My Answers to VicktorCapitalist post about Gold

Please refer to the following post in HKEJ forum:

http://www.hkej.com/template/forum/php/forum_details.php?blog_posts_id=7250

My parts:

Chan David One thing I do not agree is about the linkage between other commodities and gold. Each commodity has one's own characteristics, market structures, and cycle. They are not necessary directly related to the conjugate part of the gold-USD relationship. For example, iron ore market is basically an oligopoly, and its price can be manipulated/controlled by the mutual agreement among CVRD, Rio Tintio and BHP Billiton. And due to the vast amount for transportation by bulk ships, these big 3 also exert significant influence on freight price (and hence BDI). Yet, whether or not these 3 companies will simply be affected by a gold rush is subject to further queries. 12月18日 13:49

Chan David Another part that is subjected to further discussion is about the collapse of US treasuries. As pointed out by Mr. Lin in his HKEJ column today, US gov't and FED are the biggest buyers/holders of US treasuries. Since they are also the sole suppliers in the primary market, they have certain controls over the demand and supplies and hence the price of US treasuries. Unless USA is no longer the hegemony but a lame duck with its scale of economy downsized more than 1/2, it is hard to find a competitor of equivalent strength and importance. Setting aside the fluctuation, even at big scale, of USD price, USD is still the ultimate currency. Other countries/investors bet not just on the inflation rate of USD but also on the strength (and hence abilities to honor the contracts) of USA. Up till now a substitute with USA's size and power has still not emerged. Thus, inflation or not is not the only factor, or not even the most important factor that affects USD's value. 12月18日 14:04

Chan David Brother 肥嘉: Rally is different from a continuous trend. The current rally can be of short-term technical rebound. At least, from the actions taken by mining companies as well as the performance on bulk freight, the return of ore-related commodities is nowhere near. 12月18日 14:24

Chan David Brother 肥嘉: as I said already: At least, from the actions taken by mining companies as well as the performance on bulk freight, the return of ore-related commodities is nowhere near. 12月18日 14:48


Chan David Brother Law: from the way the money move, particularly treasuries of OECD countries all have their yields dropping, the investors for the moment still choose fiat money as the currencies rather than gold. Gold may act as a security in their portfolio. If that is the case, gold price may fluctuate only at a narrow trend. 12月18日 21:46