The Rude Awakening
Scotland, Edinburgh
Tuesday, June 12, 2007 ------------------------- - Asian fashion - Gold is in, the dollar is out,
- Crisis and opportunity in the new Asian era,
- The difference a Chinese golden pig can make and more…
------------------------- Joel Bowman reports from the British Isles… It appears impossible to take in any world news these days without some astonishing occurrence in Asia snatching the headlines. Just this morning we caught glimpses of the following… From CNSNews.com: China Moves Up the Weapons Spending Ladder - China have overtaken Japan and are now the leading military spenders in Asia, fourth in the world. The top five are United States ($528.7bn), Britain ($59.2bn), France ($53.1bn), China ($49.5bn) and Japan ($43.7bn). From The Calcutta Telegraph: India's Biggest IPO is Launched - Floated by real estate developer, DLF Ltd, the nation's largest initial public offering garnered a 78% subscription by yesterday's close. "If all shares are subscribed, the company will raise between 87.5 billion rupees (US$2.1 billion) and 96.25 billion rupees depending on the cut off price." From the Japanese Times: Japan's Economy Again Outshines US, Eurozone - "Japan's economy outperformed both the US and the Eurozone in January-March for the second straight quarter, reinforcing expectations the Bank of Japan will raise rates in August." With the Indian stock market booming and busting every other day, China gearing up to showcase itself to the world at the Beijing Olympics next year and Japan's resurgence as a world economic powerhouse, it is no wonder Asia is dominating the front pages. There is little doubt that the most explosive markets today find their home in Asia. The trouble is knowing how to invest in them without losing the souvenir kimono off your back. That's why we've dedicated the most important date on Agora Financial's calendar to this very topic. Each year we host a conference in Vancouver for investors looking to position themselves for the next global market shift. Last year the theme for the conference was investing in the age of empire. This year, we're heading to the new empire: Asia. The conference will take an in-depth look at: Precious Metals: Was $700 the top for gold… or will Asian demand finally push it to $1,000? Are the Chinese secretly securing other key metals that the mainstream is overlooking? And what's the best way to play what's ahead? Energy: The world has seen skyrocketing energy prices as India, China and other booming populations demand an ever-greater share of the world's remaining oil. Which countries are the closest to initiating radical alternative energies? And what companies will provide the raw materials for this technological revolution? Geopolitics: Who's getting rich as more and more jobs go to India and China? Can the dollar stand up to Asia's strength? Is China's dominance directly tied to its unbalanced American trade… or does it have other countries ready to buy its goods? Stocks: What will the Dow and the S&P 500 do next? Are the Asian markets set to eclipse the American exchanges? And are there any easy ways into these emerging markets? You can find all the information you need right here: The 2007 Agora Financial Investment Symposium - Crisis & Opportunity in the New Asian Era To whet your appetite, we bring you today's column from our friends over at Casey Research. Doug will be speaking at the conference but, in the meantime, we wanted to give you a glimpse at what he and his team have been working on… Over to Doug Casey in Stowe, Vermont… I am often asked by subscribers to our International Speculator why I'm so sure the economy of China is going to continue on a roll, in turn keeping demand high for commodities in general, and precious metals in particular. Rather than going through the macro-economics, I tend to abbreviate by referencing China's troubled history, and pointing out that China's leadership, which today are communist only in rhetoric, are well aware that they are an anachronism. Which is to say that a serious slowdown in the economy, with its attendant mass unemployment, could quickly turn into a terminal event… politically and maybe even personally. So they'll do what they must to keep the economy humming along. And that is to continue to benefit from the lessons so clearly learned in Hong Kong… first and foremost, staying out of the way of the market. Put another way, now that the capitalist genie-or, more correctly, 1.3 billion genies-is out of the bottle, there's no soft way of going back. As David Galland points out in the article that follows, the best way to take advantage of China's explosive growth comes from getting positioned in gold (and for leverage, gold stocks)… the cultural default for wealth in Asia. As you'll read, the signs of China's new golden age are already starting to appear. ----------------------------------- Asia's Golden Age
By David Galland More straws in the wind for gold… a wind coming out of the East. On March 29 the Tokyo Commodity Exchange (Tocom), the world's fourth-largest commodity futures exchange, announced the loosening of margins to allow greater daily price fluctuations for gold. The move broadens the range by 33% as of April 1. But it was not only what they did, but what they said, that caught our attention. According to Bloomberg, Shigeharu Amari, the general manager of Tocom's public relations department, said, "Heightened demand for gold in China and India have led to major swings in bullion prices over the past six months, which is why we decided to make the change." China's traditional cultural affinity for gold, understandable given that country's troubled history, was
suppressed by Mao and Co. for 52 years, until the liberalization of gold ownership in 2001. Chinese investment demand for gold has been growing steadily ever since. Today, that demand might begin accelerating sharply, thanks to concerns over a falling dollar…and a pig. In the Chinese lunar calendar, 2007 is the "Year of the Golden Pig," which only comes around every 60 years. In this, the luckiest of lucky years, many Chinese couples hope to land the birth of their one and only state-permitted child. The maternity ward of Beijing's China-Japan Friendship Hospital, one of the city's biggest, expects to deliver double its unusual 200 babies a month. "We are already overwhelmed," one of the hospital's nurses sighs. "Everybody wants a baby born the Year of the Pig." This auspicious year also serves to boost gold demand. The lunar calendar kicked off on February 18, 2007, but even before the starting gun, the pick-up in Chinese gold sales was apparent. In 2006, according to the China Gold Association, gold consumption in that country grew by 17%. Toss in a golden pig and things get a lot more interesting. "The 'Year of the Golden Pig' effect is having a strong impact in China [this year]," the World Gold Council reports. "providing a further boost to already robust growth…Consumer demand in Q1 was 31% higher in tonnage terms than a year earlier." The Shanghai Gold Exchange, China's only precious metals trade platform, noted a gold trading volume of nearly 130,000 kilograms in January, a rise of 73% over the same period last year. Consumer demand in India, the world's largest gold market, is also surging…even without a pig. During the first three months of 2007, Indian gold demand jumped by 50% year over year. Historically, gold jewelry accounts for a majority of Indian gold demand. And 60% to 70% of all jewelry is sold during the wedding and festival season in October and November. But most analysts now see gold in India taking on a larger role as an investment for the newly affluent looking to protect wealth (Indian inflation is now running at 6.5%), versus just as body décor and status. Thus, on February 15, the first Indian gold ETF launched, the Gold BeEs of Benchmark Mutual Fund. The second ETF launch, the UTI Gold Exchange Traded Fund, is already underway. These new gold ETFs will likely boost India's already-robust investor demand. Hopping back to China, gold investors cannot ignore the long-term significance of the 700 billion greenbacks now cluttering China's official reserves. In 2006 alone, the Chinese suffered about a $3.4 billion in exchange rate losses, due to the weakening dollar. That sum seems almost like chump change in the context of $700 billion, but this loss could be a clear warning shot of far bigger losses to come…or losses the Chinese would like to avoid. Diversifying out of the U.S. dollar, therefore, and into a far more diverse basket of assets, including tangibles such as gold, has become a very high priority in China. But yet, despite announcing last year that they were starting a new government investment management corporation, the primary purpose being to manage their towering reserves, the Chinese don't seem to be in a big hurry to diversify. But outward appearances can be deceiving. Recently, the Chinese engaged in a bit of carefully orchestrated theater, the purpose of which was to reassure the world's financial community they were not going to rock the boat in an attempt to diversify out of their hundreds of billions of dollar reserves. The show kicked off with Wen Jiabao, China's premier, assuring the market in a press conference that China's new investment regime "would not have any impact on U.S. dollar-denominated assets." The opening act was followed a few hours later by China's central bank when it pulled back the curtain on a report stating that it wouldn't be making "frequent, major adjustments to the structure of the reserves in response to market movements." Might the Chinese be going out of their way to reassure gullible markets that they would not be unloading dollars, while simultaneously getting rid of as many greenbacks as possible before the broader markets catch on? It is certainly within the realm of possibility. In fact, if you look at it through the spectrum of a leadership for whom the "Big Lie" has been an official policy tool for better than half a century, it becomes downright likely. That this may be the case is made all the more apparent by the recent news that China had invested $3.3 billion in Blackstone, the U.S. private equity firm. You can rest assured that their investment strategy is far more diverse than just investing in U.S. Treasury bills. The rapid growth of Chinese and Indian gold demand is contributing to an unmistakable global trend. "Global demand for gold reached $17.4bn in Q1 2007," the World Gold Council reports, "more than double the level of four years earlier and 22% higher, in dollar terms, than in the first quarter of 2006." Thanks to the hugely popular new ETFs in the U.S., London and elsewhere, individual investors have gained a simple means of acquiring and holding gold as an investment. Throw onto the scale the rising demand out of a booming Asia, along with the very real possibility that the U.S. dollar has seen its best days, and you have all the factors you need to see gold heading much, much higher from here. How much higher? Impossible to say, but it is worth noting that, on an inflation-adjusted basis, gold would have to rise to $2,276 just to equal the previous $850 high. How you play the unfolding gold market will depend on your psychology and temperament… with your choices ranging from straight bullion on the tame side, to the extreme leverage of futures on the wild side. Around here at Casey Research, we focus on the middle path; higher-quality gold shares.
Whatever approach you take, however, just make sure that you don't procrastinate to the point of missing the boat altogether. The Golden Age is upon us. Joel's Note: David Galland is the managing editor of Doug Casey's International Speculator newsletter, now in its 27th year. If you would like to learn more about the International Speculator and their no-risk trial subscription, click here now. Doug Casey's International Speculator --- Outstanding Investments Gold Report --- Presents: Government Guaranteed Gold This new U.S. government-backed guarantee lets you own gold with no risk… but with 100% of the gains should gold prices take off. Here's the catch… You must act on this by June 19, 2007… or you risk missing the official deadline and getting shut out of this forever… The Full Report is Here: Government Guaranteed Gold | 
