chinese stimulus mayreach $315b gold to surge

Hey Fellas

Now that George is completing the Ethnographic study, the most important event in terms of ensuring that the Landowners are taken care of before the PFS is completed

This will help to work out each of the landowners' share of the Mt Kare land, as such, once it is completed it will derisk the project, as such it is important to look at what is happening on the ASX and what the imminent Chinese stimulus will mean for our mining shares as they derisk their projects.

While Europe sorts out their debt issues and slowly moves towards a Eurobond which will take a lot of the inherent risks of lending to the PIIGS, in Australia, we need to keep an eye on what our biggest customer for our dirt, China is doing!

After 14 months of tightening their money supply to bring back their inflation rate to below 4%, they are now embarking on a stimulus package, coupled with directed stimulus measures to help their economy grow.

Again we need to remember the direct correlation between the Chinese money supply and our mining shares!

As the RRR falls, and money supply increases, so will the Materials and Energy sectors of the ASX, due to this stimulus in China going directly into buying minerals and energy.

We need to go back to these two charts below as a guide to where our market will be moving towards in the next few months. They will both be reversing very soon for strong second half of 2012.

The Chinese public is sitting on $5.2Trillion in cash in their bank accounts, as the RRR falls and the velocity of cash in the Chinese economy accelerates, coupled with the stimulus measures, expect to see demand for gold to lift breaking above $1700/Oz by Q4 2012.

Just in time for IDC's BFS!

Cheers Nectar

China Stimulus May Be 2 Trillion Yuan, Credit Suisse Says
By Bloomberg News - May 28, 2012 7:09 PM ET

The Chinese government’s stimulus in response to the nation’s economic slowdown will probably be as high as 2 trillion yuan ($315 billion), half the size of 2008’s package, Credit Suisse Group AG said.

Spending on investment will range from 1 trillion yuan to 2 trillion yuan, compared with the 4 trillion yuan stimulus enacted in response to the global financial crisis, Tao Dong, a Hong Kong-based economist, said in a research note today. The government actions will aid a rebound in growth that may slow to 7 percent or “slightly below” this quarter, Tao said.

Premier Wen Jiabao has vowed to focus more on increasing growth after trade and domestic demand were below forecasts in April, data that prompted economists to pare outlooks for the world’s second-largest economy. The government’s efforts may help lift expansion in the second half to a range of 8 percent to 8.6 percent, Tao said.

“These policy stimuli can hold the slide in growth and investment demand, but probably not enough to stage a 2009-style rebound,” Tao said. “The central government is likely to play a bigger role in funding, in contrast to last time in 2009 where the local governments relied on bank lending for funding almost entirely.”

China’s central bank is likely to cut lenders’ reserve- requirement ratio by 50 basis points each in the third and fourth quarters, said Tao, who doesn’t “rule out an extra cut in June.”

There’s a “possibility” China’s central bank will lower the benchmark lending rate by a quarter percentage-point without a reduction in the deposit rate, he said.

Lending-Rate Range

Separately, Ma Jun, an economist at Deutsche Bank AG in Hong Kong, sees chances of greater than 50 percent that the nation will cut interest rates or ease the floating range for lending rates, according to a Deutsche Bank research note dated May 25.

Credit Suisse’s second-quarter growth forecast is lower than that of all 21 economists who responded to a Bloomberg News survey May 14-15. The median estimate was for 7.9 percent expansion, with projections ranging from 7.5 percent to 8.4 percent. Tao forecast an 8 percent rate for the entire year, compared with the median 8.2 percent in the survey.

The Shanghai Composite Index rose for the first time in four trading days, gaining 1.2 percent today.

Central authorities have “encouraged local governments to bring forward their planned infrastructure projects to an earlier date,” Tao said. There are also credit lines for railways, subsidies for environmental-protection projects and funding for public housing, he said.

Speeding Up Approvals

China has sped up the approval process for major projects, the official Xinhua News Agency said in a report today. The country will also encourage greater private investment in banks, according to guidelines released by the China Banking Regulatory Commission in a statement posted on its website May 26.

China announced the 4 trillion yuan stimulus package in November 2008. Local governments ending up spending close to 14 trillion yuan, Tao said.

The National Development and Reform Commission, the planning agency, may be accelerating construction approvals. Baosteel Group Corp. and Wuhan Iron & Steel Group won permission to build 134 billion yuan of new factories, the NDRC said last week. The NDRC had delayed approving the two steel projects in 2009, citing industry overcapacity.

To contact the reporter on this story: Zhou Xin in Beijing at [email protected]