Golden armor

10:03 am (Hawaii) Opened a partial position on XG at 10.73. If it slips to 10.43 or so, I may add a few more shares. I'm expecting a gradual gain in Spot Gold this week with so much uncertainty in Europe and so much bullishness on PMs in China and other global markets. Unlike Gold, Spot Silver is not QE-proof, and until there is evidence of more POMO funds going into the market, silver will diminish gradually with the equity market ... unless today's Shanghai news is just the tip of the iceberg.

I'm not hoping (well, yes I am) that the news (and anticipation) of Shanghai's silver futures market (due to open in December) will send the spot price to the moon. I'm hoping that we get more consistently higher prices that will counter any CME Mafia attacks. I do NOT believe in using margin, but I am NOT against it either. Free markets should allow leverage as long as borrowers make good on their debts. Goes both ways, so more power to the borrower and hopefully he doesn't get blasted when volatility hits. (And those of you who rely on leverage, you know anything that is overhyped is going to be too good to be true; nothing is an automatic home run.)

So, 1. I don't expect Hong Kong gold futures or Shanghai silver futures to kick spot gold to 2000 or spot silver to 50 (or 100), but 2. I do hope that these additions will keep the market stable without losing volatility that traders like me want to play in. Otherwise, I'm staying in cash.

Imagine tens or hundreds of millions of Chinese citizens trading paper gold and silver ... while also owning a ton of physical silver and gold. The central bank there could pull a mafia move with major margin requirement changes on any spot peak price ... but just getting to that peak would be astronomical in height and speed.

The Australian: Chinese demand keeps gold soaring (May 23 2011)

Forbes: You should know what the People's Bank of China is up to (May 23 2011)

ETF Daily News: Will the gold bubble burst or is it buying time? (May 23 2011)

Larry Edelson: "I expect silver support ($32) to soon give way" (May 23 2011)

(video) Tony Segami: Dumpster diving for Japanese bargains (May 21 2011)

(video) Tony Segami: A tale of two central bankers (Apr 9 2011)

Update 11:25 am (Hawaii) Dennis Gartman on the euro and gold during Fast Money:

"Absolutely, I've said it for months and months and months. You want to own gold but predicated in non-US dollar terms. You want to own gold in euro terms. You want to own gold in sterling terms. You want to own gold in Swiss franc terms., and if you take a look at it, even if gold in US dollar terms is not making new highs, gold in euro terms today made new highs. Gold in sterling is making new highs. Much more impressive to be long of the gold market in euro terms, in sterling terms, in Swiss franc terms. I was impressed today that gold traded higher on the day. Even in US dollar terms, as crude oil was down at one time 3 dollars, and most commodities were going down. ... People are moving out of the euro and they're moving into gold as the other currency. It's a very logical trade."

Update 1:17 pm (Hawaii) A few thoughts from James Turk via King World News:

“I think this summer is going to surprise a lot of people. Many are thinking this is going to be another typical summer where precious metals prices are weak, but it doesn’t always happen that way Eric. Sentiment is set up this way because it has been 29 years since we have seen a big rally in the summer. Back in 1982, the Mexican debt default lit a fire under the precious metals and the gold price nearly doubled over the next six months.”

I noted the other day that Spot Gold has meandered in the past two summers before spiking up later in 2009 and '10. But things are different now, aren't they?

King World News: James Turk interview (May 23 2011)

Update 1:45 pm (Hawaii) Hugo Salinas Price interview with James Turk back in February.

Update 3:28 pm (Hawaii) Some stuff I watched and read this afternoon while procrastinating. Spot Gold is climbing, now 1518 with Hong Kong open. Spot Silver up, too, now 35.14.

Dan Norcini: Gold strength in euro and British pound terms firming up (May 23 2011)

Chris Martenson: John Rubino interview

(video) H1INC: Why you can't crash JP Morgan by buying silver (May 13 2011)

Sean Brodnick: The golden bottom (May 20 2011)

Daily Bell: Hugo Salinas Price on the nature of money (May 23 2010)