China Gold Puke Begins?

If so, they don't ring bells any louder. Deflationary collapse cometh.

BI: China dumped a huge amount of gold on the market and investors are spooked
A huge dump of bullion, equivalent to one-fifth of a whole day’s trade in a normal session, came on the market in China this morning in a two-minute window.

ANZ Bank analyst Victor Thianpiriya said in a note at the close of the Asia trading session that the “nature, size and timing of the heavy selling” suggests someone “was taking advantage of low liquidity or some sort of forced selling had taken place.“

If it is "forced selling" then we could be in for plenty more trouble. Forced selling generally means leveraged investors who have used borrowed money to buy gold are being forced to sell to pay back the borrowed cash. A big dip is likely to trigger more "margin calls", industry slang for people selling to pay back borrowed money, and that will exacerbate the problem.

This is precisely what happened in China's stock market, which collapsed around 30% in a month after falling into a death spiral. That collapse was only halted by an unprecedented level of government intervention.

Here’s Thianpiriya with the details on the big gold sale:

In Shanghai, close to 5 tonnes of gold was sold on the SGE in a two-minute window just prior to 9:30am, in a market where the normal volume traded is 25 tonnes in an entire day. The August 15 Comex gold contract also saw 7,600 contracts traded in the same two-minute window, though intraday trading data showed an unusual spike in Comex volume just before Shanghai, suggesting Comex gold lead the selloff, but SGE clearly exacerbated it.
Thianpiriya says the technical outlook is very bearish now for gold, saying “further downside risks remain” and that “other indicators also suggest the likelihood of an immediate rebound is low.”

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