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China corners the gold market like the Hunt Brothers goosed silver in 1980

 -- Published: Sunday, 26 January 2014 | Print  | Disqus 

By Peter Cooper

China has effectively cornered the gold market over the past couple of years by draining the vaults of the world and will now create a shortage of the yellow metal that will hike its price just as the US billionaire Hunt Brothers goosed silver in 1980 and sent the price to levels it has never achieved again in 34 years.

Only this time around something is different. The Comex wonít be able to change the rulebook as it did to bring the Hunt Brothersí empire crashing down with the silver price. China has actually taken possession of the physical gold. It is not a paper derivatives contract at stake this time.

Gold watchers

Gold watchers are waiting for two announcements at the moment: the hour of reckoning when the Comex no longer has sufficient gold in its warehouses to cover deliveries; and a report from China that its official reserves are up from 1,054 as last reported five years ago to more than 5,000 tonnes.

How anybody can be fooled by Goldman Sachs and Morgan Stanley into thinking that the next big move for gold will be back to $1,000 we donít know. Did somebody not once say that if you are going to tell a lie make it a big one and people will believe you?

What these US investment banks have done is to capitalize on investorsí myopia: they only see what is in front of them in US financial markets and donít see the wood for the trees. Think US domestic short-term and you have a recovery on your hands and a runaway stock market.

Still cashing out of gold after its big tumble last year and investing in the stock market that has just stalled after a stellar run looks like a suicide ticket to us. Perhaps the rise in the price of gold and silver since the beginning of the year is a sign that we are not alone in seeing this.

Maximizing ROI

Readers of the ArabianMoney investment newsletter will know our view on 2014 and how best to leverage up on rising precious metal prices (click here). Sadly we canít give this information away on this website and it remains proprietary to the newsletter only.

What we can tell you is that Chinaís cornering of the gold market is the biggest thing to hit precious metals since the Hunt Brothers cornered silver in 1980, but the Comex wonít be able to break Chinaís stranglehold so prices will head very much higher from here.

Of course silver will have the last laugh, and outperform gold as it always does to the upside. Given the 60 per cent discount to 1980 prices silverís price increase will be epic.

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 -- Published: Sunday, 26 January 2014 | E-Mail  | Print  | Source:

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