy now. There is so much uncertainty and volatility.

[ontheway]

The world is reluctantly but ineluctably wending its way to a gold standard and facing the terrible reality that the socialist fiat money fantasy was a hoax that the self-deluded ignorant and uneducated socialist "intelligencia" believed but failed to comprehend, that lined the pockets of a powerful, politically connected elite, and that victimized and impoverished the innocent hard working masses.


Socialism always fails.


Free markets will raise the living standards of everyone and set the people free.

[Bigfeet]

Prices going down on oil, gold, stock markets, etc., could be because of hedge funds having to unload their positions to raise cash to fund their customers' redemption.

China don't have to dump dollars in order to negatively affect the US. Buying significantly less of it will cause the value of the dollar to go down, especially with the US having to print so much more in order to bail out both producers and consumers.

[seosan08]

Iran switches reserves to gold - report
Sat Nov 15, 2008

http://in.reuters.com/article/businessNews/idINIndia-36518320081115

TEHRAN (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world's fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.

He gave no figures or other details.

Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.

Iranian officials in July denied reports Iranian banks were moving funds from Europe, with one report suggesting as much as $75 billion had been withdrawn and converted into gold or placed in Asian banks, because of a threat of tightening sanctions.

The International Monetary Fund said in August that if the price of Iranian crude fell to $75 a barrel, Iran would face a current account deficit in the medium term that would be tough to sustain due to Tehran's financial isolation.

On Friday, U.S. crude fell $1.20 at $57.04.

Gold futures ended more than 5 percent higher on Friday and bullion ended the week about $10 higher compared with its last Friday's close of $735.95 as investors covered short positions.

[seosan08]

Commitment Of Traders Data From Trader Dan
Posted: Nov 14 2008
By: Dan Norcini

http://www.jsmineset.com/

Dear Friends,

Linked below is a set of charts detailing the latest Commitment of Traders reports from the CFTC. I have included some comments on the charts as is my custom but there are several things that stood out enough for me to mention separately.

First of all - - the commercial shorts (the bullion banks) now hold their smallest number of outright short positions in nearly 3 1/2 years. One has to go all the way back to August 2005 to find a lower number. They have liquidated a mind-boggling 220,000 contracts since the beginning of this year but even more importantly, they have covered 190,000 shorts since July of this year. From a peak of 358,802 in July, before the gold market fell apart, they have now reduced their outright shorts down to a mere 167,614 contracts.

Why is this important? It tells us that the selling in the Comex gold market has not been coming from the bullion banks. They have been buying since July. Now they might sell on occasions as the market rallies into a resistance zone and provide the intraday capping but they are not adding to those shorts. Instead they are taking them off immediately as soon as the market begins to sell off.

Who then is doing the selling at the Comex? The answer is provided by looking at the data. The commercial long category has liquidated 52,000 longs since September 9. Lumped within this category are some of the giant index funds. At this point we have no way of knowing exactly how much of the selling in this category is specifically related to the index funds but I would guess that at least 50% of it is. The trading funds have sold out 124,000 of their existing longs since July with the small spec category unloading 33,000 longs over that same period (Note � these numbers are all rounded off). Not to be forgotten, some of the trading funds have gone short.

What we are therefore witnessing is confirmation that the selling pressure in the paper gold market is coming from hedge fund deleveraging and index fund redemption requests alongside of the general public who have been abandoning the commodities sector. How much longer this selling can continue is open for debate but at some point the bulk of the redemption request selling will end as those who wish to get out of commodities will have done so. At that point the paper gold market will bottom. I submit that this will occur at or near the same time that the grain markets put in a concrete bottom. A bottom in the crude oil market will be further confirmation. When these things occur, the commodity markets will begin to trade their own specific set of fundamental factors instead of the one sided selling avalanches that have buried nearly all of them irrespective of their own supply/demand factors. Right now, the dynamic that marks the commodity world is money related selling irrespective of fundamental factors. Simply put � it is all a money game that we are currently witnessing. These things happen fairly regularly in the futures markets although not to the extent and scope that we are now observing. I have seen enough of this sort of action in my trading career to know that eventually fundamental factors reassert themselves but only after the money issues are exhausted.

[canuckistan]

Too much consuming and not enough saving = recession.

They're not all bad. Recessions force people to stop buying more than they can afford and start saving again. A little reminder if you will.

[kotakji]

[On the other hand]

[huffdaddy]

Flight to safety. I guess maybe China isn't dumping the dollar just yet.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFQwLGTYEM3Y&refer=home

[RJjr]

Maybe the Chinese are just like the rest of us. I cashed out most of my CDs long ago, but there are some that are almost as old as I am in my father's safety deposit box and he finally found his keys. You can bet your ass I'll be cashing those out and buying items not dependent on "the full faith of the US Treasury." I don't want to be left holding the bag. Apparently the Chinese don't either and who can blame them?

[seosan08]