Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Growth of Chinese Margin Accounts Drove Bubble – Now Drives the Crash

Stock-Markets / Chinese Stock Market Jul 09, 2015 - 06:32 PM GMT

By: GoldCore

Stock-Markets

- Restrictions on borrowing to speculate were eased in 2010
- Middle class savers gradually saturated the market trading on leverage
- Market crash began as government tried to reign in leverage in overheated markets
- Leverage amplified gains on the up-leg, amplifies losses on down-leg forcing further sell offs
- Policy u-turns could not halt crash


Chinese markets bounced last night following drastic intervention by the state when it banned large players from selling their shares in listed companies – arresting the over 30% decline of the past four weeks.

By definition, a market ceases to be a market if selling is prohibited so it is far from clear at this point if the government can bring stability back into the system.

At the heart of the problem is the use of credit by “investors” to take up larger positions than they might have if they were gambling only with their savings. It was this trading on leverage which ignited the bubble and it is this same dynamic which is now applying downward force.

Until 2010 trading on leverage was tightly regulated in China – only those who could afford to lose could use it. Since that time, however, restrictions have been gradually eased although speculators still have to put up 50% of their own cash.

As momentum grew  more middle class speculators entered the market which led to the mania of the past twelve months. In that time the value of shares listed on stock markets more than doubled to $10 trillion. Bloomberg estimate that the surge was financed by $339 billion of new credit.

From the start of this year the government – seeing the emergence of another massive bubble – attempted to rein in margin trading by raising the minimum level of cash required and closing of loopholes that allowed speculation on higher margins. Then on June 12th, when the crash began, the government put a limit on the use of margin trading itself.

When trading on leverage, at the officially sanctioned 2:1 ratio, small time middle class speculators were making double the gains as the market rose encouraging them to take on further debt for speculation and encouraging those on the sidelines to get involved.

However, as the market has plummeted they have made double the losses causing them to liquidate positions, forcing stock prices down and further liquidations.

The Chinese government was forced to change policy again, easing margin requirements, to try to shield investors from margin calls and to kick-start the markets but it appears that many investors had already learned a very painful lesson and as the Chinese securities regulator said a “panic sentiment” had overwhelmed the market.

Speculating with borrowed money played a key role in the 2008 crisis which nearly collapsed the global economy. It would appear that the entire world is hopelessly addicted to debt. The global debt ponzi scheme grows ever more fragile and with the consequences of this crash – the evaporation of trillions of dollars worth of debt on China’s banking system – yet to be seen, we may be entering a new phase of crisis.

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,162.10, EUR 1,053.96 and GBP 755.37 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,154.25, EUR 1,045.61 and GBP 749.46 per ounce.

Gold in USD – 5 Day

Gold climbed $3.00 or 0.26 percent yesterday to $1,158.80 an ounce. Silver rose $0.04 or 0.26 percent to $15.14 an ounce.

Gold in Singapore for immediate delivery was up 0.6 percent at $1,164.30 an ounce an ounce near the end of the day,  while gold in Switzerland was at $1,163.50 an ounce. U.S. gold futures for August delivery were off 60 cents an ounce at $1,162.90 an ounce.

The yellow metal touched $1,146.75 an ounce earlier earlier this week, only a few dollars from its low for the year, a key support level.

The release of the Fed minutes from the June 16-17 meeting showed that the central bank continues to falter with its plan to raise rates, in the wake of mixed economic data domestically and global market turbulence abroad.

UBS has slashed its price forecasts for both platinum and palladium this year because a decline in investor sentiment and a greater supply of the metals.

In late morning European trading gold is up 0.49 percent at $1,162.35 an ounce. Silver is up 1.59 percent at $15.35 an ounce and platinum is up 0.98 percent at $1,032.00 an ounce.

This update can be found on the GoldCore blog here.

Stephen Flood
Chief Executive Officer

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W www.goldcore.com

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules