Monthly Archives: May 2012

Why is China hell bent on buying Gold?

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Thomas Fuller once said that it is much better to have your gold in the hand than in the heart. It seems Chinese Government has taken inspiration from this quote. Chinese rulers are heavily into piling up their gold stock to back their currency Yuan. China has come long since it had opened doors for foreign investment. Now China wants that their currency to be in leading currencies in the world. After overtaking Japan as second largest economy in the world now ambitious Chinese have set their eyes on U.S. dollar, the current strongest currency in the world. China has taken major steps to promote the Yuan as a trade and investmChina Gold Investmentent currency. Converting rigid Yuan in open currency is part of their ploy to overtake world markets by their currency. China’s new gold related investment is mirror of their Yuan policy. China is a largest producer of gold. China is on mission to expand the wings by internationalizing its gold market. Communist Politburo has allowed to more foreign bullion, more import and export and bigger transactions in Chinese market.

Not so old story when Chinese Yuan was not considered a good equalizer in trade. But then People’s bank of China entered in the picture to take control of situation. Their ambition is to in be the same line of Euro and Dollar. People’s Bank of China is currently owned 1,054.1 tonnes of gold compared to European Central Banks (all 17 countries) 10,401.3 tonnes and U.S. Federal Reserve’s 8,133.5 tonnes. It’s evident from the numbers that China is too far behind than other major world players.

China is taking every measure to ensure that they will not lag behind any more. In order to attain this goal China has stopped all gold bullion export from the country. China has sent a strong signal to other nations. No more golf from China will goes to the outside world. The net production of 350 tonnes gold will goes in the people’s Bank of China vault directly now. Its good news for the people who are in daily gold stock picking.

How to Invest in Gold

China’s bid to be in the same league of dollar and euro is not easy one. Iron curtains around China are one major problem. Chinese systems and government policies are not up to the mark if compare to other major nations. Absence of free media and non existent freedom of expression is worsening the Chinese bid to attempt supremacy.

Chinese doesn’t believe in depending only one measure to attain their goal. They have not only stopped the export the gold measure only but also they are hell bent on buying gold in international market. Of the overall approx. 3000 tonnes of gold bullion supplied to the world in 2011, it is estimated that China is on the look out for most of the gold, to back their Currency.  In 2009, China bought four tonnes of gold bullion from Hong Kong. In 2011, China imported 46 tonnes of gold bullion from the other exporters of gold. China has always have many tricks in their sleeves to surprise the rest of the world for sure.

China’s geo political ambitions in Asia –Pacific region are not the best kept secret. Strengthening the Yuan is very important in order to attain their aim. That why China is very serious on this front. According to reputed gold investment newsletters, China’s holy mission to get more and more gold is good news for the investor world wide that are willing to buy gold stocks.

China’s move to buy more and more gold will increase rates of gold stocks in the global market. It’s good opportunity for gold investors to earn some profit. Now they know if they want to sell gold stocks where they have to look out.

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Critical Warning Number Six Video

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Critical Warning Number Six Video by Michael Lombardi


Get the Michael Lombardi Prediction

Something bigger and more devastating than the credit crisis of 2008 is headed our way. For most people, it will hit them like a brick wall.

It will touch Americans harder and deeper than anything else we’ve seen since the Great Depression.

I feel so strongly about the critical warning I’m about to give you, I’ve decided to document it in this audio-video presentation. And I’ve labeled this a controversial video, because most people will not like what I have to say…they will find it hard to believe until they see all the facts as I present them.

My name is Michael Lombardi. You may have heard of me. Maybe you are one of the hundreds of thousand of investors who get my daily Profit Confidential column.

Or maybe you’ve heard of my company, Lombardi Publishing Corporation. I started it back in 1986. It’s served over one million customers in 141 countries since then.

Over the past decade, I’ve been widely recognized as the predictor of five major economic events.

Japanese Pension Fund Buys Gold as Currency

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Article By: Michael Lombardi

In the midst of the current market correction in the price of gold bullion, a Japanese pension fund, Okayama Metal & Machinery, is going to place 1.5% of its total assets ($500 million) in gold bullion-backed exchange-traded funds (ETFs) (source: Financial Times, May 16, 2012).

This is the first time the fund has bought gold bullion in its history.

The chief investment officer of the fund said explicitly that investing in gold bullion was meant to protect against sovereign risk.

Historically, the $3.4-trillion Japanese pension market has invested in bonds, with the balance finding its way to other assets, but not gold bullion…until now.

How to Invest in Gold

The perception in Japan has begun to change, as retail investors are beginning to view investing in gold bullion as a protection against a crisis—whether it is a tsunami or a debt crisis like in the eurozone.

The oldest and largest Japanese wealth manager, Normura, has added investing in gold bullion in its survey to retail investors. It has found—much to its surprise—that the average Japanese person views gold bullion as the third-most desirable investment.

The second-largest financial firm in Japan, Mizuho Financial Group, has begun to allow smaller Japanese pension funds to invest in gold bullion.

Unlike North America, the talk isn’t of investing in gold bullion as a commodity, but the perception is that of gold bullion as a currency.

Now that the tables have turned and Japanese pension funds are beginning to dip into gold bullion, while the average person in Japan is warming to the idea of investing in gold bullion, increased demand in Japan is just beginning.

Follow me here. If even five percent of assets are invested in gold bullion, then five percent of a $3.4-trillion dollar pension fund market is a staggering $170 billion.

You know what that would do for gold bullion prices…

I don’t believe I’m making an outrageous claim. If the perception of gold bullion as protection against a crisis takes hold in Japan, then five percent is a reasonable portion of one’s portfolio to set aside for insurance against a crisis. I’m not even counting the average person in Japan. The $170 billion represents just the pension funds.

Besides China, Japan is joining the group of gold bullion investors around the world. Central banks as well have been investing in gold bullion in the first few months of this year, as I’ve been writing about in these pages. (See: Half of World Gold Production Being Bought by Central Banks.)

If you want to sell your gold bullion, looks like there are plenty of Japanese investors who will be happy to take it off your hands.

Michael’s Personal Notes :

Last Friday came news that Hewlett-Packard Company (NYSE/HPQ) is considering cutting 25,000 jobs in an effort to help the company trim costs and increase profits.

With the second half of 2012 looking like a continued slowdown in economic growth, I believe we will see more companies like Hewlett-Packard announcing job cuts as the year progresses.

It’s been a snowball effect…

The recessions in various eurozone countries have resulted in big American companies that sell in Europe seeing softness in product/service demand. And the slowdown in China’s economic growth is causing a pullback in demand from one of the world’s biggest economies.

After a couple of years of solid earnings growth from big American companies, I believe earnings growth will falter this year.

Amid stagnant economic growth, companies are finding it difficult to deliver revenue growth. If revenue is not growing, and companies want to increase profits, their next logical move is to cut expenses.

Twenty-five thousand job cuts at Hewlett-Packard is a big number, but percentage wise, it’s only eight percent of Hewlett-Packard’s total workforce. As more companies cut payrolls in the second half of 2012, more pressure will be placed on the unemployment rate and, consequently, economic growth in this country could easily stall.

In a global economy, it is unreasonable to believe a country as big as America can isolate itself from worldwide slowdown in economic growth.

Because of what I have outlined above, the Fed will be forced to keep interest rates low for a very long period of time. As the stock market continues to struggle and economic growth falters, the Fed will be more aggressive in quantitative easing.

So, as investor, I believe you are looking at a prolonged period of low interest rates and more money printing by the Fed, both of which are inflationary.

Eventually, interest rates will be pushed up as a consequence of inflation. It’s just a matter of when. But in the meantime, just expect more of the same…record-low interest rates to continue, government debt to continue rising, and the monetary policy to be very expansive. Oh, and let’s not forget, economic growth to deteriorate rapidly.

Where the Market Stands; Where it’s Headed:

If I am correct, the stock market is just about finished putting in a huge top that will act as the right shoulder of a classic head and shoulders pattern. This means it is more likely stocks are headed down than up.

Facebook, Inc. (NASDAQ/FB) wasn’t able to change the market’s tide on Friday. If there is one thing I know about traders, when the market is fragile, like it was last week, they don’t like to go home for the weekend with too much stock on their books.

Expect a bad summer for the stock market. The economy is slowing rapidly, so corporate profits will be stretched. Those smart corporate insiders I’ve have written about a few times this year…they jumped off the bandwagon at just the right time. (For the benefit of my new readers, corporate insiders have been very big sellers of stock this year; see: Another Key Stock Market Indicator Flashes Red.)

What He Said:

“What group of stocks is next to fall in light of the softening U.S. housing market? The stocks of companies that sell retail products to the American consumer, I believe, are next on the hit list. Many retail stocks are already reporting soft sales. In my opinion, they haven’t seen anything yet in respect to weaker sales.” Michael Lombardi in PROFIT CONFIDENTIAL, August 30, 2006. According to the Dow Jones Retail Index, retail stocks fell 42% from the fall of 2006 through March 2009.