Month: April 2016

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Despite surging commodity prices in China – which must be real and represent demand growth and price increases, right? – Aussie core inflation slowed to the weakest on record as headline prices unexpectedly fell last quarter (CPI -0.2%). RBA Rate-cut odds tripled instantly sending AUD down over 1.2% (its biggest drop in 2 months). Perhaps, just perhaps, that collossal credit injection in Q1 via China did not make it into the AsiaPac economy after all and merely fueled a speculative frenzy in commodities that merely “looks” like a recovery?

The Reserve Bank of Australia looks at two core inflation measures — trimmed mean and weighted median — and Wednesday’s report showed:

• Trimmed mean CPI rose 0.2% QoQ vs. median forecast of 0.5%
• Weighted median CPI gained 0.1% QoQ vs. median forecast of 0.5%
• CPI fell 0.2%, first decline since final quarter of 2008 vs. median forecast 0.2% rise

This does not look like a recovering Chinese economy is helping…

Which drove traders to bet on a rate-cut…

• *RBA MAY RATE CUT ODDS RISE TO 40% FROM 14% YDAY, FUTURES SHOW

“A pre-emptive May cut is surely now a real possibility,” said Gareth Berry, a foreign-exchange and rates strategist in Singapore at Macquarie Bank Ltd. “At the latest, an August cut is now inevitable. That spells the end of this three-month old Australian dollar rebound, and the downtrend can now resume in earnest.”

“Whereas the RBA was previously thinking that low inflation would allow it to cut interest rates if demand faltered, it is now clear that low inflation itself is the problem,” said Paul Dales, chief economist for Australia and New Zealand at Capital Economics. “An inflation-targeting bank like the RBA can’t ignore such a big undershoot of underlying inflation.”

As Goldman notes,

We believe the RBA will now be forced to lower their inflation forecasts in the May Statement of Monetary Policy, not just due to the low CPI data for 1Q16 but also in response to the rise in the A$ through 2016 which will further challenge the RBA’s assessment that inflation will accelerate to well within the target band due to rising tradeable inflation. From our perspective the inflation data is key evidence that excess capacity exists in both product and labour markets and this is supported by private sector wages expanding at record lows and the recent erosion of surveyed measures of inflation expectations (see here). In concert with our analysis that the reported strength in GDP growth in 4Q15 overstates the underlying pulse of the domestic economy (see here) and evidence that economic activity is slowing in 2016 across a broad range of indicators (including investment intentions, retail sales, finance approvals, tourist arrivals, housing turnover, consumer confidence).

 

Moreover, the RBA clearly established the criteria required for them to act upon their easing bias; weak inflation, slowing employment growth and a currency at a level that challenges the RBA assumptions of future economic growth. On all three criteria the evidence supports the case to ease policy in May. Should the RBA choose to remain on hold in May the RBA will be more than aware that the calendar quickly becomes crowded by a likely election campaign through May to early July (the RBA’s July meeting is just 3 days post the likely date of the federal election) and the leadership transition at the RBA scheduled for September. History has shown that since 1990 the RBA has not been overly influenced by political and leadership events. The RBA has eased on 3 occasions and hiked once in the month of or the month prior to a federal election and Governor Stevens continued a tightening cycle soon after his appointment to Governor. Nevertheless, it would seem lmore likely that the next widow for the RBA would be late in 2016.

 

While it is still possible that the RBA holds out hope that the rally in commodity prices might continue and that the US Federal Reserve turns significantly more hawkish, we continue to believe that the course of least regret is for the RBA to follow its inflation targeting framework and ease in May, where we continue to forecast a 25bp reduction. Nevertheless, following the firming of the possibility of an early federal election in July we have decided to move our final forecast rate cut to November 2016 (previously July). Our A$ forecast is under review.

*  *  *

Makes one wonder if any of this bounce in Chinese industrial metals is real at all…

Charts: Bloomberg

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Submitted by John Whitehead via The Rutherford Institute,

“You had to live – did live, from habit that became instinct – in the assumption that every sound you made was overheard, and, except in darkness, every movement scrutinized.”—George Orwell, 1984

In past ages, those who dared to speak out against tyranny – viewed as an act of treason – were blinded, castrated, disfigured, mutilated, rendered mute by having their tongues cut out of their heads, and ultimately crucified.

In the American police state, the price to be paid for speaking truth to power (also increasingly viewed as an act of treason) is surveillance, censorship, jail and ultimately death.

It’s a diabolically ingenious tactic for muzzling, disarming and ultimately eliminating one’s critics or potential adversaries.

However, where many Americans go wrong is in assuming that you have to be doing something illegal or challenging the government’s authority in order to be flagged as a suspicious character, labeled an enemy of the state and locked up like a dangerous criminal.

In fact, as I point out in my book Battlefield America: The War on the American People, all you really need to do is use certain trigger words, surf the internet, communicate using a cell phone, drive a car, stay at a hotel, purchase materials at a hardware store, take flying or boating lessons, appear suspicious, question government authority, or generally live in the United States.

With the help of automated eyes and ears, a growing arsenal of high-tech software, hardware and techniques, government propaganda urging Americans to turn into spies and snitches, as well as social media and behavior sensing software, government agents are spinning a sticky spider-web of threat assessments, behavioral sensing warnings, flagged “words,” and “suspicious” activity reports aimed at snaring potential enemies of the state.

It’s the American police state’s take on the dystopian terrors foreshadowed by George Orwell, Aldous Huxley and Phillip K. Dick all rolled up into one oppressive pre-crime and pre-thought crime package.

What’s more, the technocrats who run the surveillance state don’t even have to break a sweat while monitoring what you say, what you read, what you write, where you go, how much you spend, whom you support, and with whom you communicate. Computers now do the tedious work of trolling social media, the internet, text messages and phone calls for potentially anti-government remarks—all of which is carefully recorded, documented, and stored to be used against you someday at a time and place of the government’s choosing.

While this may sound like a riff on a bad joke, it’s a bad joke with “we the people” as the punchline. Yet it is no laughing matter that Americans are being jailed for growing orchids, feeding whales, collecting rainwater, and praying in their backyards. There is nothing humorous about Americans having their families terrorized by SWAT teams, their pets killed, their children shot, their homes trashed and their privacy shredded. And there’s really not much comic relief to be found when the citizenry is forced to pay their own government to jail, spy on, censor, terrorize and kill them.

The following activities are guaranteed to get you censored, surveilled, eventually placed on a government watch list, possibly detained and potentially killed.

Laugh at your own peril.

Use harmless trigger words like cloud, pork and pirates: The Department of Homeland Security has an expansive list of keywords and phrases it uses to monitor social networking sites and online media for signs of terrorist or other threats. While you’ll definitely send up an alert for using phrases such as dirty bomb, Jihad and Agro terror, you’re just as likely to get flagged for surveillance if you reference the terms SWAT, lockdown, police, cloud, food poisoning, pork, flu, Subway, smart, delays, cancelled, la familia, pirates, hurricane, forest fire, storm, flood, help, ice, snow, worm, warning or social media.

 

Use a cell phone: Simply by using a cell phone, you make yourself an easy target for government agents—working closely with corporations—who can listen in on your phone calls, read your text messages and emails, and track your movements based on the data transferred from, received by, and stored in your cell phone. Mention any of the so-called “trigger” words in a conversation or text message, and you’ll get flagged for sure.

 

Drive a car: Unless you’ve got an old junkyard heap without any of the gadgets and gizmos that are so attractive to today’s car buyers (GPS, satellite radio, electrical everything, smart systems, etc.), driving a car today is like wearing a homing device: you’ll be tracked from the moment you open that car door thanks to black box recorders and vehicle-to-vehicle communications systems that can monitor your speed, direction, location, the number of miles traveled, and even your seatbelt use. Once you add satellites, GPS devices, license plate readers, and real-time traffic cameras to the mix, there’s nowhere you can go on our nation’s highways and byways that you can’t be followed. By the time you add self-driving cars into the futuristic mix, equipped with computers that know where you want to go before you do, privacy and autonomy will be little more than distant mirages in your rearview mirror.

 

Attend a political rally: Enacted in the wake of 9/11, the Patriot Act redefined terrorism so broadly that many non-terrorist political activities such as protest marches, demonstrations and civil disobedience were considered potential terrorist acts, thereby rendering anyone desiring to engage in protected First Amendment expressive activities as suspects of the surveillance state.

 

Express yourself on social media: The FBI, CIA, NSA and other government agencies are investing in and relying on corporate surveillance technologies that can mine constitutionally protected speech on social media platforms such as Facebook, Twitter and Instagram in order to identify potential extremists and predict who might engage in future acts of anti-government behavior. A decorated Marine, 26-year-old Brandon Raub was targeted by the Secret Service because of his Facebook posts, interrogated by government agents about his views on government corruption, arrested with no warning, labeled mentally ill for subscribing to so-called “conspiratorial” views about the government, detained against his will in a psych ward for having “dangerous” opinions, and isolated from his family, friends and attorneys.

 

Serve in the military: Operation Vigilant Eagle, the brainchild of the Dept. of Homeland Security, calls for surveillance of military veterans returning from Iraq and Afghanistan, characterizing them as extremists and potential domestic terrorist threats because they may be “disgruntled, disillusioned or suffering from the psychological effects of war.” Police agencies are also using Beware, an “early warning” computer system that tips them off to a potential suspect’s inclination to be a troublemaker and assigns individuals a color-coded threat score—green, yellow or red—based on a variety of factors including one’s criminal records, military background, medical history and social media surveillance.

 

Disagree with a law enforcement official: A growing number of government programs are aimed at identifying, monitoring and locking up anyone considered potentially “dangerous” or mentally ill (according to government standards, of course). For instance, a homeless man in New York City who reportedly had a history of violence but no signs of mental illness was forcibly detained in a psych ward for a week after arguing with shelter police. Despite the fact that doctors cited no medical reason to commit him, the man was locked up in accordance with a $22 million program that monitors mentally ill people considered “potentially” violent. According to the Associated Press, “A judge finally ordered his release, ruling that the man's commitment violated his civil rights and that bureaucrats had meddled in his medical treatment.”

 

Call in sick to work: In Virginia, a so-called police “welfare check” instigated by a 58-year-old man’s employer after he called in sick resulted in a two-hour, SWAT team-style raid on the man’s truck and a 72-hour mental health hold. During the standoff, a heavily armed police tactical team confronted Benjamin Burruss as he was leaving an area motel, surrounded his truck, deployed a “stinger” device behind the rear tires, launched a flash grenade, smashed the side window in order to drag him from the truck, handcuffed and searched him, and transported him to a local hospital for a psychiatric evaluation and mental health hold. All of this was done despite the fact that police acknowledged they had no legal basis nor probable cause for detaining Burruss, given that he had not threatened to harm anyone and was not mentally ill.

 

Limp or stutter: As a result of a nationwide push to certify a broad spectrum of government officials in mental health first-aid training (a 12-hour course comprised of PowerPoint presentations, videos, discussions, role playing and other interactive activities), more Americans are going to run the risk of being reported for having mental health issues by non-medical personnel. Mind you, once you get on such a government watch list—whether it’s a terrorist watch list, a mental health watch list, or a dissident watch list—there’s no clear-cut way to get off, whether or not you should actually be on there. For instance, one 37-year-old disabled man was arrested, diagnosed by police and an unlicensed mental health screener as having “mental health issues,” apparently because of his slurred speech and unsteady gait, and subsequently locked up for five days in a mental health facility against his will and with no access to family and friends. A subsequent hearing found that Gordon Goines, who suffers from a neurological condition similar to multiple sclerosis, has no mental illness and should not have been confined.

 

Appear confused or nervous, fidget, whistle or smell bad: According to the Transportation Security Administration’s 92-point secret behavior watch list for spotting terrorists, these are among some of the telling signs of suspicious behavior: fidgeting, whistling, bad body odor, yawning, clearing your throat, having a pale face from recently shaving your beard, covering your mouth with your hand when speaking and blinking your eyes fast. You can also be pulled aside for interrogation if you “have ‘unusual items,’ like almanacs and ‘numerous prepaid calling cards or cell phones.’” One critic of the program accurately referred to the program as a “license to harass.”

 

Allow yourself to be seen in public waving a toy gun or anything remotely resembling a gun, such as a water nozzle or a remote control or a walking cane, for instance: No longer is it unusual to hear about incidents in which police shoot unarmed individuals first and ask questions later. John Crawford was shot by police in an Ohio Wal-Mart for holding an air rifle sold in the store that he may have intended to buy. Thirteen-year-old Andy Lopez Cruz was shot 7 times in 10 seconds by a California police officer who mistook the boy’s toy gun for an assault rifle. Christopher Roupe, 17, was shot and killed after opening the door to a police officer. The officer, mistaking the Wii remote control in Roupe’s hand for a gun, shot him in the chest. Another police officer repeatedly shot 70-year-old Bobby Canipe during a traffic stop. The cop saw the man reaching for his cane and, believing the cane to be a rifle, opened fire.

 

Stare at a police officer: Miami-Dade police slammed the 14-year-old Tremaine McMillian to the ground, putting him in a chokehold and handcuffing him after he allegedly gave them “dehumanizing stares” and walked away from them, which the officers found unacceptable.

 

Appear to be pro-gun, pro-freedom or anti-government: You might be a domestic terrorist in the eyes of the FBI (and its network of snitches) if you: express libertarian philosophies (statements, bumper stickers); exhibit Second Amendment-oriented views (NRA or gun club membership); read survivalist literature, including apocalyptic fictional books; show signs of self-sufficiency (stockpiling food, ammo, hand tools, medical supplies); fear an economic collapse; buy gold and barter items; subscribe to religious views concerning the book of Revelation; voice fears about Big Brother or big government; expound about constitutional rights and civil liberties; or believe in a New World Order conspiracy. This is all part of a larger trend in American governance whereby dissent is criminalized and pathologized, and dissenters are censored, silenced or declared unfit for society.

 

Attend a public school: Microcosms of the police state, America’s public schools contain almost every aspect of the militarized, intolerant, senseless, overcriminalized, legalistic, surveillance-riddled, totalitarian landscape that plagues those of us on the “outside.” From the moment a child enters one of the nation’s 98,000 public schools to the moment she graduates, she will be exposed to a steady diet of draconian zero tolerance policies that criminalize childish behavior, overreaching anti-bullying statutes that criminalize speech, school resource officers (police) tasked with disciplining and/or arresting so-called “disorderly” students, standardized testing that emphasizes rote answers over critical thinking, politically correct mindsets that teach young people to censor themselves and those around them, and extensive biometric and surveillance systems that, coupled with the rest, acclimate young people to a world in which they have no freedom of thought, speech or movement. Additionally, as part of the government’s so-called ongoing war on terror, the FBI—the nation’s de facto secret police force—is now recruiting students and teachers to spy on each other and report anyone who appears to have the potential to be “anti-government” or “extremist” as part of its “Don’t Be a Puppet” campaign.

 

Speak truth to power: Long before Chelsea Manning and Edward Snowden were being castigated for blowing the whistle on the government’s war crimes and the National Security Agency’s abuse of its surveillance powers, it was activists such as Martin Luther King Jr. and John Lennon who were being singled out for daring to speak truth to power. These men and others like them had their phone calls monitored and data files collected on their activities and associations. For a little while, at least, they became enemy number one in the eyes of the U.S. government.

There’s always a price to pay for standing up to the powers-that-be.

Yet as this list shows, you don’t even have to be a dissident to get flagged by the government for surveillance, censorship and detention.

All you really need to be is a citizen of the American police state.

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This afternoon Jeffrey Gundlach held one of his periodic interviews with Reuters’ Jenna Ablan in which he said that the selloff in Treasuries is over and that investors looking to purchase Treasuries in the wake of the bond market’s sell-off – if one can call a move in the 10Y to 1.91% a selloff – are making a prudent move. “I think it is a reasonable strategy to start legging into the Treasury market.”

To be sure, he is talking his book, but at least he is honest about it: “We’ve been buying a little bit today … we bought a small amount of guaranteed mortgages, particularly Freddie Mac MBS.”

What about equity investors? Gundlach said that investors who want to purchase equities at this juncture should consider non-U.S. stocks. “They are down more than U.S. stocks. If U.S. equities go higher, it would seem very implausible that other markets would not participate in the rally even more.” 

Gundlach, who runs $95 billion at DoubleLine, said he does not expect much from the latest Federal Reserve meeting but does expect somewhat “hawkish” language about the potential for hikes at meetings later this year.  Instead he believes, as do we since 2013, that the next major easing step is also the final one: Gundlach suggested that a “helicopter money” drop could be the government’s next big monetary and fiscal move to stimulate the U.S. economy.

“Helicopter money is going to happen,” he said.

Gundlach’s track record has so far been mostly impeccable: last year, Gundlach correctly predicted that oil prices would plunge, junk bonds would live up to their name and China’s slowing economy would pressure emerging markets. In 2014, Gundlach correctly forecast U.S. Treasury yields would fall, not rise as many others had expected.

So if it is not the Fed, then what does spook him?

Last month, Gundlach told Reuters that he foresees a “global growth scare” between now and the end of the summer, triggered by a presidential nomination of Donald Trump.

Trump’s protectionist policies could mean negative global growth, Gundlach warned. “As he gets the nomination, the markets and investors are going to worry about it more. You will see a downgrading of global growth based on geopolitical risks. You must factor this into your risk-management.”

Which is ironic because as we reported last Friday, Gundlach also sees Trump as being the next president, and a good one at that.

Trump is going to win. I think Clinton and Sanders are both very poor candidates. I know the polls are signaling the opposite. But the polls said the opposite four years ago, too.

 

In the short term, Trump winning would be probably very positive for the economy. He says a lot of contradictory things and things that are not very specific. But he does say that he will build up the military and that he will build a wall at the border to Mexiko. If he wins he’s got at least to try those things. Also, he might initiate a big infrastructure program. What’s his campaign slogan? Make America great again. What that means is let’s go back to the past, let’s go back to the 1960s economy. So he might spend a lot of money on airports, roads and weapons. I think Trump would run up a huge deficit. Trump is very comfortable with debt. He’s a debt guy. His whole business has had a lot of debt over time and he has gone bankrupt with several enterprises. So I think you could have a debt-fuelled boom. But the overall debt level is already so high that you start to wonder what would happen after that.

It remains to be seen if Gundlach is right about bonds or stocks, but when it comes to Trump, as of moments ago, he is well on his way with a clean sweep in the entire “Amtrak Primary”, winning all five contested states.

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Authored by Pepe Escobar, originally posted Op-Ed at SputnikNews.com,

US President Barack Obama landed in Saudi Arabia for a GCC petrodollar summit and to proverbially “reassure Gulf allies” amidst the oiliest of storms.

The Doha summit this past weekend that was supposed to enshrine a cut in oil production by OPEC, in tandem with Russia – it was practically a done deal – ended up literally in the dust.

The City of London – via the FT – wants to convey the impression to global public opinion that it all boiled down to a dispute between Prince Mohammed bin Salman – the conductor of the illegal war on Yemen —  and Saudi Oil Minister Ali Al-Naimi. The son of  — ailing — King Salman has been dubbed “the unpredictable new voice of the kingdom’s energy policy.”

 

 

A famous 3 am call did take place in Doha on Sunday. The young Salman called the Saudi delegation and told them the deal was off.  Every other energy market player was stunned by the reversion.

 

Yet the true story, according to a financial source with very close links to the House of Saud, is that “the United States threatened the Prince that night with the most dire consequences if he did not back down on the oil price freeze.”

So – predictably — this goes way beyond an internal Saudi matter, or the Prince’s “erratic” behavior, even as the House of Saud is indeed racked by multiple instances of fear and paranoia, as I analysed here. 

As the source explains, an oil production cut would have “hindered the US goal of bankrupting Russia via an oil price war, which is what this is all about. Even the Prince is not that erratic.”

Iran had made it more than clear that after the lifting of sanctions it does not have any reason to embark on a production cut. On the contrary; oil contributes to 23% of Iran’s GDP. But as far as the House of Saud is concerned – feeling the pain of a budget deficit of $98 billion in 2015 — a moderate cut was feasible, along with most of OPEC and Russia, as Al-Naimi had promised.

Another key variable must also be taken into account. Not only the whole saga goes way beyond an internal Saudi dispute; no matter what Washington does, the oil price has not crashed as expected. This would indicate that the global surplus of oil has been largely sopped up by falling supply and increasing demand.

As a GCC-based oil market source reveals, “have you noticed how much attention Kerry and Obama have been giving Saudi Arabia out of all proportion to the past to keep that oil price down? Yet WTI is up and holding over $40.00 a barrel. That’s because oil demand and supply is tightening.” The oil market source notes, “oil surplus is now probably less than a million barrels a day.” So the only way, in the short to medium term, is up.

Blowback from His Masters’ Voice?

The House of Saud, by flooding the market with oil, believed it could accomplish three major feats.

1) Kill off competition – from Iran to the US shale oil industry.

 

2) Prevent the competition from stealing market share with key energy customer China.

 

3) Inflict serious damage to the Russian economy. Now it’s blowback time – as it could come from none other than His Masters’ Voice.

The heart of the whole matter is that Washington has been threatening Riyadh to freeze Saudi assets all across the spectrum if the House of Saud does not “cooperate” in the oil price war against Russia.

That reached the tipping point of the Saudis shaking the entire turbo-capitalist financial universe by issuing their own counter threat; the so-called $750 billion response.  

The — burning — issue of freezing all Saudi assets across the planet has come up with the US Congress considering a bill exposing he Saudi connection to 9/11.  

 

 

The declassification and release of those notorious 28 pages would do little to rewrite recent history; 9/11 – with no serious investigation — was blamed on “Islamic terror”, and that justified the invasion of Afghanistan and the bombing/invasion/occupation of Iraq, which had no connection to 9-11 nor any weapons of mass destruction.  

The 28 pages did intimidate the House of Saud and Saudi intelligence though. Especially because the odd sharp brain in Riyadh could make the connection; the 28 pages were being paraded around in Western corporate media before the OPEC meeting to keep the Saudis in line on the oil war against Russia. That may have been yet another Mafia-style “offer you can’t refuse”; if the House of Saud cuts oil production, then it will be destroyed by the release of the 28 pages. 

So we are now deep into Mutually Assured Threat (MAT) territory, more than Mutually Assured Destruction (MAD).

No one really knows how much Saudi Arabia has tied up in US Treasuries – except for a few insiders in both Riyadh and Washington, and they are not talking. What is known is that the US Treasury bundles Riyadh's holdings along with other GCC petrodollar monarchies. Together, that amounted to $281 billion two months ago.

Yet the Saudis are now saying they would get rid of a whopping $750 billion. A New York investment banker advances that “six trillion dollars would be more like it.” Earlier this year, I revealed on Sputnik how the House of Saud was busy unloading at least $1 trillion in US securities on the market to balance its increasingly disastrous budget. The problem is no one was ever supposed to know about it. 

The fact is the US and the West froze $80 billion in assets that belonged to the deposed head of the Egyptian snake, Mubarak. So a freeze tied up with framing Saudi Arabia for terrorism would not exactly be a hard sell.

The nuclear option

For all the pledges of eternal love, it’s an open secret in the Beltway that the House of Saud is the object of bipartisan contempt; and their purchased support, when push comes to shove, may reveal itself to be worthless.

Now picture a geopolitical no exit with a self-cornered House of Saud having both superpowers, the US and Russia, as their enemies.

Obama’s visit is a non-event. Whatever happens, Washington needs to sell the fiction that the House of Saud is always an ally in the “war on terra”, now fighting ISIS/ISIL/Daesh (even if they don’t.) And Washington needs Riyadh for Divide and Rule purposes – keeping Iran in check. This does not mean that the House of Saud may not be thrown under the bus in a flash, should the occasion arise.

As the source close to Riyadh advances, “the real nuclear option for the Saudis would be to cooperate with Russia in a new alliance to cut back oil production 20% for all of OPEC, in the process raising the oil price to $200.00 a barrel to make up for lost revenue, forced on them by the United States.” This is what the West fear like the plague. And this is what the perennial vassal, the House of Saud, will never have the balls to pull off.

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While it was broadly accepted that Trump would sweep tonight’s “Acela Primary”, few were expecting Trump to post majority wins in any of the states. And Yet, that appears to be taking place nowhere more so than in Pennsylvania where Trump’s vote as of this moment is over 65%, a result which would go far to assuring Trump of getting the required 1237 votes to avoid a contested convention.

And indeed, the market is already responding. Moments ago, on popular online betting side PredictIt, the odds of a contested GOP convention just tumbled to 21%, trying the record low in history.

Meanwhile, Trump’s odds of wining the GOP primary have soared, and are now at 80%, tying the highest level in contract history.

So, with Hillary also now assured of the Democratic nomination, and with Trump on his way, is the presidential primary race effectively over?

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Via HardAssetsAlliance.com,

Apple spent about five years developing the iPhone, which has changed the smartphone market forever. Until the release, however, nobody could imagine what impact the iPhone would have on the market.

And most consumers didn’t know about it at all.

The same thing is happening with China and gold right now. The gold market will soon be very different than from what we see today – largely due to the current developments in China.

China’s influence will impact not just gold investors but everyone who has a vested interest in the global economy, stock markets, and the US dollar. After all, China will be a dominant force in all, as most analysts project.

Here are the five trends in China that will change the gold market forever…

(Hedge fund manager Dan Tapiero talks about some of these trends in his short interview, especially the #5 listed below.)

Trend #1: China now officially participates in the gold price fix

China has officially established a daily yuan price fix for gold.

Gold fixing was historically held at the London Bullion Market Association (LBMA). China was not part of that process, so it started its own pricing benchmark.

The Shanghai Gold Exchange’s program includes 12 “fixing” members, 10 of which are Chinese banks. The new gold benchmark will better reflect local market flows and, just as important, reduces gold’s price dependency on the US dollar.

The program has profound implications as the gold trade continues to move from West to East. It will increase China’s influence over the gold price and expand the yuan’s role as a global currency.

Trend #2: China also participates in setting the silver price

China Construction Bank, one of the country’s largest, recently joined the elite group of banks that set silver’s official daily price.

The Chinese bank now bids prices with HSBC, JPMorgan Chase, Bank of Nova Scotia, Toronto Dominion Bank, and UBS. That means China now has direct influence on the price of this key industrial and monetary metal.

These two moves makes sense, since some of the world's top gold and silver consumers are in the East—India, Russia, Turkey, and of course China.

It is clear China wants more influence over gold and silver prices—and now it will get it.

Trend #3: The renminbi is in the IMF basket

Last November, the IMF added the renminbi to its reserve currency basket. The prestigious basket will include the yuan along with the dollar, euro, pound sterling, and yen when calculating the value of the Special Drawing Rights (SDRs).

The long-term implication is that the yuan may one day become as recognizable as the dollar or euro.

It also means China must accumulate enough bullion reserves to stand on the world stage. And by any measure, it doesn’t have enough.

Some analysts believe China has more than the official 1,797.5 tonnes it reported in March, but that amount is 4.5 times less than 8,133.5 tonnes the US holds. Even if China doesn’t want that much, the current total represents only 2.2% of its total reserves.

This means that not only does China need to continue buying gold in massive quantities, it will at some point need to announce it holds a much higher amount. And that announcement will light a fire under the gold price.

You may not trust the numbers coming out of Beijing, but keep in mind that China’s biggest goal is to become a first world economy. It wants to be on the same footing as the US, Japan, and Europe.

And one way to achieve that is to accumulate a lot more gold.

Trend #4: Chinese gold production is slowing

China produces more gold than any other nation.

But even the world’s top producer isn’t immune to the effects of the four-year bear market in gold. Mine production is slowing and is poised to decline for at least several years just like everywhere else.

That’s because the cost of production has risen, ore grades are falling, and reserves in the country are limited.

And get this: China doesn’t export gold in any meaningful amount. So whatever gets produced there, stays there.

Bottom line: China’s gold production won’t make it to world markets. Its output is in decline and won’t be available to meet global demand.

Trend #5: Lack of other alternatives for Chinese investors

This trend is explosive…

As hedge fund manager Dan Tapiero points out, Chinese investors will be increasingly attracted to gold because they won’t want their savings at a zero percent interest rate.

Yet, Beijing has made it clear that it will bring rates lower. So what will investors buy? Government debt yields just 1–2%. High-yield corporate debt pays more, but only 15% of Chinese debt is rated by foreign agencies like Moody’s and S&P, so it comes with a lot of potential credit risk. The stock market wiped out many investors, and real estate petered out.

UBS analysts agree:

Deterioration in China's macro backdrop could trigger flows towards gold; there are a limited number of investment alternatives and gold is poised to benefit should outlooks across the different options turn sour… rotation into gold ETFs would be a relatively easy switch for local equity investors and could gain further traction if equity markets continue to weaken.

That’s not all.

Chinese savers have huge exposure to a devaluation of their currency, as their wealth is tied directly to the fate of the renminbi. Devaluation fears have prompted massive capital outflows from both the currency and the country—some of which is fleeing into gold.

Looking at the big picture over the next 3-5 years—these changes signal that China will be a big driver of the gold price.

via http://ift.tt/1TcAEaE Tyler Durden