The Chinese "Buy Signal" on Gold
by Sean Brodrick
The Chinese are buying gold in every way imaginable, which is one very big reason why a new bull market in gold is likely to begin soon.
In several previous editions of The Non-Dollar Report, we have pointed out that Chinese gold demand is robust and growing. Not only is China importing large quantities of physical gold, but it is also ramping up its domestic gold-mining operations... and keeping every one of those newly mined ounces inside its borders.
Now comes a brand-new Chinese gold venture... and it's a biggie.
China's Shanghai Gold Exchange is setting up a new fund to hold physical gold. The fund expects to raise $16.1 billion in three phases. For perspective, $16.1 billion would be about 60% of the size of the SPDR Gold Trust ETF (NYSE: GLD), the granddaddy of gold ETFs. The fund holds a whopping 716 metric tons of gold, worth $27 billion. If the ETF were a country, it would hold the 10th-largest gold reserve in the world, between Japan and the Netherlands.
The new Shanghai-based fund will draw investments from 60 countries, most of which lie along the so-called Silk Road Economic Belt and the 21st-Century Maritime Silk Road. And many of these countries have a traditional and cultural attachment to gold.
Silk Road Turns to Gold
The fund will facilitate central bank purchases of gold for the member countries. But it won't be a pure metal-holding fund. It will also invest in gold mining projects in central Asia.
The fund gives China at least three advantages in one swoop...
•It further expands China's influence over many countries in Central and Southeast Asia.
•It adds another layer to the country's alternative system of gold trading. The Shanghai Gold Exchange already has future trading operations.
•It gives China access to new markets and also lets it get a feel for gold demand among the member countries.
What We Don't Know
Details about the new fund are still sparse. We don't know, for example, how much of the fund will be devoted to physical bullion and how much will be devoted to mining projects. We also don't know if China will expand the fund beyond the initial $16.1 billion, though I think that's likely.
What we do know is that this fund is another expression of China's growing appetite for gold. China has imported about 2,800 metric tons of gold during the past three years. That's equivalent to one year's global gold-mining production!
Additionally, Bloomberg Intelligence has reported that the People's Bank of China may have tripled holdings of bullion to 3,510 metric tons since it last updated them in April 2009. If that's true, China would possess the world's second-largest gold reserve, after the U.S. And some sources say accumulated Chinese gold holdings are even greater than that!
So with all this Chinese buying, why hasn't the gold price moved higher during the last couple years? The short answer is that gold selling in the Western financial markets is overwhelming gold buying in the Eastern markets.
My colleague Eric Fry examined this phenomenon a couple months ago. In a column titled "The Stealth Bull Market in Gold," Eric observed:
Since hitting its all-time high in September 2011, gold has consistently traded to the upside during Asian trading hours, but to the downside during New York and London trading hours.
In other words, for nearly four years, gold has been rising in the East and setting in the West. The cumulative results of these divergent trends have been nothing short of incredible.
During Asian trading hours, gold has gained a cumulative $738 an ounce since September 2011. But during New York and London trading hours, gold has racked up a cumulative loss of $1,177 per ounce...
Gold Sets in the West
[Clearly], Asian gold buyers are more than happy to load up on every ounce that Western investors are unloading... As gold trading volumes grow in Asia, and those volumes represent physical metal rather than mere paper claims, the balance of power in the gold market will likely shift from the West to the East... No longer will New York gold selling squelch Asian gold buying. But rather, Asian buying will set the tone in the gold market.
Already, the Shanghai Gold Exchange has become the world's largest physical gold exchange. This recent achievement could well signal an important shift in the gold market.
There's one last thing you should know about China's gold-buying binge and its new Shanghai gold fund. These maneuvers are calculated and tactical! In fact, Chinese officials have openly stated that launching the new Shanghai gold fund was part of a plan to "increase the influence of the renminbi in gold pricing."
But clearly, China's plans for the renminbi do not end there.
As I have pointed out in these recent editions of The Non-Dollar Report, "A Tsunami of Gold Buying" and "China Takes Aim at the U.S. Dollar," China's recent gold buying is part of a grand plan to establish the renminbi as one of the world's reserve currencies, alongside the dollar.
China has been pressing the International Monetary Fund (IMF) to add the renminbi to the elite four-currency basket that comprises the IMF's so-called "special drawing rights" (SDRs). If the IMF agrees, the renminbi would join the big leagues of reserve currencies - right there alongside the euro, yen, pound... and U.S. dollar.
Gold plays a key role in China's hopes for the renminbi. Building a massive gold reserve would lend instant international credibility to the renminbi as a reserve currency. That's why China's gold buying seems likely to trend higher... and why the gold price is also likely to trend higher.
So why not beat the rush and increase your gold holdings now?
All the best,
For The Non-Dollar Report
With a money flow over coming years into Chinese stocks that will be measured in the hundreds of billions of dollar, buying Chinese stocks is clearly one possibility. For a variety of reasons, this approach may not fit many individual investors. Hong Kong exchange may be more viable and friendly route.
The next alternative should be obvious from the above discussion. Gold is a form of currency that moves opposite the value of national currencies. Dollar and most other national currencies should depreciate versus the Chinese Renminbi. That action should add support to the value of Gold in those currencies.
So for a PE of say 20 in gold bull, the Price is 2.40 year end. Just wanted to point that out, but revenues would grown immensely by then.
Book Value Per Share (mrq): 1.95 Yahoo Finance from Thompson Reuters
Sentiment: Strong Buy
Looking S decreased by a penny per share and revenues are nowhere in sight.
I am also a fan of the Pebble HGTR Reactor:
Sentiment: Strong Buy
" Transparently responding to that Solicitor General announcement, Johnson & Johnson/Lifescan has submitted a request for an unscheduled Case Management Conference to supposedly identify a path to conflict resolution. In actuality, it represents an overt effort to precipitate the court's final appeal ruling and to preclude the hearing of the evidence in the resultant anti-trust litigation"
U.S. Solicitor General Intervenes Against Johnson & Johnson in DECN's Long Running Patent Battle Over GenStrip 50
Sentiment: Strong Buy
LOS ANGELES, April 21, 2015 /PRNewswire/ -- Decision Diagnostics Corp. (OTC PINK: DECN), the manufacturer, quality plan administrator and the exclusive worldwide sales, service and regulatory processes agent for the popular GenStrip™ 50, the FDA-cleared Green Alternative Strip, specifically designed to work with the market leading Johnson & Johnson's LifeScan OneTouch Ultra family of glucose testing meters, the most popular meter worldwide for diabetic use, announced today that Johnson & Johnson/Lifescan has requested an unscheduled Case Management Conference in the U.S. District Court for the Northern District of California. Pharma Tech announced last week that the Solicitor General of the United States had noticed its intention to intervene in support of Pharma Tech's legal arguments in that recent Johnson & Johnson/Lifescan appeal. Transparently responding to that Solicitor General announcement, Johnson & Johnson/Lifescan has submitted a request for an unscheduled Case Management Conference to supposedly identify a path to conflict resolution. In actuality, it represents an overt effort to precipitate the court's final appeal ruling and to preclude the hearing of the evidence in the resultant anti-trust litigation.
Keith Berman, Principal Executive Officer of Decision Diagnostics, commented, "Apparently our recent Solicitor General announcement has forced Johnson & Johnson/Lifescan to fully embrace the inevitability of losing the '105 patent, and with it the totality of their questionable patent infringement case. The upcoming Appeals Court decision on the Johnson & Johnson/Lifescan foundational patent would necessarily shatter their blood glucose test strip franchise monopoly, and also dramatically introduce the now-likely profound implications of a pending financial judgment and possible punitive damages emanating from their egregious behavior. The rash and panicked request to the courts to permit a Case Management Conference clearly suggests that they now anticipate the eventual ramifications of their actions. It also strongly suggests that they are anxious to keep the case evidence and the appellate court's decision from a jury's scrutiny and evaluation.
The motion for an unscheduled Case Management Conference to resolve the case has been filed in an obvious attempt to salvage hope from its successive sustained and expected losses. Not surprisingly, it has been introduced to the sole court to afford Johnson & Johnson/Lifescan any support at all in this 44-month-old case, in a transparent attempt to manipulate that court into forcing Pharma Tech's participation into yet another mandated mediation and to lay the foundation for a summary judgment claim. This desperate effort to position for summary judgment - a case that has been stayed by the courts for almost two years before any facts have been put into evidence, any discovery begun or any expert witness deposed or examined - has been assessed by legal experts to have a remote probability for success.
Mr. Berman concluded, "Johnson & Johnson/Lifescan has elected to file the legal equivalent of the final seconds 'Hail Mary Pass.' Facing imminent catastrophic patent losses that would profoundly impact the monopoly that they oversee, this motion is designed to divert attention from the facts of the case and shift focus towards another unnecessary mediation and their eventual filing of a summary judgment that will unmistakably add to their long list of legal failures. It is unfortunate that this case has devolved into a series of rash and emotional responses. If Johnson & Johnson/Lifescan had behaved professionally and appropriately, they would not now be facing the appropriate justice emanating from their actions
CSO and their LAWYER.
He is paid too much for doing his job. This is toast! I lost out on this as have many others. Look, all these development contracts are based on a successful trial. It had the potential to be a blockbuster..........so Wall Street got their spies in and now? It's worthless..
Do not fall for the BS.
Sentiment: Strong Sell
Hey..........who benefits? Look at the CSO, CFGO and CEO salaries.......and their increases! It's a scam to say the least.
But they just may meet both endpoints as the bar is not very demanding here. If that happens, you will double easily. The odds favor this scenario, based on previous work.