Raleigh – Yesterday you asked, “Copper, aluminum, iron ore, steel. And what about gold? I remember everybody saying China was buying all the gold. Hmmm, could it just be they were doing the same thing with gold?”
Indeed they were:
https://www.zerohedge.com/news/2014-03-22/how-china-imported-record-70-billion-physical-gold-without-sending-price-gold-soarin
Quoting from the middle of the article: “In other words, the only limit on the amount of leverage, aka rehypothecation of copper, was limited only by letter of credit logistics (i.e. corrupt bank back office administrator efficiency), as there was absolutely no regulatory oversight and limitation on how many times the underlying commodity can be recirculated in a CCFD…. And gold is orders of magnitude higher!”
The ZH analysis, though, describes a different possible price consequence for gold than for all the other involved commodities if the shadowy Chinese Commodity Funding Deals are forced to unwind. But even as the CCFD’s unwind, it sounds like the price of gold will still be determined by the futures (paper) market that China participates heavily in. (I hope I said that right – – technical finance is well above my pay grade.)
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