First, to me derivatives are definitely what will ...

2009-10-26T22:10:02.125Z

First, to me derivatives are definitely what will lead us to the financial armageddon and the actual bubble that has not burst yet, cf this post where i discuss this: http://blog.thelordoftrading.com/2009/06/dealing-with-16-digit-dollar-exposure.html

The Bubble is created and fed by the OTC derivatives dealers and makers: mostly the US banks. That's similar to what happened with Credit Derivatives and CDOs: that's a volume business, the more you sell, the more you make money, so you sell what you don't have and what doesn't exist: that's pure leverage. Here the story shows that JP and DB sold gold no one has and this kind of methods works when all the participants play the "game". But China, the main player in several metals and commodities markets, announced in August that they wouldn't play anymore that and may default on their OTC agreements. A default on their losses would be the direct loss of their OTC counterparts : mostly the US banks

It looks like China is to create artificially a drought of the gold, silver and the commodities markets : roughly they are to massively exchange USD (they have plenty of them, purchased to maintain their currency weak) against the physical commodities. The implications would be obvious : Gold, silver and commodities will skyrocket while the USD will sank and become worthless.
Doing so:
- they will get rid of their USD as it seems the USD is doomed and its weakness is supported by the US gov itself (notably to inflate its debt out)
- they will be the main owner of commodities (they are already the main producer of most of them)
- they will get rid of the derivatives exposure and will avoid the financial armageddon when it comes letting it for the West...

I've seen less smart moves...

"and this kind of situation shows why derivat...

2009-10-26T16:03:16.348Z

"and this kind of situation shows why derivatives are weapons of financial destruction," ... haha nice quote. So you are saying the deriviatives markets is the next bubble. And you site possible demand bubbles coming from emerging asia? And you think that supply will not be able to meet depend and thus gold will be in the 2000＋ range. ... so what are the implications for the USD and equties?

Comments on The Eye of Sauros @ The Lord of Trading: A Tale on Gold

First, to me derivatives are definitely what will ...

"and this kind of situation shows why derivat...