Welcome to illuminati silver, we tell you
the truth about silver. Today is Monday 2nd May 2016 and we are addressing
the issue of China, PMI and gold and silver price issues.
With gold prices up 22% since the 1st January and silver up 29% (in US dollar terms), many
people are asking why and is this trend set to continue?
Well a number of factors have affected these prices, not least of these have been the FED’s
rather dovish approach to interest rates, thereby causing the dollar index to decline
from 99.6 to its current 93 level, zero or negative interest rates in many nations throughout
the world including Europe and Asia ensuring precious metals becoming more attractive for
investors, and an acceptance that their significant fall from their 2011 highs may in fact have
been overdone. One of the main concerns has been global economic
decline not least the slowdown in the Chinese economy resulting in their lowering of GDP
forecasts to below 7%. Many economists assess future trends based
on a number of factors including GDP. PMI’s (Purchasing Managers’ Index) have also proven
to be a significant, and frequently accurate forward looking indicator of commodity prices
and economic activity. J.P.Morgan only last week admitted in its
morning note that “stocks are taking their cues from the monthly PMIs,” the manufacturing
surveys in particular, as opposed to GDP. China’s March PMI reading, at 49.7, was not
only at its highest since February 2015 but it also crossed above its three-month moving
average – a bullish signal However, earlier yesterday, it was announced
that the official Purchasing Managers’ Index (PMI) rose to 50.1 in April, but barely above
the 50-point mark that separates expansion in activity from contraction. Analysts polled
by Reuters had predicted the reading would improve to 50.4, after upbeat March data fuelled
hopes that the country’s prolonged economic slowdown was easing.
According to Zhou Hao, senior emerging market economist at Commerzbank in Singapore – “The
findings were a little bit disappointing…… To some extent, this hints that recent China
enthusiasm has been a bit overpriced and the data improvement in March is short-lived.”
Indeed, South Korea reported April demand from China was the worst in three months,
with exports to its biggest market tumbling 18.4% on-year.
And China’s factories continued to shed workers, with staff cuts quickening from the previous
month. The property recovery appears to have spurred
demand for building materials from cement and glass to steel, and a recent rebound in
commodity prices is bringing in more cash flow for some companies to service their mountains
of debt. However, home sales are now falling in some
large cities, such as Shanghai, as authorities try to curb rapid price rises, and previously
buoyant steel and iron ore markets cooled last week after Chinese securities regulator
ordered commodity futures exchanges to control speculative trading.
Analysts also worry that recent signs of improvement may be largely driven by companies and local
governments taking on more debt, putting the chances of a stable recovery at risk.
China’s Big Five banks reported last week that their bad loans had increased by 53.2
billion yuan ($8.21 billion) in the first quarter.
On the other side of the coin however, consumer confidence appears to be increasing as a result
of recent house price rises. China’s appetite for metals – gold, silver,
copper, iron ore and more – has also been growing, especially compared to last year,
another sign that its economy may be rebounding. China is the world’s largest importer, consumer
and producer of gold. Last year, physical delivery from the Shanghai Gold Exchange (SGE)
reached a record number of tonnes, more than 90% of total global output for 2015. Meanwhile,
the People’s Bank of China continues to add to its reserves nearly every month and is
now the sixth largest holder of gold. According to the World Gold Council, despite China’s
declared holding of 1,788 tonnes of gold, it still only amounts to 2.2% of its total
foreign reserves, a tiny amount and much less than that held by other world super powers.
This can only lead to one course of action – further demand.
This is further supported by its introducing a new fix price for gold, one that is denominated
in Chinese Renminbi /Yuan. The Shanghai fix price is designed to give China, especially
over time, a greater say in the world price of gold.
Copper demand too has increased in China in fact it has been reported some 39% more in
March compared with the previous year. Caixin reports that China’s iron ore imports are
surging on lower prices. In the first two months of 2016, the country purchased 86%
more iron than it needs. What’s more, total imports were up 84% from the same time last
year. Steel production, which requires iron ore, is likewise rising. Output is currently
at 70.65 million tonnes, an increase of nearly 3% year-over-year.
A recent article on Zero Hedge has indicated that China has been growing its silver inventories
quite substantially for the past 6 months. This month, as of April 19, the Shanghai Futures
Exchange added a massive 1,706 tonnes, which is a 452% increase from the amount it added
in April 2015. Shanghai silver inventories are now at their highest level ever.
It is rumoured that the proposed growth in solar panels is the prime reason for this
demand – something which India too is concerned over and will begin to acquire larger silver
volumes. Bank loans in China have spiked dramatically
this year while money supply has grown more than 13% year-over-year, which is good for
metals and manufacturing. The increase in metals demand, not to mention
the weakening of the US Dollar, has allowed silver to become the top performing commodity
of 2016 after recently overtaking gold. So what are we all to make of this? Well there
is no doubt that China has been on a buying spree of precious and industrial metals. The
PMI’s support the reasons for this; though in some quarters it is felt that perhaps the
acquisitions have been overdone. It is our contention, from our contacts that overdone
or not, China is very much aware of silver supply conditions and its own need to increase
gold holdings against its reserve levels. For these reasons we see their demand continuing
to increase yet further, thereby supporting recent price rises. We also see some of the
speculative froth coming out of the paper markets and perhaps some price fall backs
in the summer months. However, that said, we could very well see
gold rise above $1300 and silver above $18 – $18.50 in the interim and at these levels
significant resistance will be met. Nevertheless, pull backs, we believe later in the year,
will give purchasers another opportunity to purchase these metals at lower prices but
onward looking, can see that 2015 may indeed have provided the lows and that a new paradigm
is beginning to emerge. We hope you have found this video interesting
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is updated daily can be found at facebook.com/illuminatisilver Disclaimer: Illuminati Silver owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of