‘Lehman Moment’ Coming? Chinese Credit Markets Freeze

Friday, March 14, 2014
By Paul Martin

Friday, 14 March 2014

Heightened tensions ahead of Ukraine’s weekend referendum in Crimea and concerns over China’s financial system and economy and indeed the global economy pushed world stocks to their lowest in a month on Friday and sent investors into safe haven gold.

Gold is 2.3% higher again this week and reached a 6 month high of $1,376.64/oz today and is poised for its sixth straight weekly rise. Gold is now 14% higher so far in 2014. It’s technicals look good and from a momentum perspective gold looks bullish.

European shares started the day down 0.6% after the Nikkei plunged 3.3% overnight and is down 6.2% for the week. Stocks globally are on course for their biggest weekly drop since January. The German DAX whose German constituents have the most exposure to Russia, is down 4.3% for the week and facing its largest weekly losses since the height of the euro crisis in June 2012.

Ordinarily, one would expect a pullback for gold after a succession of such price gains. However, the very serious geopolitical situation is making traders reluctant to take profits or go short. Gold may test the $1,400/oz level prior to seeing any correction and traders will want to be long over the weekend. There is of course the possibility that a further breakdown in diplomatic relations between Russia and the West leads to further safe haven price gains.

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