An interesting discussion about the opening of the China-based Pan Asia Gold Exchange and its potential impact on the global gold, silver, and currency markets.
My own expectation is that it will be met by concentrated gaming from the paper trade on the various exchanges, until things eventually sort themselves out and the market finds a truer price discovery based on actual supply and demand.
I suspect there will be an initial surge, and then a great push back, and finally a tug of war until the paper trade capitulates and leverage is resolved. Do not forget that this leverage and the existing imbalances were built up over a period of twenty years, and they have only been ten years in the unwinding so far, and are caught up in what I have called the currency wars.
The timing will be highly dependent on the context of the other markets and sovereign debt. I suspect that once the financiers are done messing about with Europe, they will turn once again to Asia.
I concur with Andrew's analysis of how the short side leverage will break down. One may choose not to participate in the metals investment, but I think it is becoming almost insane to short it, except perhaps on a day trade. The danger of a market dislocation is becoming too large for all but the TBTF firms to bear.
And although the percentage gains may ultimately be greater in the instruments such as miners, with of course the commensurate increased risk, I think bullion will continue to lead the way, since the reform of the naked shorting of equities will be dependent on changed demanded as the result of a breakdown first in some other market scheme, like the metals paper manipulation with the excessive use of leverage and the abuse of market pricing.
And although the Comex seems to be the focal point of all this discussion, there are some things that suggest that scandals may rock the London and even the Canadian exchanges and their banking systems, reaching perhaps to the higher levels of government. There seems to be a new Triangle Trade in fraudulently misrepresented financial instruments going across the Atlantic, which includes the Caribbean and some of the other tax havens.
Andrew Maguire Interview on King World News.
