Gold and Silver Investors in China and Asia
This article is going to provide information on some new mercantile exchanges for trading silver and gold that will explain why their creation could help skyrocket silver and gold prices in 2012. The emergence of these mercantile exchanges are truly going to be “game changers” in our opinion and the price escalation in precious metal prices could even start in the next few months.
New mercantile exchanges are getting started in China, Asia, and India and existing ones are gaining in popularity. The citizens in these countries have an insatiable appetite for gold and silver investing. Having easier access to local mercantile exchanges for their large institutions and individual investors is the key to why future silver and gold buying will explode.
For those of you that are unfamiliar with futures contracts trading, the king for many years has been the Chicago Mercantile Exchange (CME). They are still the top exchange for buying gold and silver futures contracts. They run the NYMEX which is the world’s largest physical commodity futures exchange. In addition, they control the COMEX which is the global exchange for copper, aluminum, silver, and gold. And, they run the CBOT for trading options and futures contracts on gold, silver, U.S. Treasury bonds, and energy and they even control the Dow Jones Industrial Average. The CME was the only game in town for big money players outside the United States. Investors had to trade in US dollars and they needed to obey the CME’s rules.
What that really means is that for many years China, Asia, and India were shut out from taking delivery of gold and silver unless they purchased contracts through the CME. And practically speaking, getting delivery from the US is not convenient.
Also, the huge fall in silver prices in late April of 2011 was brought about by a large number of successive margin call limit raises by the CME. This is easy to do in a non-competitive exchange world when you are the dominant player. As we explain later, adding very big exchange players in the gold and silver markets will probably curtail that type of ”artificial price fixing” from the CME. And without a momentum stopping action by the CME in a more competitive environment, the momentum buying from huge speculators in China and Asia could drive prices much higher than ever before.
Gold and Silver Game Changer #1 – Hong Kong Mercantile Exchange
The world of the CME being the dominant player in gold and silver futures trading is quickly changing. It has been slowly changing in recent years and it will change even more going forward. The Hong Kong Mercantile Exchange (HKME) recently opened and is now a major player in gold and silver futures contracts. The biggest difference is that it is the first time in history that the Chinese and Asian countries can purchase gold and silver futures’ contracts and actually take physical deliveries in Hong Kong.
Enabling much easier access to the physical precious metals to investors will most likely propel the HKME to become the dominant gold and silver gateway for all of China and Asia. No longer will China and Asia be at the mercy of the CME’s rules and the United States.
If you think that is not a huge market changing event for gold and silver then you would be dead wrong. Today, the Chinese are the biggest consumers of silver in the world and accounted for a mind boggling 25% of the global silver consumption last year. The silver demand rose 67% in 2010 in China alone. And this demand is expected in increase dramatically in the next few years.
In addition, not only can the Chinese and Asians take delivery of gold and silver locally but they can buy it in much smaller dollar increments. For those who want to trade gold and silver futures contracts on the new Hong Kong Mercantile Exchange, the buy-in is only a 1,000 troy ounce minimum. This is dramatically less than the current minimum contract from the CME of a 5,000 troy ounce minimum. That change alone will provide a huge advantage to smaller buyers. It should naturally increase the buying volume size and probably the total amount of silver and gold purchased. The larger volume purchases with more attractive buy-in parameters will put a strong upside pressure on gold and silver prices as the HKME gains momentum.
And, not surprisingly, the HKME has already signed up over 20 of the biggest brokerage trading firms in Asia. Those firms will undoubtedly create some huge volume buying in the near future, and that bigger buying is probably going to get going by the Summer of 2012.
The last silver squeeze, which Momentum Rider forecasted for subscribers, was started in mid 2010 and ended in late April of 2011 when silver prices went from $16 to $48. And that big short squeeze was without this new and powerful HKME. It could be even more staggering with new exchange buying pressures that could easily push silver to over $60.
Gold and Silver Game Changer #2 – Pan Asia Gold Exchange
The opening of Pan Asia Gold Exchange (PAGE) is scheduled to be in June 2012. This could literally take silver and gold prices to a triple from the current prices when buying momentum takes over. This is because in June, Chinese will be able to buy spot gold and futures contracts in their own Chinese currency. It will be the first time in history that the ruling currency will be used in speculative commodities like gold and silver. This is monumental in importance in terms of its positive affect on higher gold and silver prices. It could also be the start of the Chinese trying to undermine the US dollar in order to move their currency up the currency importance list.
You see PAGE will enable all 320 million retail customers and their 2.7 million corporate customers of the Agricultural Bank of China to use the Chinese money in their bank accounts to trade gold and silver. How significant is that? If just 2% of the Agricultural Bank of China customers buy 250 ounces of silver ($8,000 worth at $32/oz)), that would require 1.6 billion ounces of silver to come off the market. It would remove almost 10% of the yearly available silver amount open to worldwide investors. It is easy to see how fast the opening of PAGE could accelerate gold and silver prices upward.
It is all part of China’s five year plan to dominate global financial markets and the global economy. The PAGE also has the potential to eventually win the spot market for gold over London’s Metals Exchange and the Comex in New York.
The PAGE opening in June 2012 could conceivably force most short positions in gold and silver to cover before its buying power is unleashed. And the big institutional players will probably front run the opening which means that gold and silver prices will start going up well before PAGE opens in June. Based on our opinion, the PAGE’s future prospects almost guarantees a short squeeze and fast run up in prices that could rival the late 1970′s and early 1980′s.
Some are predicting the potential for $200 per ounce for silver and $5,000 and ounce for gold. That would not happen in the next few years but it is not out of the question by 2020.
Gold and Silver Investing
Here is the best and safest non-leveraged way to play this big move in gold and silver prices. We recommend buying the SLV, PSLV, or SIVR ETFs for silver and the IAU or GLD ETFs for gold. They track the spot prices one-for-one.
Of course there are also leveraged ETFs that can traded when the momentum heats up and you can buy gold and silver miners, you can buy coins, and futures contracts and options are also something to consider.
Leveraged Silver ETFs: AGQ (2X); USLV (3X) – these decay mathematically as investments so holding them long term is not advisable – used for trading
Leverage Gold ETFs: DGP (2X); UGL (2X); UGLD (3X) - these decay mathematically as investments so holding them long term is not advisable – used for trading
Another parabolic move in silver and gold prices similar to what happened in 2010 and 2011 is very probable and it could be even bigger this time around. The opening of some new exchanges are truly game changers for the gold and silver prices and for investors.
Start buying in small amounts right now and on any pullbacks before the big momentum move really kicks in. Watch for Momentum Rider’s frequent updates on gold and silver prices in blogs and in the MR Power Stock Newsletters.
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Good luck in your trading and investing,
CEO Jalexa Trading Consultants, LLC
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