Shanghai Gold Volume Shock

Yesterday marked the beginning of extended trading hours (night trading) for the Shanghai futures exchange (SHFE), and volume was superb.  The average trading volume during the day is about 90,000 contracts. The first night session saw more than 220,000 contracts change hands!
Slowly, Shanghai’s paper gold market should begin to rival the COMEX.   That’s excellent news for bullish gold investors in the West!

Submitted by Stewart Thomson:

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  1. For decades, the American “paper gold” market (the COMEX) has been the primary market for determining the POYG (price of your gold).
  2. Most analysts in the gold community believe that demand for physical gold will somehow overwhelm the COMEX, and “liberate” the POYG. They predict vastly higher prices are coming, when that happens.
  3. I disagree. I believe paper gold markets will continue to be the primary price setting mechanism for gold, but Asian paper gold markets will be where most of the action is.
  4. Like the COMEX, the Shanghai futures exchange (SHFE) is a paper gold market. Yesterday marked the beginning of extended trading hours (night trading) for the SHFE, and volume was superb.
  5. The average trading volume during the day is about 90,000 contracts. The first night session saw more than 220,000 contracts change hands.
  6. Slowly, Shanghai’s paper gold market should begin to rival the COMEX. That’s excellent news for bullish gold investors in the West!
  7. Public investors in Asia are generally “pro-gold”, while Westerners are generally “pro-fiat”.  Institutional paper gold investors in Asia are more reluctant to sell into price declines than their Western counterparts, and they can be eager buyers of size!
  8. Also, when analysing the gold price, the market actions of Japanese investors should not be overlooked. “Assets held by Mitsubishi UFJ’s gold ETF reached 24.58 billion yen ($243 million) on July 5, compared with 25.86 billion yen at the end of last year, Hoshi said. About half of the assets are held by individual investors, with the rest owned by financial institutions, pension funds and corporations and foreigners, Hoshi said. Trading value in Mitsubishi UFJ Trust’s gold ETF on the Tokyo Stock Exchange amounted to 7.23 billion yen in May, becoming the most-traded commodity fund listed in Japan, according to data compiled by the bank.” –Bloomberg News, July 9, 2013.
  9. The rise of Eastern paper gold markets will be a process, rather than a one-time event, so patience is required. Japan’s paper gold markets are still very small, but they are gaining popularity. The trend is definitely your friend.
  10. SPDR Gold Trust, the world’s largest gold ETF, said its holdings fell 1.56 percent to 946.96 tonnes on Monday – the lowest since February 2009.” –Reuters News, July 9, 2013.
  11. SPDR is a Western gold ETF. In the big picture, the West continues to bail out of gold, and the East is an eager buyer of all that is offered.
  12. The banks are also substantial buyers, as shown by recent COT reports. To view the latest one, please click here now .
  13. You can see that the commercial traders’ long position is growing nicely. The gold community is not alone; powerful banks and many types of Asian entities are buyers now.
  14. Please click here now . That’s the hourly bars chart for gold. It shows the trading on the COMEX.
  15. It will be interesting to see if the SHFE night session traders can put a bit of a scare into COMEX pit traders this week.
  16. Regardless, my suggestion to both Eastern and Western gold traders is to be a light seller in the $1255 – $1275 range, and a buyer at $1175 – $1225.
  17. Please click here now . That’s the daily gold chart. No significant rally has occurred yet, but a number of bank analysts have suggested the decline is nearly finished.
  18. Note the position of my stokeillator. A buy signal is in play, and I don’t like to bet against it. Longer term investors should book some profits in the $1280 – $1320 zone, if the price gets there. Hold the rest as a core position.
  19. Chinese inflation is apparently on the rise again, as are Chinese gold imports from Hong Kong.
  20. Please click here now . You are looking at the GDX daily chart. It’s an appalling picture, but I’m a buyer anyways. From a tactical standpoint, I recommend adding short positions or put options with every purchase of gold stock, to maintain some semblance of emotional sanity.
  21. One reason that I’m now focused on gold stocks more than bullion, is because I believe that gold stocks outperform in an inflationary environment. Since 2008, deflation has been the main investment theme, but I think there is a transition to inflation, in play now.
  22. Also, there’s a lot of talk about owning gold bullion as a “growth with safety” play. I believe in “safety first”, not “safety after I’ve blown up in gold stocks”. Gold bullion is arguably the safest asset in the world, so it should be the first item on every investor’s buy list, not one that is bought in hindsight, after a portfolio wipeout occurs. It’s too late to transition to bullion from gold stocks now, and it’s the wrong play, in my professional opinion.
  23. Silver investors should click here now . That’s the daily chart for silver. I prefer to own silver stocks, rather than bullion. Buyers of silver stocks should already own silver bullion, as your “safety first” play. The red supply line on this chart is a pesky one. The stokeillator is flashing a buy signal, but the silver price still can’t break above that annoying trend line. Patience is the virtue that is required here.
  24. Please click here now . That’s the daily chart of SIL-NYSE, which is a silver stocks ETF. I own it, and I want to own a lot more of it. Will you join me today, in a small way, and show the East… how the West was really won? Hi, ho, silver!

Jul 9, 2013
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com
email to request the free reports: freereports@gracelandupdates.com

 

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Comments

  1. Just lovely … now the elite bankers have THREE … centralized … metals ’exchanges’ in 1) Europe, 2) America and 3) now Asia. This is a GOOD thing, we’re supposed to rejoice? Whoever fools themselves into  believing THIS will bring about rational value to the metals is ‘drinking kool-aide’.

    They can ‘buy time’ for their banknote wet-dream a little longer, but the core rot has no antidote and its ‘terminal phase’ is well into its progression.

    • Pat, are you assuming the global elites are in control of the Shanghai Futures Exchange as well as the COMEX?
       
      I can’t disagree or agree – I just don’t know, but I think it’s a stretch to imagine that is the case.
       
      I suppose time will tell – if they are not in control of it, there should be a divergence between the SHFE and COMEX paper gold prices at some point. Do you think?

    • Speros
      Since, I don’t aspire to be among the ‘professional commentariat’, I don’t keep huge files of stories to reference, anywhere except my head; but I recall that one of the Rothschildes is a KEY ‘player’ in that Shanghai ‘exchange’, which was formed right after all the existing HONEST LONG-ESTABLISHED regional exchanges across China’s provinces were … OUTLAWED and closed by the government there. Kind of a ‘signature’ set of circumstances, I’d say.

    • The English side of the Rothschild family have always been Gold allies. Nat is a bit of a dick, but his dad is pretty cool. Can’t say much for the other parts of the family. They are backing the physical, run a company called bullionvault.com, also firm believers in the energy is money theory, hence the buy in at Bumi.

    • I agree Pat! Rothschild’s are involved in all of this mess which means more suppression so they can cause as much debt as possible. Their goal being to destroy the currencies of the world and each countries sovereignty.

  2. I’m sorry but I think there will never be a substitute for the real physical gold you can hold in your hand, it’s (paper gold) worse than fiat cause you still have counter party risk, the price is volatile and manipulated, you most likely will be settled in fiat as the fund you trade in or the bullion bank show you the fine print that says your contract may be settled in cash. Unless you can breath smoke stick with physical metal you hold in your hand, when the SHTF paper gold goes to zero faster than your fiat hyper inflates 

    • interestingly, and surprised it was not mentioned in the article, the amount of contracts settled by physical delivery at Shanghai is much much much higher than at comex, meaning that many more people use the paper as a way to source physical, similar to anyone here making an order on a website that is on backorder, you buy, have your price locked in, and get your physical at a later date.

  3. Contrary to the article, I happened to think that this opens the door much wider for more manipulation. Chinese government is no more moral than U.S govt. They have good reasons to keep the gold price low. This is not a happy news at all to me.

    • Agreed @silvery1979-  This is CRAP! Article is stating “Use your paper money to buy ETF’s”  To keep the Fiat game afloat as the Military Industrial Complex takes more resources from other countries to sell to the masses as the elite makes twice as much profit by deceit & plunder around the world.  Personally, I don’t  need your stinking paper money to enrich the few!  Now if Chinese, Russian, India, South Africa, & Brazil stand point come together and build competition against the; bought out governments, wall street interests, corporations (with the elite), and sheeple which is dazed & confused by being doped up, locked up, boxed up in a moving containers that moves (automobiles) who are shallow minded (TV commercial worshipers) which are receiving less in their pay checks by a manipulated system that states eating recycled food is good for you. The shell game must NOT continue. 

      History is our best weapon

      Do I hear WWIII?  That is a distraction.  I am going to bury my precious metals because it is not an investment vehicle, but to save my ass just as the Chinese are doing.  Buy & hold is my motto, since UN, wants To take a leader (Assad) out of power just so Military Industrial complex can build pipe-lines to the Mediterranean sea from Iran. 

      Please do not believe the hype. 

      I will be in FEMA camp IX.

  4. All this means is the manipulation moves to China.   They have the Gold now to make it work.    Then in umpteen years it will move back to the West and all start again.

  5. Soon they are going to start shorting tungsten cause thats all they will have left…

  6. sgorem

     
    can’t find a damn can of gold spray paint anywhere in the NYC area & a friend said the same problem was happening in London area too. whats up with that i wonder? :)

    Login or register to post comments

    Tue, 07/09/2013 – 21:52 | 3736064Herd Redirectio…

     
    The tungsten bars need a couple coats at least, I figure.
     
     
    Got to love ZH this is classic

  7. I was reading this article and thought WTF, how can the creation of more paper Gold be a good thing, the mind boggles. All those Chinese investors who think they now own Gold because of a piece of paper. Dilution, dilution and more dilution is all I can see. There again maybe the Chinese want to counter the West’s crusade to crucify PM’s. We will see I guess.

    • I’m thinking the same as you, Neo.  If paper gold is the root of all gold manipulation evil in the US-UK axis, perhaps this is China’s way of horning in on their action?  That would not surprise me a bit.  Additionally, rumor has it that the Russkies have more gold than China, so they could be preparing for some action of their own in this regard.
       

  8. Gotta agree with you guys.
    hard to get excited about this.
    just another shorting opportunity in the futures markets.
    cheers

  9. Mister Thomson doesn’t even stack physical silver. He prefers ETF’s. This guy is just a paper bug looking to profit short term. Might as well put this article in the hall of shame. Like others have pointed out. This exchange may just lead to more shorting. 

  10. I disagree with all the pessimism. I think anything that takes the pricing power from the west, and moves it east is positive. If China wasn’t buying so much gold, and advocating its citizens to accumulate large quantities of it, I would certainly be less optimistic. The elite in China have a big incentive to see gold prices rise–probably not as fast as we would all like but I see them as wanting to take the opposite side of the price suppression scheme employed by the west.
    China’s economy will be larger than the U.S.’s by 2020. I believe China will eventually announce a yuan backed by gold–although this is five to 10 years away. They will only be able to do this when the Chinese citizens have accumulated enough wealth to rely on domestic consumption for future growth. If China were to announce this tomorrow, it would be completely self-defeating –their economy is not prepared for it. That’s is why they are phasing into it by taking gradual steps–and the SHFE is one of them.

  11. Just the heading made me throw-up. Yea! Lot’s of Contracts Changed Hands Yea!       Did The Spot Go Up? NOPE
    You got to be kidding me, rejoice at the Paper Market and all it’s Manipulation. Hell I’m a Physical Stacker and not into Paper. Keep Stacking

  12.  
    Anything that helps remove power from the US crime syndication should be viewed as positive.  The Federal Reserve needs to be removed from the markets and any attempt to do so, no matter where cannot make matters worse than we have seen in the past 30 years.  Unfortunately, the US is a cesspool of liars and cheats and spy’s and the epicenter of this fraud is the Federal Reserve and its friends on Wall Street.

  13. I am afraid that all that is happening here is the same crooks are now setting up there shell game in the east .

  14. To me this is a non-event, no more important than the price of eggs in China. My 90% US coin ‘collection’ is doing just fine, and all of this news has not changed it one bit. It looks and feels the same as it did many years ago, except there seems to be more of it, wondered how that happened?

  15. i think this could be interesting.  the amount of futures contracts in shanghaithat are settled physically is huge compared to comex.  so, does the new volume just mean that more paper is pushed about with no real change and we see delivery of physical shrink as a percentage of open interest, or does the increased volume also result in an increase in the physical deliveries?
     
    My lean is tht it is likely just more paper trading hands, but the fact that so many at shanghai choose to execute via physical delivery is an interesting twist,

  16. More paper… need I say more
     

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