Comments: A forceful move down in the USD portends good things for Gold. There is still some lateral support but I think it's just a matter of time before that breaks--if it doesn't break early next week. The volatility bands were squeezing shut very tightly so there could well be quite a lot of volatility left in this move.[Edit from Sunday 11/26: a senior Chinese F/X official was quoted over the weekend as saying that countries that are holding U.S. Dollar reserves find it difficult to diversify because no other asset has the same liquidity as the U.S. Dollar, making a big sell off in the USD unlikely. I think this news may result in some kind of bounce attempt in the U.S. Dollar. That's the problem with relying on these rumors that China is going to diversify out of the U.S. Dollar and into Gold. However, one alternative to the U.S. Dollar is the Euro, which offers plenty of liquidity. So, in my opinion, China doesn't need to diversify its reserves into Gold, for Gold to appreciate--they can indirectly cause Gold appreciation by buying the Euro instead, with which Gold has been strongly correlated.
Comments: The XAU was the index that failed to confirm the move up in the HUI in September, but this time it appears to be leading in breaking the downtrend, despite some weird-looking chandlestocks the last two days. Still need HUI to confirm the downtrend break (a move above 347 should do it).Portfolio Gain/Loss for the Week: +4.75%. I made back last week's losses and then some. I bought back a bit on Friday, but I was careful not to go overboard just yet. Hopefully December will bring another nice long winning streak. In my options portfolio, I really lucked out on the FCX calls, which was a huge surge for me. I'm around half way to making back my depressing options losses now. Just going to take it one day and one week at a time.
4 comments:
If I were holding $1 trillion USD, I would also be making public statements to try to prevent a panic, too. It is clearly not in the interest of the Chinese to have a sudden and dramatic decline in the Dollar. It is also not likely that they would want to telegraph their intentions in regard to diversification, no matter how relatively small, as doing so would make it more difficult to carry it out. One of the ways that the Chinese have been deploying their massive USD reserves is by working with South American and African countries on infrastructure projects. They secure long-term access to raw materials and in exchange, provide the means for infrastructure projects that will help move those raw materials and also to bolster the economies of those countries. They are NOT doing this in the form of govt-to-govt loans, but are loaning money to Chinese businessmen who build the projects and then re-coup the investment through usage fees and tolls. Pretty smart, eh?
p.s. I just read Clive Maund's latest article at 321Gold, regarding the breakdown in the USD. It's worth a look.
http://www.321gold.com/editorials/maund/maund112706.html
Agreed. Central Bankers, and I think Chinese Central Bankers, are a wiley lot. I generally suspect that they do the opposite of what they announce. In fact, do oyu remember that Copper trading scandal where a major Chinese trader was caught in a short squeeze in Copper. Right before that happened, Chinese officials had been making some bearish statements about Copper and their intention to unload it. I think it was pretty obvious that there was some serious collusion going on.
I have also been paying attention to the Chinese moves in the middle East and more recently, in Africa. The Chinese are not to be understimated.
I visited Shanghai last year and that city impressed me with its modern, almost futuristic architecture (though I was less impressed with the people there, but that's another story). I read somewhere that they intend to build 150 cities the size of Philadephia in the coming years. It will be interesting what happens there.
I did read the Clive Maud piece. I basically agree with it. It's exciting stuff, though I think the dollar has some lives left before it permanently breaches 80.5 on the USD Index, which will mark the official beginning of the "Dollar Crisis", whcih i believe will be the major financial event of our generation.
Hope all is well. What are you focussing on these days in your investments? Nice call on Uranium by the way. It seems that prices really did get squeezed as a result of Cameco's mine disaster.
Titan - yes, all is well, thanks. Pretty much the same playbook as I have been using. It seems to be working well, so I intend to stick with it unless something changes in the big picture. Cheers!
tsl
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