A Golden Time Bomb

I have no clue what implications this has, but this event will probably tell tales of knowledge preceding its tales of profits. This news came out today but I am still shocked that I haven’t yet received 40 emails regarding it.

Imagine giving a billion people the ability to buy something they really like… on credit. That’s the way I see behind the following headline:

Shanghai Futures Exchange sets details of gold futures; trading starts Jan. 9

Get it? The exchange has decided to raise the minimum contracts to 1000g (about 320 oz.), up from a previously stated 300g, in order to limit speculation by smaller investors. To give you a figure 300g = $81,000 and 1000g = $27,000.

That’s a lot of money. And the Chinese have it, especially those who understand the value of gold. I can see this going both ways. If you remember, a while back Uranium was trading at about $120/lb. up on an amazing run from $10 offering investors who had access to the metal a whopping %1,200 return. Then, Uranium started trading on the U.S. Futures exchange. To say the least it’s down to about $80 now.

In other words, either investors bid up the price too high waiting for the suckers to come speculating on the price rise. When they did they unloaded and how! Or speculators just saw a shorting opportunity from the run-up and profited from it.

The scenario for gold may work the same in the short-term. Chinese institutions may see a selling opportunity and some may even short. However, what I see ion the long-term is shocking. In my opinion this is the government’s vehicle enabling then to buy and sell gold easier and faster. Institutions will also run on board. I can then see pools of smaller investors coming together to grab a piece of the price rise.

Remember what happened when Americans were finally able to buy gold after 30 years? Now imagine that China is faced with the same predicament. This is the early stages of gold coming to the availability of the market.

Again, I have no clue what January 9th may bring. All I can say is that if it goes lower that’s nothing that the investor and the gold-bug haven’t seen before. If on the other hand gold rockets higher it may be the first and last time that the Chinese will see gold so cheap. (Yes, Mao would be pissed!)

So, mark your calendars because we will definitely see history in the making. I’m just not sure what part!


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