Eric Sprott - Aggressive Chinese Buying Will Spike Gold Price

Just in case you missed this, we spotted it on Eric Kings site, King World News, which is well worth a few minutes of your time, in our humble opinion. We have mentioned KWS on more than one occasion so hopefully you have book marked it by now, haven’t you, yes?

Today billionaire Eric Sprott told King World News the Chinese cannot continue to buy gold as aggressively as they have been without there being a dramatic increase in the price.  Eric Sprott, Chairman of Sprott Asset Management, had this to say about Chinese purchases of gold and the recent announcement that Iranian oil will be acquired using gold: 

“There are two things I think are important about that.  One,

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BENZINGA RADIO: Exclusive Interview with SAM KIRTLEY of SKOPTIONSTRADING

 

Following the publication of our recent research into the behaviour of gold both intraday and overnight, Benzinga Radio very kindly gave us the opportunity to discuss this phenomena via an exclusive interview with Sam Kirtley, which we hope that you find both interesting and informative.

Sam Kirtley first presented the short intraday / long overnight gold trade that has yielded astounding returns since 2001 in two articles: one posted in August 2010 and the other earlier this month . We spoke with him to get further insight on the trade and the new fund that SK Options Trading has in the works. 

In 2010 you first presented the idea of an overnight gold fund, citing your calculations that a $100 million hedge fund, starting in 2001 and going long gold on the PM to AM fix and short on the AM to PM fix, would be worth 2.6 billion dollars today. Talk to us about how you discovered this trade and what you have found out.

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IMF's Christine Lagarde warns of '1930s moment'

IMF chief Christine Lagarde has warned the world faces an economic spiral reminiscent of the 1930s unless action is taken on the eurozone crisis, according to the BBC Business News

Ms Lagarde, speaking in Berlin, warned of a danger of rising unemployment if governments did not act together.

She said the Fund needed 500bn euros more to help sustain those countries worst hit by the eurozone crisis.

She added that Germany's economy depended on the economic health of its customers in other eurozone countries.

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India to pay gold instead of dollars for Iranian oil

India is the first  buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, DEBKAfile's intelligence and Iranian sources report exclusively.  Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran's total exports of 2.5 million bpd. Both are superpowers in terms of gold assets.

By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran's oil exports.

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What Does A Flattening Yield Curve Mean For Gold?

In this article, we look to analyse the relationship between gold and the U.S. bond yield curve. The yield curve is an immensely useful economic indicator and hence can be used as one of the determinants of the gold price.

We have previously covered yield curve dynamics, for a refresher the following excerpt should aid in comprehension of this article.

“For those readers who may be unfamiliar with how the yield curve works, we will provide a brief explanation. Bonds of different maturities have different yields. By plotting these yields against their maturities we can build a yield curve. The yield curve becomes steeper if longer term interest rates increase relative to shorter term interest rates. The yield curve becomes flatter if longer term interest rates decrease relative to shorter term interest rates. One way to measure the steepness of the yield curve is to look at the difference between the yields at two different points on the curve. For example one may look at the difference between the yields on 2 year Treasuries compared to the yield on 5 year Treasuries. Such a comparison will often be referred to as “2s5s” and is measured in basis points (bps) by subtracting the shorter term yield from the longer term yield. So if one says “2s5s are trading at +225” this means that the yield on 5 year bonds is 2.25% higher than the yield on 2 year bonds. If 2s5s go from +225 to +275 then the yield curve has steepened between those two maturities. If 2s5s go from +225 to +175 then the yield curve has flattened between those two maturities.”

Intuitively, one would expect a flattening yield curve to be bullish for gold. Flatter yield curve = economic weakness = safe haven assets (gold) becoming more valuable, especially if such weakening in the economy is followed by monetary easing, or increased expectations of monetary easing. As with any hypothesis, this one is useless without being tested.

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The Making of China's Epic Hard Landing by Dee Woo

Dee Woo 

Dee Woo first gained international attention by writing a personal letter to Barack Obama in October 2010, attempting to dissuade the US from initiating a trade war with China. As a result, he was featured in much of the Mainland Chinese media, as well as in Hong Kong, Singapore, Macao, Malaysia, Canada and the US, including by the Wall Street Journal. Now he is an Economics columnist for many prominent magazines and newspaper cross the east and west.

Dee Woo has very kindly sent his 'take' on the situation in China and given us permission to re-print his views which are encapsulated in the following article:

The Making of China's Epic Hard Landing

1. The unsavory episodes of China's economy

For the better part of 2011,

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When Will Gold Reach a New High?

By Jeff Clark, Casey Research

Some investors are frustrated and a few are worried that gold seems stuck in a rut. This stall in price has happened before, of course, but since 2001 it's always eventually powered to a new high. Unless one thinks the gold bull market is over, it's natural to wonder how long might we have to wait before seeing another new high.

Absent some sort of global shock that sparks another rush into gold (easily possible in today's climate), I think the answer may lie in examining the size and length of past corrections and how long it took gold to reach new highs afterward.

It makes sense that big corrections would take longer to reach new highs than small ones, but I wanted to confirm that assumption with the data. I also wanted to determine if there were any patterns in past recoveries that would give us some clues that we can apply to today.

Gold set a record on September 5 at $1,895 an ounce (London PM Fix) and to date has fallen as low as $1,531 (December 29), a decline of 19.2%. In order to determine how long it might take to breach $1,895 again, I measured how long it took new highs to be mounted after big corrections in the past.

The following chart details three large corrections since 2001, and calculates how many weeks it took the gold price to a) breach the old high, and b) stay above that level.

(Click on image to enlarge)

As you can see,

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Revisiting Our Proposal for an Overnight Gold Fund

In August 2010 we wrote an article entitled “Proposing An Overnight Gold Fund” in which we explored the potential for launching a fund that held long positions in gold overnight and was short gold during the day. We pointed out that “a hedge fund starting in 2001 with $100m, with the strategy of being long gold from the PM to AM fix, and short gold from the AM to PM fix...would be worth $2.16billion today, before any fees and expenses.” We have been monitoring this trading strategy since then and therefore would like to take this opportunity to update readers on its astonishing progress.

Firstly we will introduce the thinking that led us to investigate this trading strategy. There is much debate within the precious metals industry regarding the alleged suppression, or at least manipulation to an extent, by either central banks or the proprietary trading divisions of large banks, or a combination of the two.

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GOLDMONEY: Physical Gold or Paper Gold?

There are three elements to way we have conducted business during this bull market for precious metals. The first step is to own physical gold and silver. The second step is to acquire a small number of quality gold and silver producers. The third step has been the utilization of the options market in precious metals.

Now, a number of our readers have acquired ownership of both gold and silver and actually have it in their very hands, which is something that we most definitely agree with. However, there a number of institutions and funds that provide this service for retail investors and acquire the metal on the retailers behalf. The retailer provides the funds and in return is issued with a certificate of ownership. This is where we have a problem, in that the retail investor has acquired a piece of paper and has not taken possession of the physical metal and so remains exposed to the risk of holding paper in much the same way as he would if he held a share certificate.

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Who Really Owns Your Gold Stocks?

Jim Sinclair

The following is a missive that we received from Jim Sinclair this morning, who is the host of a web site called Jim Sinclair's MineSet

He sums up the situation much better than we can so its well worth the time spent on reading what he has to say. The above link will take to his site and his updates via email are free, so you have nothing to lose by signing up for them.

Dear CIGAs,

Please do not sleep on my dear friends. If you do nothing, you may very well have nothing in the end.

If you do not want to get it in the end you will have to act now on what I have already told you. The material contained in here concerning the system and market events is correct, even though it proposes its own solution. I should know. I have owned brokerage and clearing houses.

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