Reading between the lines it was Bob Dylan who wrote: "You don't have to be a weatherman to see which way the wind is blowing."
- In my previous article I have covered China's new move to make the yuan a world currency.
- Boeing (BA) has signed a pact to give the Chinese our aircraft technology secrets.
- We have agreed to share nuclear secrets to China.
- U.S. and Chinese Energy companies announced a variety of partnerships to share information. Alcoa (AA), Duke Energy, Chinese Power Investment Corporation and Shenhua Group for $7.5 billion.
- General Electric (GE) announced a joint venture to China's Shenua Group to sell clean-coal technologies.
- The Chinese are entering the U.S sports apparel field and challenging Nike and Adidas.
- China has entered the retail banking industry where U.S. Citizen can invest in the yuan.
Everyone is leaving home happy except investors in precious metals and mining stocks. In October and November, major institutions sold their positions into the hysteria of QE2, where a major amount of retail and momentum traders entered into metals. At that time a lot of the fund flow was to basic commodities such as uranium, rare earths, copper, wheat, oil and gas and potash. Now the major gold stocks are on sale and I believe we will see a re-entry into gold miners and gold and silver bullion as it returns to long term multi-year support. Major gold stocks such as Goldcorp (GG), Newmont (NEM) and Barrick (ABX) are reaching oversold levels not seen in the past two years at a time that they will be producing hefty returns and returning possibly large dividends to shareholders.
Profit taking is a natural process in a bull market that shakes out short-term traders and provides opportunities for long-term traders and institutions to add or initiate positions. Gold has done it every six months for the past two years since all the bailouts and central bank actions began. Don't be too surprised if gold reverses back into the limelight as investors' hedge against further sovereign credit defaults out of Europe and within states and municipalities within the Unites States.
One of the most important deals I highlighted above that shows China's international interests in expanding its economic presence and promoting the yuan as a major reserve currency is its expansion into the U.S. retail banking business. China signed a deal that would acquire retail bank branches in the U.S for the first time. Now U.S. residents can transfer their savings from cheap U.S. dollars to the strengthening yuan. A deal has been made; China will allow the U.S. dollar to devalue to fund record-breaking deficits if China is allowed entry into the heart of American Capitalism—its retail banking industry. China's financial institutions are in a much stronger position to acquire failing toxic banks after 2008's financial crisis. This will promote the strengthening yuan as an investment to a U.S. residents by offering the ability to convert and encourage savings. China is attempting to purchase more silver and gold to support the yuan against other debt-ridden and weak currencies. In fact this year it has purchased up to five times what it has in previous years. It has also started funds to invest in ETFs and just opened a branch in Toronto—the epicenter of resource companies.
The U.S. dollar will continue to decline so the U.S. can pay its debts and provide the funds to bankrupt states and municipalities if China is allowed access into the heart of the North American Financial Markets as outlined above.
This move could be the beginning of a major trend of Chinese financial institutions migrating into the U.S. to expand their global presence. I expect major deals to occur this year, which may be very lucrative for natural resource investors, as China has shown an aggressive interest for foreign supplies of precious metals and basic commodities.
This major deal of entering the retail U.S. banking market was the most important event to Chinese officials. China needs to expand its presence globally. They are rapidly developing into the Western Hemisphere and this move is a first step in developing the yuan as an International Currency. The average American will now have access to enter a bank and invest in the yuan. This is a signal to my readers about the very grave danger of a U.S. dollar collapse into new lows. China wants to expand overseas with their huge foreign capital reserves and they need basic commodities to fuel its rapidly developing global economy. This could be the beginning of several major steps that could make gold and silver soar. Now mining stocks and bullion are providing interesting opportunities.
I invite you to partake in my free 30-day trial at http://goldstocktrades.com/premium-service-trial to be informed of important opportunities in the financial markets and for detailed chart analysis.
Jeb Handwerger, Editor
Gold Stock Trades