Gold looking at recording worst quarter since 2008

In the Lead: “Medium Rare”

Most respondents see China’s GDP growing at but 5% by 2016 – about half of its current 9.5% level. That’s a shocker, to be sure (so much for the “insatiable commodity demand” from China arguments). It implies a hard-landing for one of the world’s top economies. Those dour expectations do not even begin to factor in the potential outcomes of the possible implosion of China’s shadow banking (make that shadow lending) system.

In so many words, China is sitting squarely on top of a loudly ticking nuclear device of two-thirds of a trillion dollars’ worth of informal loans. Developers who have borrowed astronomical sums at rates ranging from 14 to 70 percent stand to run out of cash within the next half a year unless the PBOC eases its grip on tight credit. If such alarming reports are even halfway correct, the Chinese economic “miracle” is suddenly taking on the odor of a …mackerel, and the possible “China Syndrome” type of event that such a situation might yield could make the US and (current) European crises seem like a very pleasant day at the park.

This is the big Chinese gorilla in the global economic room that everyone should totally fear, including those who see unending boom times for gold, mainly on account of (present and future) Chinese buyers. Much as some would like to say that gold is strictly an investment for the Chinese public, it is in very large part right up there with other high-end luxury goods and status symbols. Do the math and go see the plethora of billboards around Shanghai that try to seduce young working women to cover themselves with gold they “deserve” after a hard day at the office.

Speaking of difficult days at work, some of those may be in store for Mr. Boehner up in Washington DC, soon. Someone needs to break the following news to him…quickly, and gently. It is time he became aware of the impending reality. We leave you now with this little excerpt from the folks at Bloomberg News:

“Global investors overwhelmingly support President Barack Obama’s proposed tax increase for those earning annual incomes of $1 million or more in an effort to reduce the deficit. By a margin of 63 percent to 32 percent, respondents in a Bloomberg Global Poll approved of the president’s proposal, known as the “Buffett rule” in a nod to Warren Buffett, the chairman of Berkshire Hathaway Inc., who has said it is wrong that he pays a smaller share of his income in taxes than does his secretary. Obama said Sept. 19 that making sure that the wealthy pay at least the same tax rate as the middle class was “just the right thing to do.” House Speaker John Boehner accused the president of practicing “class warfare,” saying any new tax would hurt job creation and Buffett’s situation was not typical.”

Let’s see if “majority rule” has any meaning.

Have a pleasant weekend and to our Jewish readers, also have a healthy, happy 5772! L’Shanah Tovah Tikatev V’Taihatem.

Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America

About the Author
Jon Nadler

Jon Nadler is senior metals analyst with Kitco Metals Inc. in Montreal.

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