All Things Precious Metals

[Pro-Life]

Is April 19th the Catalyst?
by Brian Cowan 14/04/2016 9:52 PM

https://www.marketslant.com/articles/april-19th-catalyst

Will April 19 2016 be the Catalyst?

Recently, there have been many articles about the new Chinese gold contract being launched on April 19. The popular opinion is that we may have real price discovery again in the precious metals sector. Why? The contract must be settled in physical gold, unlike most of the contracts in the west that settle in cash. The additional physical demand attributed to the contract could be huge. The western banks were asked to participate, but to my knowledge only Standard Chartered and ANZ have got on board. How will the rest of the banks be able to deal with this new contract? The precious metals derivative books of the major western banks are huge and should certainly feel threatened by this new contract. But don’t expect these banks to truly suffer, as it is widely speculated that they control precious metals prices on behalf of the Fed. And the Fed will bail them out in the name of national security. The Fed justifies this manipulation as price stability, which is a key mandate for the Fed and many central banks.

Currently, the Chinese are looking for a way to convert their paper into tangible assets. Real estate has been a huge beneficiary. As an example, it is generally agreed that most of the speculation in the Vancouver B.C. real estate market is being driven by the Chinese. But where will the Chinese money turn next? As we know the Chinese have a love of gold, and will look to this new contract as a way of diversifying out of paper.

On the horizon there are many bullish factors for this contract. Firstly, if this contract performs as it should, many of the miners who are currently giving their assets away, will look to supply this market and bypass the highly manipulated contracts in the west. Secondly, in October of this year the yuan is included in the SDR, which most central banks reference to adjust their reserves. This means selling of U.S. dollars as they rebalance. Historically whenever there is USD weakness, precious metals appreciate.

Thirdly, as the world economy slows we have a surplus of copper and other industrial metals. Copper miners have been a big supplier of precious metals and as they curtail operations there will be less precious metals supplied to the market.

Finally, as global debt levels continue to increase and central banks pursue negative interest rates, precious metals cannot be ignored as a hedge for disaster. More and more money managers will realize the attractiveness of precious metals in their portfolios.

In summary, no one can predict exactly how this event will unfold. It is interesting that a special meeting was held by the Fed last Monday. It wouldn’t surprise me if this new contract was discussed and a strategy devised to deal with it. Or maybe they realize they have kicked the can to the end of the road and hit a wall.

By the way anyone remember the central bank term “Escape Velocity” ?
Experiment never worked!