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China to Use Gold in Order to Undermine US Political and Economic Dominance?

Weekly Markets
Precious Metals - UBS on Swiss Buying; Rothschild;
Strong Demand in Middle East; HSBC on Seasonality
Oil - Above $60 Again
Commodities - Strength Continues
Currencies - Berlusconi's Antics; USD Crisis
Bonds - Yield Curve Flattens
Stocks - DOW & Gold 35 year performance in % terms
Property - UK housing slowdown affecting consumption

Weekly Commentary
'A Golden Solution To The China Syndrome?'
Richard Lehmann, Editor of Forbes/ Lehmann Income Securities Investor

Mike Dolan, David McWilliams, Jean Phillipe-Cotis, Bill Gross, Bill Bonner, John Challenger, Bill Fleckenstein, Warren Buffet

Performance ( % Change)
  Current Level  5 Days  1 Year  5 Year 
Gold  429.50  1.2%  11.0%  51.7% 
Silver  7.22  2.4%  14.2%  44.8% 
S&P  1,234.18  0.0%  12.7%  -16.5% 
Nasdaq  2,184.83  0.2%  16.1%  -45.7% 
ISEQ  6,770.12  -0.4%  28.5%  36.1% 
FTSE  5,282.30  0.8%  22.1%  -18.7% 
USD/EUR  0.8239  0.3%  -0.9%  -21.8% 
OIL (Nymex)  60.57  3.3%  41.7%  100.0% 

"The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops." - The Economist

Weekly Markets

Precious metals were up for the week.
Oil and commodities up for the week.
Stock markets were mixed for the week.
Bond markets sold off with a consequent rise in yields.

Precious Metals

Gold was higher by $5.10 or some 1.2% for the week; from $424.40 to $429.50.

Gold in EUR terms for the week was again up more than 1% up from EUR352.11 to EUR356.34.

Silver was higher by $0.17 or some 2.4% for the week; from $7.05 to $7.22.

Platinum settled at $896 from $889. It was up nearly 1% for the week.

UBS reported on very strong buying out of Switzerland:

"Gold opened weakly in Comex trading on Wednesday, under pressure from the strong dollar and this led Comex traders to try gold from the short side early on before some weighty Swiss buying, probably speculative in nature, wrong-sided the market and gold never looked back after that."

Gold imports into Turkey for July were reported by The Istanbul Gold Exchange. It was a record month for gold imports with 34.625 tonnes imported. The Istanbul Gold Exchange started recording data eleven years ago and this figure has never been surpassed. It was a significant 50.3% higher than June and 1.8% above the level of July last year, the previous record. So far this year imports are 21.2% above last year's imports which were themselves a record.

The Istanbul Gold Exchange is where many buyers in the Middle East acquire bullion. Geopolitical uncertainty, terrorism, the threat of a war with Iran and the 'war on terror' are undoubtedly underpinning strong demand from the region. Also record oil prices are filling the coffers of oil producing countries in the region and some of these petrodollars are being recycled into gold.

Commonwealth Bank of Australia commented on this in a report which was quoted in Reuters and can be found in our Opinions of the Week section:

"Strength in both China's economy and currency and heightened investor interest should support Asian gold demand over the next year. And with rivers of energy dollars flowing into the Middle East, demand there shouldn't be too shabby either,"

NM Rothschild & Sons (Australia) Ltd said that China's currency revaluation is expected to boost domestic demand for gold and help provide a base for gold prices.

"Without a doubt, revaluation is going to underpin metal prices, particularly gold, by making them more affordable from a Chinese standpoint," said Darren Heathcote, head of trading at N M Rothschild & Sons (Australia) Ltd.

Interestingly Rothchild's noted that India imports some 700 tonnes of gold per annum while China imported only 230 tonnes last year which was up 13% on the previous year.

"I could see demand (growth) rising toward 20% this year from about 13% last year and it's only a matter of years before we see (China) up there with India in terms of overall quantity," Heathcote said.

HSBC had some excellent research on seasonality in gold and how August and particularly September have historically seen the best performance of gold:

"July historically has been a poor month for gold. Over the last fifteen years the average monthly price movement during July has been a decline of USD1.56/oz, while over the last five years July has seen an average fall of USD5.93/oz.

Indeed, over the more recent period, July has been the worst month of the year for gold.

Since 1990, gold has risen in July only five times, and fallen in eleven, while since 2000 gold has risen only once (2003 when gold rallied USD4.40/oz) and fallen five times.

The good news though is that August, and particularly September have historically been good months for gold. True, since 1990 gold has been little changed on average through August, and has risen eight times and fallen seven, although the performance since 2000 has been more impressive. Gold has risen in four of the last five Augusts and has fallen only once, averaging a rise of USD11.18/oz. September has been a more reliable month, with gold price rises averaging USD9.06/oz since 1990 and USD8.21/oz since 2000. Over the last fifteen years gold prices have rallied through September twelve times, over the last five years gold has increased four times. (a USD3/oz fall in 2000 the exception)."

A Golden Solution To The China Syndrome? - Forbes
Gold Price Target: $500 by year end - Turk, CBS Market Watch TV
Gold Prices on Comex Rise as Euro Strengthens Against Dollar - Bloomberg
China Needs Higher Gold Reserves - Shanghai Gold Exchange - Dow Jones
Gold Prices Rise for Third Day in Four Amid Terror Concerns - Bloomberg
Gold recovers, security threats - AME Info
Hot on Commodities... Gold, Hubbert's Peak & More - Investment University
21st Century Gold Rush - Gold Eagle
Gold Watch: The China/US dollar equation - Resource Investor

In order to read the complete newsletter please click here or for previous editions of the newsletter click here.

Gold Investments were featured in the July/August edition of The Investor Magazine in an article entitled 'A Golden Opportunity'. We were also featured in the July Edition of the 'Irish Broker', the official journal of the Irish Brokers Association, in an article entitled 'The Case for having an Allocation to Gold Bullion in an Investment Portfolio.'

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