Gold Prices Up 17% for 2014 as Beijing "Clamps Down" on China Credit Bubble, Crimea Vote Looms for Ukraine

GOLD PRICES leapt in London trade Friday, rising 3.3% from last week's finish to touch the highest level since early September at $1385 per ounce.

Market watchers pointed variously to the ongoing Ukraine crisis and a sharp clampdown on bank lending and unregulated credit in China.


Silver also leapt Friday, finally bucking this week's trend to overtake gold prices with a 4.1% gain just shy of $21.80, a 3-week high.


That quickly pushed the ratio of gold to silver prices lower, down below 64 from a 6-month high above 65.


World stock markets fell, commodities ticked higher and major government bonds rose in price, pushing interest rates down.


Japan's Nikkei index has now lost more than 12% for 2014 to date.


Hong Kong equities have dropped 10% from December's 2-year highs.


Gold priced in US Dollars stood 17% higher on Friday afternoon from the 3-year lows hit last June and again on New Year's Eve.


"Uncertainty surrounding the Ukraine crisis seems to have had a more lasting effect on gold than on oil so far," says Swiss investment and bullion bank UBS.


Ahead of Sunday's vote on secession from Ukraine by Crimea, the BBC today reports violent clashes in the eastern city Donetsk, centre of Ukraine's most productive region where pro-Russian protesters fought with police overnight.


"While the push higher is attracting greater gold investment demand," says London market maker HSBC, "higher prices may be cooling emerging market physical appetite."


Shanghai gold prices ended Friday at a discount of $6.70 per ounce to London prices, the sharpest discount since gold in China last traded below the international benchmark in January 2012.


Last April's crash in the gold price saw Shanghai premiums to $100 per ounce.


"A decrease in China's physical demand for gold," says HSBC, "even if only a temporary one, could undermine rallies."


The world's largest gold consumer in 2013, China has doubled its annual GDP to $8.2 trillion since 2009, notes Newedge brokerage strategist Robbert van Batenburg.


That growth came "in part by heavy leveraging...The shadow banking system alone has grown from $3trn in 2010 to $8trn by the end of last year."


"Weaning China off [its] credit bubble is likely to be painful and may play out over the next several months," reckons Robbert van Batenburg, strategist at New York-based brokerage Newedge.


"If Chinese authorities lose control over this process, it may spark a flight into the safest assets, notably Treasuries and gold."


Shares in CITIC Bank, which earlier this week announced a "virtual credit card" venture with internet giants Tencent and Alibaba, were suspended in Hong Kong today after a 7% drop, apparently sparked by rumors of a clampdown by Beijing.


Also prompted by the Communist government, says Reuters, China's banks are slashing credit lines to major industries by up to 20% this year from 2013, Reuters reports from Shanghai, citing unnamed "sources with knowledge" of a cut to shipbuilders and a specific letter sent to steel mills.


The China Banking and Regulatory Commission has added debt financing and derivatives trading to those sectors for which bank lenders must submit audits – a "new development", according to one source, after last week's default on bond interest payments by PV solar-cell manufacturer Chaori Solar.


"The specific sectors to be audited are steel, cement, aluminium smelting, flat-glass and shipbuilding," says one source quoted by Reuters.


"Beijing has already given enough warning that they are cracking down," says another.

"Rising expectations that [People's Bank of China] could act this weekend," says a London bullion desk, "to ease the tensions over liquidity crunch spiral."

Gee all those problems for China, (if you believe gurus), savior of the world? How could that be?

If most of China's gold is in the Philippines like some say, why?

     

Should I be selling off all of my old wedding rings or should I hold off a bit longer for the value to increase?
 
         

If you need or want to go ahead and sell ... will it go up? Maybe, but my gut's been telling me for a while that precious metals are about due for a tumble. No proof, just a feeling.

Better to hang onto gold jewelry until gold hits $5,000 an ounce. Also, the value of jewelry depends on the quantity of gold karats. When the dollar crashes, if it ever does, gold will skyrocket unless the new treasury bills come into play. 

                    

No need to worry about new Treasury bills, they don't exist. Don't think there's much worry about the dollar crashing either. Even IF China and Russia gang up on us, they don't hold all that much ... We still hold most of our own debt domestically.

Kevin wrote:

"Even IF China and Russia gang up on us, they don't hold all that much ... We still hold most of our own debt domestically."

I agree, that all is pure specualtion at this point until some form of proof is located. So far, there is nothing that makes me believe in the TRN, but we never know until long past the period of decision and/or action. The BRICS are starting their own IMF. Not sure what you mean by "We still own most of our own debt". If you are speaking of the "national debt" there is no such thing. You can't make something out of nothing. In other words, fiat currency is a debt currency and pays off nothing.

Whatever floats your boat since everyone is using so called fiat currency. The BRICS can do whatever they want but since the US still accounts for 1/4 of the world's economy, and has a proven stability that the BRICS can't even think to match ....

All speculative in nature except that we have been paying interest in gold to the Fed for 100 years from a so-called debt created with fiat currency.....that IS verifiable. Read the Act of 1871, and the Emergency War Act of 1933 that includes the banking act.