Chinese Demand For Gold Remains Strong!

August 5, 2014 · by 

Good Day! …  And a Tom Terrific Tuesday to you! I hit all the traffic lights on green on my way to work this morning, so that in itself confirms it will be a Tom Terrific Tuesday! I saw my St. Louis oncologist yesterday as a follow up to last week, and he informed me he’s leaving that office… He’s the second oncologist I’ve had in St. Louis, with both of the previous ones leaving… Is it me? Oh well, onward and upward, as the Big Boss, Frank Trotter, likes to say! Oh, by the way, he repeated that I’m “stable”… I told him that a few of my readers would probably argue with that, and he laughed… Crazy evening for me, as I inadvertently turned the ringer on my phone off, and I missed all the calls and texts telling when to arrive for Delaney’s birthday dinner… So, I missed out… What a dolt thing to do! See? I even call myself a dolt, when it applies, which is why I don’t understand why I can’t call others such when it applies!

Speaking of when it applies… Riddle me this Batman… Gold goes down during the heavy fighting in the Gaza strip, but rises in price when there’s a cease fire, and a withdrawal of Israeli forces… How does that happen Batman? Is that like the Nickelodeon show that my older kids used to watch, called, “The Opposites”?  It sure appears to be! So don’t ask me anymore what Gold should be doing, for I’ll be on the wrong side of the tracks, thinking logically, while Gold traders are on the other side of the tracks thinking like they’re playing out an old Nickelodeon Show!

Nah… Things will go back to fundamentals and logical thinking eventually… And then once again, I’ll be right on the night! HA!  Speaking of not being right on the night… There’s a bias to buy dollars that has taken hold as the night went along, and Asia handed the books over to Europe… I’m wondering just what caused that shift, for Spanish and Italian, certainly peripheral Eurozone countries, printed stronger than expected Services PMI’s (non-manufacturing), in July… Spain’s was higher than June’s reading, and Italy’s slipped a bit, but not as much as suspected to be the case, so… The Eurozone got a shot in the arm, but that hasn’t kept the euro from sliding below the 1.34 figure this morning.

As I told you yesterday, The Reserve Bank of Australia (RBA) was meeting last night (Tuesday morning for them) and the RBA left rates unchanged, and RBA Gov. Stevens just couldn’t resist taking a shot at the Aussie dollar (A$)… Stevens said, and if you feel like you’ve heard this before, no worries, you have! “ The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance that it might in achieving balanced growth in the economy.”

The “balanced growth in the economy” that Stevens is talking about is this shift from the mining boom to an economy led by industries including residential construction… Remember it was the previous Gov’t, that killed the Goose that was laying the Golden Eggs in the mining industry… So, now the mining industry is on its knees, and the Aussie Gov’t was to rebalance the economy…  That’s good of them I guess, but I still get angry and go yell at the walls when I think of what the previous Gov’t did to mining..

While we’re kicking ‘round the cobblestones in Australia, the Aussie Trade Balance printed for June last night, and printed much better than expected… A deficit of $2 Billion was expected, but it came in at $1,683 Billion… Now, I know there’s two ways to look at this… But in the end, I’m a fan of lower Trade Deficits… I prefer to look at it as exports being better than expected… But then you could also look at it as the domestic demand for foreign goods weren’t that strong… See why I prefer the former? Oh, and the Aussie dollar (A$) is basically flat but down just a bit this morning… So, all-in-all, the RBA didn’t achieve maximum results from their dissing of the A$. The dissing was probably offset by the better than expected Trade Deficit…

The boys and girls over at RBC research tell me that following Friday’s Jobs Jamboree (my words not theirs!)  that this is the strongest 6 month average of jobs gains since 2000… Ahhh grasshopper, but do I have to remind you that in the last 6 months, part of that “strongest jobs gains since 2000”, has been ghost jobs totaling 839,000!  I know, you’re saying but Chuck, some of those Birth /Death Model jobs had to actually materialize eventually… And yes, I’ll give you that… But… Where’s the negatives? Where are the jobs lost due to businesses closing down?  I have something on this whole thing in today’s FWIW section, so make sure you don’t miss that!

So, as I look at the currency screens this morning, the Chinese renminbi/ yuan, Indian rupee, Russian ruble, Sing dollar, Gold, & Silver are the only currencies posting gains VS the dollar this morning… The rest of them, are either flat or down VS the dollar, as my fat fingers fly across the keyboard this morning… HA!…  Speaking of flying across the keyboard… I was asked recently what was the one subject you took in High School that helped your career… I thought long and hard about that, and then said… Typing… Just shows to go you that I’m with Paul Simon when he said, “When I think back on all the cr… I learned in High School, it’s a wonder I can think at all”…

Of course, Gold’s increase in price this morning is just a couple of bucks, and it’s now a couple bucks lower than it was when I first began writing this morning, which doesn’t bode well for today’s action, for usually when we see this weakening this early, the price manipulators use it as their foot in the door to Pile On..

Well, we sure haven’t gotten August off to a roaring start! I walked into the Big Boss, Frank Trotter’s, office yesterday, and he asked me what was going on in the markets… I told him, that we’ve seen a 4 tick move in the euro today, and everything else is stuck in the mud… He told me, that this was the usual August doldrums for the currencies, and I said, “Well, that’s all fine and good, but what do I tell readers happened today, the euro moved 4-ticks?”  He laughed and said, you might want to hit your head on the desk to wake you up first!   HA! But seriously, that’s how it feels when we get like this in the dog days of August, which is traditionally a month of vacations, and getaways. Shoot Rudy, in Germany they close up for August! Well, that’s how it used to be, but these days, with so many manufacturing companies going robotic, who knows?

But to think we might have “something” to move the markets out of this mud they are stuck in, could be difficult to come to reality… We should hope that there are no “black swans” events for the markets in August… Or maybe we do hope there is a “black swan” or two!  Would make reporting more interesting instead of you having to hear about my high school typing class! HA!

WOW! I almost forgot to look this up this morning! Last night while I was sitting at home by myself again, I was reading some posts on Google+, and came across a submitted article by Gold guru, Koos Jansen… I know I’ve talked a lot about Gold today, but this is important stuff… So I don’t want to delay a day to print it! So here you, Koos was quoted on Bullionstar.com… “In ?China’s Xinjiang Uygur Autonomous Region, the largest province in China, there has been a massive gold deposit discovered, according to Xinhua News. At least 127 tonnes has been found in resource rich Xinjiang, said the regional bureau of geology and mineral exploration and development.”   He then followed that up with this little ditty: “Using SGE withdrawals as a reference, China mainland has net imported 670.7 tonnes year to date. Based on net imports, Chinese mining, a jewelry base of 2,500 tonnes in 1995 and guessing how much the PBOC has accumulated since 2009, total estimated Chinese gold reserves stand at 14,901 tonnes as of July 25. This is 11 grams per capita. I believe this estimate is conservative as it’s likely the jewelry base (calculated by the World Gold Council in 1995) does not include gold hoards by wealthy Chinese families and I don’t have good import data from prior to 2007.”

SGE stands for Shanghai Gold Exchange…  so you now you know!

So, do you recall last week, me talking about the Hong Kong dollar / honker peg to the dollar, and how it was reported on zerohedge.com that the Hong Kong Monetary Authority (HKMA) was defending the peg? The folks at zerohedge.com took this as a smoking gun that the peg was about to be dropped…  I didn’t argue against that, but thought instead that the HKMA had plenty of ammo to defend the peg… Well, now zerohedge.com is reporting that they think they found another smoking gun, as they reported that Russian oligarchs are de-dollarizing their cash holdings and shifting to Hong Kong dollars… Apparently they believe that up to 40% of their cash position has been shifted from U.S. dollars to Hong Kong dollars…

Here’s my thought on all this… I don’t get what the Oligarchs are up to here, as shifting to Hong Kong dollars is like keeping it in U.S. dollars, because of the peg… Unless… the peg is dropped… While I think, and I showed you how I think it will all go down last week, that the peg will eventually drop, I don’t think right now is the time… But, if you are like the Russian Oligarchs and think that now is the time, or that you just want to be there “ahead of time” then go ahead and own some honkers…

Well… Yesterday, Chris sent me a graph that’s very interesting… It’s a graph that charts the Fed’s Monetary Balance, and the S&P 500… Talk about two peas in a pod! Which kind of makes you fearful of what could happen once the Fed stops adding to their monetary balance… Doesn’t it? I guess it would help if you saw the graph, which I’m going to try to add to the Pfennig web site posting this morning, so if it works, and trust me, I’m not even your last choice of a “techie” to get something like that done, but if it works, you’ll be able to see it at www.dailypfennig.com

Oh, it didn’t work! Oh well… I tried…

The U.S. Data Cupboard has the Services PMI to print today for July, and Factory Orders for June… Not a lot to talk about here, except that tomorrow we at least get to see the June Trade Deficit… Like I told you yesterday to start the week, it’s a light week in data here for the U.S.

Before I head to the Big Finish today… I mentioned the 5 Fridays, Saturdays, and Sundays yesterday as being something special, and several of you dear readers pointed out that it was not that special… So, sorry… As I said in the letter yesterday, I was only reporting what I was told, and I thought it to be interesting…

For What It’s Worth… Today’s FWIW contains snippets from an interview with American entrepreneur Wayne Gorsek, who started his first company in 1994, in the basement of his home, and brought the small company to one of the most successful online vitamin retailers in the world! So, I would think he knows plenty about starting a company in the U.S.  But that was 1994, and now he’s decided to do it again, only this time, things have changed dramatically, and it’s for these reasons that Mr. Gorsek sees the decline of small business and the middle class in America…  Here are some of the snippets:

“It doesn’t surprise me that there are 92 million working-age Americans no longer working and even worse 108 million are now on one or multiple forms of welfare. It doesn’t surprise me that for the first time in history more businesses are failing each day than starting. I’ve now seen the reasons for the murder of the middle class up close and personal.

Gorsek says things have changed dramatically since he started his first company in 1994 and not for the better:

I have found it three times more expensive and far more stressful and difficult compared to 20 years ago. The differences are stunning. I did not have to risk $26 million of my own money to build a state-of-the-art vitamin manufacturing facility in Las Vegas. I didn’t have to… but I wanted to. I did it to create jobs; to lower vitamin prices and significantly improve the formulations with MADE IN USA vitamins for consumers; and to help turnaround the economy.

A trillion a year in welfare spending incentivizing people not to work has made it hard to find quality employees. Why work when you can stay home, sleep late and collect dozens of different welfare checks, free food, free cell phones, free health care and many other freebies from government?

Then there are the much higher income taxes and capital gain taxes; employment taxes, hundreds of thousands of pages of onerous regulations, fees and fines; plus the lawyer and accounting costs to comply with a maze of city, county, state and federal laws…

Now add in Obamacare, the biggest job killer ever. Because of the massive costs of Obamacare, many employers have no choice but to lay off employees, or create only part-time low wage jobs. When I started my prior company in the 1990s health care costs were $1 trillion per year, they are now at nearly triple that insane level to $2.8 trillion per year.

Lastly, the ease for employees to file frivolous lawsuits is truly a disgrace. Lawyers are job killers, but guess who runs government and makes the laws? Lawyers. It just doesn’t pay to risk your money to start a business anymore when the chance of failure is now near 100 percent and the government has monopolized the wealth and power to the Fortune 1,000 companies (because they are the only ones that can afford to ‘pay to play’).”

Chuck again… This is powerful stuff from someone who should know the ropes folks… If you would like to read the whole report of what he had to say, you can find it here: http://www.theblaze.com/contributions/legendary-business-owner-warns-of-economic-collapse-2/

There’s also this thought I have about the difficulty in starting a business here in the U.S. and that is… Does that bode well for having 839,000 jobs added for business startups in the last 6 months? In my book, the answer is a big fat NO!  And if I were king, I would be sounding like Ricky Ricardo telling the BLS… “You’ve got a lot of explaining to do”!

To recap… Well, things were moving along nice and quiet in Asia last night, but when they handed the books over to Europe, traders thought it best to turn to a bias to buy dollars… Gold is up and there’s a cease fire in the Middle East… It’s Opposites day!  Spain and Italy print better than expected Services PMI’s but the euro drops below 1.34… China has a large Gold discovery, which works out nicely given the demand they have for Gold! And Chuck has a special story in the FWIW that debunks the need to add so many jobs by the BLS…

Currencies today 8/5/14… American Style: A$ .9320, kiwi .8515, C$ .9140, euro 1.3390, sterling 1.6865, Swiss $1.0995, … European Style: rand 10.6650, krone 6.2645, SEK 6.8735, forint 233.95, zloty 3.1150, koruna 20.6430, RUB 35.80, yen 102.70, sing 1.2455, HKD 7.7500, INR 60.82, China 6.1655, pesos 13.20, BRL 2.2565, Dollar Index 81.49, Oil $98.45, 10-year 2.49%, Silver 20.21, Platinum $1,459.75, Palladium $847.50, and Gold… $1,291.80

That’s it for today… Cards and Red Sox for the next 3 nights here in St. Louis… The Sox have had our number the last two World Series that we’ve played each other, and while 3 regular season games aren’t the same as World Series games, it would still be nice to give them some pay-back… It was raining on my way in, and hopefully we get a real soaker today, as we are in need of some rain here… Al Stewart’s song: On The Border, was just playing on the IPod, I love his music! And hearing it gets me in a good mood to start the day! Another song that puts me in a good mood is Bob Marley’s song: One Love…  You hear that song, and you think of a beach, the sun, palm trees, steel drums, and umbrella drinks!  Ok, before I go and book a flight to a beach, I had better cut this off here, and hope you have a Tom Terrific Tuesday!

Chuck Butler

President

EverBank World Markets

Editor of A Pfennig For Your Thoughts

1-800-926-4922

http://www.everbank.com

– See more at: http://www.dailypfennig.com/2014/08/05/chinese-demand-for-gold-remains-strong/#sthash.GlsDBk0S.dpuf

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Nuria Pujol