Tag Archives: gold

IMF Sells Gold to India (Updated)

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Update 2 (Nov 3): The only other explanation I can think of is that the Indian government is privy to information indicating that the demise of the dollar is much closer at hand than is being given out..

Update 1:

OK. As you know, I’ve found this Indian purchase a bit puzzling.  I have a bunch of questions:

*Why didn’t the Indian government make a big purchase earlier this year, at $900, rather than now, at the top?

*What, if any, is the connection between this and the Fisk report a few weeks ago about the Gulf Arabs moving out of the dollar, which  a lot of people found odd, despite the reputation of the reporter? The report bumped up the price of gold.

Now, here’s Chuck Butler of Everbank, via The Daily Reckoning:

“I told you yesterday that I thought it would be a “wash” for the dollar and the gold price… But that was before I learned that the Reserve Bank of India paid for their $6.7 billion dollars worth of gold with… SDRs.”

(Note:Reuters reports that the sale was in dollars – which would be dollar negative).

What does this mean? That, over the whole past 15 -20 years of “globalization” while the US Govt. inflated its money and sold its treasuries and fake derivatives all over the world in return for real work and real savings, who were the buyers?

Countries like India, where large parts of the middle-class stored its savings in dollars. Now those dollars are seen as so unsound that the IMF (which is the new locus of Anglo-European global domination) won’t accept them for payment of gold.

That means the Indian government has to give up its SDRs (Special Drawing Rights) in exchange.

Now the resurgent IMF is where the globalists are exerting their power and not in the G20 (which was supposed to augment the power of developing nations when it was established in 1999).

As I blogged earlier, the Financial Stability Board is the new regulatory agency that will coordinate with the IMF, but it includes the G20  and also Spain and the European Commission and is headed by ex-Goldmanite, Mario Draghi and it’s housed at the Bank for International Settlements in Basel. So that is a double hit to any representation India will have in the forum.

India sold gold at the bottom in the 1990s;  and is now buying it at the top nearly 20 years later – thus selling part of the gains of these past years. At least, so it seems to me. To me this smacks of neocolonialism.

And now, it becomes easier to understand why the center-liberal establishment media is interested in co-opting the anger against Goldman and channeling it into various subplots of the financial crisis (naked short selling, the bail-outs etc.etc).

I see this as an elaborate feint to divert world attention from the reprise of Anglo American and European colonization over the last two decades – accomplished, with a  “black” president in charge.

Here’s a piece on IMF sales of gold in 1999. http://www.independent.co.uk/news/business/imf-sells-gold-to-hep-debt-of-poorest-nations-1090154.html

Notice how similar the language is – they’re doing it to increase funding to the poorest countries, etc. etc.

In the news, Bloomberg reports:

“The International Monetary Fund sold 200 metric tons of gold to the Reserve Bank of India for about $6.7 billion, its first such sale in nine years.

The transaction, equivalent to 8 percent of global annual mine production, involved daily sales from Oct. 19-30 at market prices and is in the process of being settled, the IMF said in a statement yesterday. The average price to India, the biggest consumer, was about $1,045 an ounce, an IMF official said on a conference call. Gold for immediate delivery gained 0.2 percent.”

My Comment:

Interesting. The Indian government doesn’t buy gold at the bottom (2000) but now, when it’s at all time highs (shades of the British government selling gold at the bottom).
Now, the Indian central bank is reputed to be very savvy, as are Indian gold buyers. Most commentators expect gold to consolidate, if not correct, before pushing on. It would make sense for the Indian government to wait and buy it on dips.

This is a good move for the IMF. But for the Indian government, which managed to steer the banking system past the whirlpool of unwinding derivatives, I wonder if this move is astute.

Look at the peculiar facts, as reported in the New York TimesWall Street Journal)

“In the last one year, China has increased its gold holdings, by weight, by 75.69%, Russia by 18.78%, the Philippines by 18.50% and Mexico by 108.91%.
Compared with this, India’s central bank did not add anything to its gold reserves in the last one year, according to Bloomberg data.

(Lila: Why not? Why buy gold at record prices when the government was unwilling to buy when it was trading much lower, only this year?)

In fact, the share of gold in India’s total reserves has dwindled over the decade.

In March 1994, the share of gold in the total reserves of the country was 20.86%; by the end of June 2009, gold constituted only 3.7% of the total reserves.”

Even the IMF expressed surprise, as Breitbart.com notes:

“A senior IMF official said that the IMF was “lucky” in selling the 200 tonnes to India for roughly 1,045 dollars an ounce, compared with 850 dollars an ounce in April 2008.”

(Lila: In other words, over the whole period of globalization, India sold it’s gold and bought US treasury…dollars…just what the US government was desperate to get rid off, so it wouldn’t drive inflation at home…)

Again, India sold gold cheap and bought it back at its height. Does that sound like savvy behavior from a country renowned for well trained economists and smart gold buyers?

A former governor of the Indian central bank (Reserve Bank of India), Bimal Jalan, said it was to help the IMF meet its funding needs for loans to the poorest countries, for which it had looked to India and China.

As an aside, in an earlier post, I speculated that the report (by Robert Fisk, a very respected source) about Gulf Arabs moving out of the petrodollar – which was promptly denied – might have been a rumor circulated to bump up the price of gold to help IMF gold sales….maybe, I wasn’t so far off, after all.

I went back to an earlier post this year, in February, which quotes from a list in Richard Russell’s letter:
Note: The list looks inaccurate. I’ll go back and find why Russell’s numbers are so different from the World Gold Council figures below them). (Note: Russell is referring to tonnes of gold; the WGC figures are for dollar amounts. So the discrepancies we refer to at in the percentages).

The US has 8,135 tonnes….64.4% of reserves

Germany — 3,412… …64.4% of reserves
IMF — 3,217… … …(1)
France — 2,508… … …58.7%
Italy — 2,451… … …61.9%
Switzerland — 1,040… …23.8%
Japan — 765.2… …1.9% …(a potential gold-buyer)
China — 600.0… …0.9% …(should be a big buyer)*

A reader notes that this number is too low. I assume it’s a number from before China started buying off market. Compare with list below.

Russia — 495. 9… …2.2% …(is a buyer)
Taiwan — 422.2… …3.6% …(should be a buyer)
India — 357.7… …3.0% …(should be a buyer)
UK — 310.3… … …14.5% …(sold most of its gold at the low price)
Saudi Arabia — 143.0… …11.4% (should buy gold)
South Africa — 124.4… …9.0%
Australia — 79.8… … …6.3%

From Richard Russell, The Dow Theory Letters.

So there you have it. Among countries, Italy, France, Germany, and the US have the most gold. Switzerland has a third of what they have. The UK, South Africa, Australia, and Saudi Arabia are next with about  1/5th – 1/10th as much. Russia and Japan have only a small percent in gold. China and India have even less. What do  most Asians have? Debt (treasuries and dollars) from the US. Neo-colonialism anyone?

Correction:

CNBC has the following completely different list of top gold holding countries compiled by tradermark via Seeking Alpha, posted October 13, 2009.

(Note: Data is based on the World Gold Council’s September 2009 report and is converted to US short tons at a rate of 1 T = 1.102311 US tons. All monetary estimates are calculated at the rate of 1oz gold = $1042 US).

United States $298.4 N/A
Germany $125.0 69.2%
International Monetary Fund $118.0 N/A
Italy $89.9 66.6%
France $89.7 70.6%
China $38.7 1.9%
Switzerland $38.2 29.1%
Japan $28.1 2.3%
Netherlands $22.5 59.6%
Russia $20.9 4.3%
European Central Bank $18.4 18.8%
Taiwan $15.5 3.9%
Portugal $14.0 90.9%
India $13.1 4.0%
Venezuela $13.1 36.1%

Gulf Arabs to Move Out of Petro-Dollar (Updated)

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Update:

I’m adding my comment at the top here after watching this puzzling day. Gold shot up to new highs over $1040 (and not just in the US but elsewhere). Is this the bull break-out the bugs have been waiting for? Maybe. Central bankers and officials from the Gulf states came out to pooh-pooh the story, but it couldn’t be put back in the box.

My puzzlement is this: If gold is soaring because of this “revelation” of the dollar’s death – then why did the dollar itself sink only modestly (at least, as I write).

I note also that the stock market recovered some of its ground. That might have something to do with the Australian Reserve Bank announcing a tighter policy, quite unexpectedly, and in apparent belief that the recovery is real, never mind Joseph Stiglitz, George Soros, Marc Faber, Jim Rogers, and other no-longer-strange bedfellows who think the opposite.

V-shaped, U-shaped, Square-root shaped, or corkscrewed, the recovery isn’t your grandfather’s recovery, that’s for sure. And someone is trying to make a silk purse out of this sow’s ear. That skepticism leads me to wonder whether this very convenient rumor, which coincides with the IMF meeting in Istanbul, might be a certain kind of saber rattling in anticipation of negotiations – except that these very public meetings are never where anything substantial takes place any way. (So says Simon Johnson in a recent blog post). But the IMF is selling gold, we know, and we know also that it wants to make sure it doesn’t hit the markets too hard when it does. Could this little upswing be helpful toward that end? Probably. Could this rumor – widely denounced as insubstantial – have something to do with that? Perhaps.

 

In the news, the Independent’s Robert Fisk reports on the coming fall of the petro-dollar:

“In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.”

The Fed’s Market Manipulation Scheme…

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The St. Louis Federal Reserve Bank has a document on file, marked confidential, taken from the papers of William McChesney Martin Jr. (Chairman of the Board of Governors of the Federal Reserve from 1951-1970, the longest tenure). The collection is housed at the Missouri Historical Society. The paper was discovered by researcher Elaine Supkis and is cited by James Turk at the Gold Anti-trust Action Committee’s website.

Note the following:

“There can be little question that the interconvertibility of gold and the dollar at a fixed price will have to remain the keystone of the international currency structure. At the same time, foreign exchange dealings by the United States monetary authorities, when judiciously applied, can serve to reduce capital flows, to dampen speculation, to minimize potential reserve effects, and hence, to minimize the impact on the United States gold stock.
The basic purpose of such operations would be to maintain confidence in the dollar* Foreign exchange operations would, of course, not be a substitute for other appropriate and basic actions to maintain the integrity of the dollar* but would serve as a highly useful and flexible addition to other monetary and fiscal policy measures..”

Dollar Dilemma…

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At Lew Rockwell, David Calderwood writes:

“If one believes that the failure of the Federal Debt system is imminent, then one should be preparing for TEOTWAWKI (Lila: The End of The World As We Know It). In this event, prudent preparation includes quitting the job, selling the house, moving the family to a temperate rural area and converting all assets to guns, food, ammo, farmland, livestock, barter goods, and books on how to live an 18th century lifestyle.

The trouble is that preparing for TEOTWAWKI renders one in a very poor position should things not be quite so catastrophic. People are incredibly resourceful and the history of communism shows us that even unsustainable systems don’t necessarily collapse all at once.

If the federal government system survives for a period of time after the Federal Reserve banking cartel crashes (or more likely, is seized by an Act of Congress), instead of an immediate dollar collapse, surviving dollars would soar in value. Ironically, the closer any dollar credit exists to the U.S. Treasury, the longer it may survive. The idea in this case would be to hold the last surviving dollar credits, stepping off that boat to the dry land of hard assets when all vulnerable credits have disappeared and asset values have declined about as far as they’re going to. Then will be the time to flee dollars in fear of the appearance of ever-larger denominations of currency, the hallmark of currency hyperinflation.”

My Comment:

I’m playing both sides. I’ve left for a temperate clime, started scouting out my rural retreat, am on my way to learning how to skin squirrels, drive a buggy, and forage for roots (in a manner of speaking)….AND I cling to my dollars.

I’ve been a dollar contrarian…all through the ups and downs of the last three years. (It’s been a sickening ride) Why? Because someone who knows a lot about the world told me this a few years ago: “Don’t bet against the United States of America.”

[Note: That’s not a vote for the dollar, which I think has terrible fundamentals. It’s a contrarian approach to moving out of the dollar. And as always, if things change fast, I’ll change my mind with them. I’d modify that: don’t bet too confidently against the United States.

Gold Action Vindicates Caution

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All the bugs who were rah-rahing and telling people to buy gold over $1000, instead of cautioning them to take profits and watch out must be feeling subdued. Despite the thrust upward to yearly highs, the gold action this year never struck me as spectacular at all. Considering everything that’s gone on, it’s been rather staid.

The most common explanation for that from the gold bug community is manipulation.  GATA has recently got confirmation of Federal Reserve gold swap arrangements that would certainly fall under the category of market intervention.

A second reason is that we still haven’t come out of the deflationary movement of the economy. We had the first wave of contraction last year, followed by an artificial bounce provoked by stimulus money and a lot of happy talk from the pundits. Now the second contraction has begun. Gold might do well in a deflation relative to other commodities, but so far it’s tended to sink when the market sells off, and that’s precisely what happened yesterday. No surprise there for me at all.

But it seems to have been a surprise to some traders out there. Rick Ackerman at Rick’s Picks expresses his puzzlement over the rush to dollars – it’s a rush to the Titanic, he argues.

Well – that’s why fundamental analysis is something you need to put on the back-burner when trading. I don’t care how bad fundamentals are. Nothing moves in a straight line down or up. Besides that, Ackerman, like many American commentators, assumes that his view of the dollar is the world’s view. That simply isn’t so. The dollar has terrible problems, but at least for now, there aren’t that many currencies that are free of problems – some of them worse than the dollar’s. And since the dollar is the currency used in a majority of transactions, moving out of them (which would be the case if you felt the economy was contracting) would entail buying dollars. It’s simple logic.

Finally – never pile onto a trade that has too many people on one side. That’s logic too.

Gold rose, but only wishful thinking would call it as powerful an upthrust as the gold experts have claimed it was. If you watch gold prices regularly, you’ll know it’s nothing for gold to move $40-50 in a day. It’s volatile. That’s its nature.

Add to its inherent volatility, the other things going on – the G20 meeting, much talk about altering the SDR’s backing, Bernanke’s comments about the recession ending, international tensions over Iran, the fact that September is usually a strong month for gold, Chinese comments about walking away from derivative contracts, China’s instructions to its population to buy gold — put all of that together and it’s not surprising that gold should have moved up by about $70.

If you bought earlier, you should have taken profits and you should be watching to see how things play out. I didn’t buy earlier, so I’m just watching.

I still firmly believe we are due for a correction – and a relatively big one. I’ll buy then (with reluctance – since I think it’s a terrible industry in many ways).  But what if we don’t correct, and gold shoots up?

Well, what if? Then I’ll be out. So what? if it goes up, it’s likely to go to $1200 or so. That’s a 20% upside. It could also go down to $800. Equal downside.

That’s not a good ratio of reward to risk. There are any number of stocks which will give you that kind of movement if you like gambling. But if you’re investing – and not gambling – then you should act like an investor and ask if you really want to buy at prices that high at the end of a long upthrust.

It doesn’t make investing sense.  So wait and buy on dips.

That said, I’m prepared to eat my words…

PS: Seems like Ackerman is in the deflationist camp (along with Shedlock, Prechter and others) – as opposed to the hyperinflationists like Schiff. [Correction: I accidentally had this in reverse, with Shedlock as inflationist. I’ve posted on why both Schiff and Shedlock are correct – and why that sort of face-off is misguided. Deflation in some areas and over a certain time frame can certainly take place with inflation over other areas. But if you consider inflation to be only the kind that shows up in CPI and on the grocery shelves then obviously, we haven’t see the kind of hyperinflation that gold bugs are waiting for. One thing I fail to see from a lot of people is an awareness that what’s anticipated from the Fed might already be priced into the dollar.]

Rick Ackerman’s Response:

RE: gold and the titanic?
From: Rick Ackerman
Sent: Fri 9/25/09 10:00 PM

Hey, Lila!

I’m using a $1074 target for Comex December Gold and have told my subscribers, many of whom are hard-money guys, that I can’t promise them any higher than that, at least not based on the evidence of GCZ’s daily and weekly charts. My gut feeling is that this is not the rally cycle that will take gold into the Promised Land, assuming it gets there at all. I’m still a hard-core deflationist who believes hyperinflation must ultimately play out, but not in time to save 80 million underwater U.S. homeowners from going through the ringer.

No matter what happens, the Baby Boomers’ retirement plans have already been deflated away to nothing. And concerning the dollar, I’ve moved beyond the idea that the currency is fundamentally worthless, accepting the reality that it trades, simply, as a share in USA, Inc.

With kind regards,

Rick

That’s a pretty good take on things from one of the more astute traders around.

China’s Gold Rush..

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From Adrian Ash at Bullion Vault, via goldseek:

“The International Monetary Fund confirmed on Friday that it will sell 403 tonnes from its hoard to finance development projects in poorer countries, offering gold to central banks before considering steady, pre-announced open-market sales.
“China has no need at all to Buy Gold from the international markets,” counters Lila Lu, chief precious metals trader at Minsheng Bank Corp. in Beijing, speaking to Reuters.
“Because China is a large gold producer, it can source gold directly from its domestic makers, most of which are state-run enterprises.”
Off-market purchases direct from domestic Gold Mining firms enabled South Africa – then the world’s No.1 producer – to double its gold reserves during the late 1960s.
“Why should we use US Dollars to Buy Gold?” Lu added today. “We can use Yuan instead to purchase gold from domestic producers.”
Early Tuesday the state-owned China Investment Corp. announced taking a 15% stake in Singapore-listed commodities trading house Noble Group at a cost of $850 million.
Physical gold demand from private Chinese households rose 9% in the first half of this year, trade marketing-group the World Gold Council said today, announcing an “unprecedented” sales push across rural China.”

My Comment

There are several terribly important things going on in the capital markets and in international politics.

I’ll start with what most investors are probably watching anxiously – the teetering of the dollar at the lower end of the long term band of support (76-80), below which it plunged only a year ago. After showing some strength yesterday, the dollar is down again and gold is back up strongly over 1010. The reason seems to be the whispering in the markets that China will be buying IMF gold to supplement what are said to be meager reserves.

Rumors like these could be seen as a threat by the Chinese, for they expose China’s weakness in relation to other countries, especially those that possess better gold reserves. I suspect the comments by Lu are intended to diffuse that threat.

Another reason for dollar weakness is that the relative strengths of currencies are on the table at the G20 meeting, which is scheduled to take place in Thursday in Pittburgh, Pennsylvania and trade deficits are going to be considered – which is likely to be dollar negative.

The IMF sales are pretty interesting, although it’s hard to tell exactly what’s involved. It seems the gold will be sold to central banks (which ones?) and the proceeds will go to supplement and improve the financing now available to low-income countries (how?).

Question: Why should these professed good intentions be taken at face value, given all we know about the IMF?

At present, the IMF also allocates SDRs (or Special Drawing Rights) to each member country based on its contribution to the IMF (this is supposed to be a way to improve members’ liquidity in the international markets).

The SDR’s are based on a basket of currencies – currently, the US dollar, the euro, the sterling, and the yen – that can be traded for other currencies or used directly.

The IMF will use the gold sale proceeds to invest in other things. The interest from those investments will then benefit low-income countries. At least, that’s what I took away from my reading.

It all sounds suspiciously convoluted and opaque. My fear is that this is all an elaborate charade to leave some countries/institutions holding the “paper” bag, while real value is siphoned off by other countries/institutions.

I’ll leave you to decide who the winners and the losers will be….

Meanwhile, this is only my suspicion. I’ll need to go and do some more digging. But I’m putting my suspicions out here to fuel some leg work in the blogosphere.

Here’s a link to some relevant information on gold market manipulation at the website of the Gold Anti-Trust Action Committee (GATA), the leading activist group on gold price manipulation.

Especially read through the events surrounding the sale of Britain’s gold by then Chancellor of the Exchequer, Gordon Brown. Unlike other countries, UK gold sales are under the authority of the politicians. Brown sold British gold at a price lower than the market price at the time. The timing was extremely suspicious and followed on Robert Rubin’s unsuccessful attempts to get the IMF to sell its gold. The ostensible reason was to “help poor countries” – the same reason being given now. But the actual reason was a simpler one and one I’ve discussed a number of times. It was to keep the gold price low to support the dollar, disguise the rate of monetary debasement, and pump up the stock market. That in turn helped the derivative market, which Rubin and Greenspan had also helped to keep out of regulation. This was in the late 1990s….

Now, a decade later, the IMF hasn’t been weakened by the revelations of its sins. Instead, it’s been strengthened. And now, again, the IMF is selling gold – and again, the excuse is “helping the poor.”

Bernanke Declares Depression Over…

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That’s it folks. Wrap it up. This here recession…correction…depress…oh whatever..is over. Time to go home. Put away your pens and paper, boys and girls.

Professor Bernanke says there’s going to be no test. Or there’s going to be just a take-home. Or better yet, you just get to write in and ask for whatever grade you want. Bob Rubin and Jamie Dimon get A’s, of course. The rest of you get good B’s…. No one fails. Ain’t life great?

Whew. That depression stuff was so, well, depressing. Glad it’s over.

Wasn’t so bad, after all, seeing as how it was the worse one in half-a-century and the sky was falling and we were all going to live in the Ozarks on canned peas and mackerel until we got raptured up… and really all that happened was some green paper got printed and we had a to listen to a lot of speeches in Barackistani (not quite as strange sounding a dialect as Bushlish but just as daft…) and then, bingo, everything’s back to normal again.

Yessir. The economy is healthy.

Except for jobs. No jobs.

What kind of recovery is that, you ask? It’s the new jobless, rocketing-inflation, trashed-currency, falling-house-price, bankrupt-government, kazillions-in-debt, trade-warring-with-China recovery – that’s what it is.

Glad you asked. Now you know…
Old Ground Hog Ben.

Here’s the news clip:

“Gold futures climbed back above the $1,000-an-ounce mark on Tuesday, after upbeat U.S. economic reports and as Federal Reserve Chairman Ben Bernanke said the recession is likely over.

However, he and other Fed officials reiterated views that unemployment will remain high and economy stay weak well into next year, fueling expectations that the central bank will continue to provide ample liquidity. ”

More at Market Watch.

Gold Below $1000, While Dollar Slides

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In the news, gold failed to find a foot-hold above $1000, despite a weakening dollar. A better-than-expected jobs report probably had something to do with that.

From Market Watch via Goldseek:

“Gold futures fell Thursday for a second session, continuing to pull back from the $1,000-an-ounce level as a slightly better than expected U.S. weekly jobless data reduced the metal’s safe-haven appeal.

The number of people filing for initial unemployment benefits fell to a seasonally adjusted 550,000 last week. Economists surveyed by MarketWatch expected claims to stand at 558,000.”

Major Market Move in Offing

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Looks like there’ll be a good deal of volatility ahead in the markets this coming week and through the fall:

*From Monday last week onward, New York has been riled up by the news out of China that Chinese SOEs (State Owned Enterprises) might walk away on derivative contracts that they think have been deeply manipulated. (They’re right on that). The SOEs involved are Air China, China Eastern, and Cosco.

*The derivatives are not mortgage-backed securities (the cause of the 2008 melt-down) but – likely- hedged oil futures in the OTC (over the counter) market, which is unregulated (that is, the SEOs hold synthetic longs).

*The threat – if it is that – has forced gold out of its summer trading range to within points of the $1000 mark, before falling back..and it pushed up the Chinese market by about 5%.(Sept 3)

*The counter-parties are 6 foreign banks, said to include Goldman Sachs, UBS, and JP Morgan. Goldman could take a hit on the contracts for around $15 billion, it’s rumored.

Note: The Chinese have been buying IMF bonds (50 billion) and watching the US meltdown and “stimulus” hocus-pocus with a good deal of warranted alarm, because all it means is their investments are being manipulated and driven down.

Obama’s reappointment of Bernanke was also taken as a bad sign by the Chinese. (correctly).

*Rumors have been swirling of further defaults of major US banks.

*The G20 has a preliminary meeting this weekend and the Chinese are said to have put the purchase of off-market gold on the table.

*The Chinese are pushing gold and silver on their populations, probably in anticipation of a currency meltdown.

*Meanwhile, Hong Kong has asked for all its gold to be returned from London.

*Last week, Germany asked for all its gold to be returned from London.

*Meanwhile, Abu Dhabi Commercial Bank and King County, Washington State have brought suit against Moody’s, S&P, and Morgan Stanley on fraud charges for the contracts they wrote, a case that would have massive implications for how other contracts are treated.

*[Oddly (?), Washington State is also where the earliest swine flu cases in the US were detected and where one of the largest outbreaks on campus just surfaced today – with some 2000 students at Washington State University coming down with the virus. Washington State had previously received large grants from Homeland Security for emergency preparations for pandemics, had TV Public Service Ads in place, had written up plans and practiced exercises].

Gold Spike Related to Chinese Derivative Contracts Busting?

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Here’s a zinger that might explain gold’s sudden spike since yesterday:

“Some of the State Owned Enterprises that stated their potential intentions to default were Air China. China Eastern and Cosco. Mainly in part because they took major derivatives losses over the past year but also, concerns are arising that the derivatives that they were sold by these foreign institutions are garbage, underwater and may never see the light of day. So why continue to pay for them? So the concern in the financial world is that holders of these losing products may just walk away, not unlike a home owner with a $600,000 mortgage on a home valued at $475,000 deciding to just hand in their keys. However, read on…this has nothing to do with morgtgage backed products.  This time, the concern may be over Oil.

They (Reuters) cited 6 foreign banks. Where the story gets really intriguing is that among the major derivatives providers according to Reuters but also widely known in the industry, are Goldman Sachs, UBS and JP Morgan.

Here is the looming problem. These products are worth billions. One report that a good friend of mine did showed that if  Goldman Sachs for example were to take this one up the rear, they could stand to lose 15 billion dollars. (This number is by no means confirmed)……. I would imagine that China, being the biggest purchaser of US debt, could surely collapse the US institutions that were at one point deemed too big to fail if they decide to go ahead with this plan.

This is why I don’t take tonight’s news that China purchased 50 billion dollars of IMF bonds lightly. In fact, I take it very seriously. This is why I take the buzz on the floor over the past two days very seriously as well as I do the incredible spike in Gold today. Most importantly, I do not take lightly the recent 25% correction we have seen in the Chinese Stock Market. Can all these events be interconnected some how? Is the Chinese stock collapse giving us a hint?”

More here.