Leeb: “Eric, overnight there was some data that was disappointing from China.  Gold and silver have been hit, but strangely enough, oil has been firm.  The key thing the markets are failing to realize is that the Chinese are getting the job done.  They are not going to slow their economy to the point where they have high unemployment and riots in the streets....

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“Instead of China growing at 7.3 percent, maybe they will grow at 7 percent.  How many times in its history has the United States grown 7 percent in a year?  But I still think 7 percent is a lowball figure for China.

What was not included in that overnight release from China was that their gold purchases continue at a staggering rate.  They are on pace to exceed 1,000 tons this year as well as the next two years, at least according to the World Gold Council.  It’s almost certain that China is going to end up with more gold than the United States if they don’t already have more.

Another item which was not included in that release is the fact that China has now amassed close to $4 trillion of foreign exchange reserves.  It’s sort of silly to worry about a country that has $4 trillion of foreign exchange reserves.  So I think the Chinese are doing very well.

It’s impossible for the Chinese to run an economy that large without having problems, but they know what the problems are.  They see them and they are addressing them.  I think this quarter will be the slowest quarter for China and after that they will resume growing.

Turning to the situation in Europe, which I think is extremely interesting:  The Bundesbank has announced that they would consider quantitative easing.  They gave an opinion as to why this would not be inconsistent with European laws.  With Europe recovering a bit, why would the ECB say that quantitative easing is now a possibility?  I think this has to do with the fact that Europe is worried about Ukraine.  They are also worried about the Baltic states.  Their economies are starting to seriously weaken because of the sanctions the West has imposed on Russia.

The problems now emerging in the Baltic states are a threat to the entire European community.  The countries have been showpieces for what the euro has achieved.  So trouble spiraling out of control in the Baltic states actually threatens the euro. This is also the reason why (ECB President Mario) Draghi said they are going to do whatever it takes to get the euro down.  They want a lower exchange rate for the euro.  So Western leaders feel the only way out of this is to stimulate growth, and this will lead to greater  inflation.

Meanwhile, China is maneuvering to get oil priced in something other than dollars.  Obviously China is working with Russia to get this accomplished.  The interesting thing here is that the Germans cannot back away from the euro, but their relationship is strengthening with China and Russia.

In this environment people should expect the unexpected.  What if the Germans and the Russians formed a currency bloc?  We don’t know how wild things are going to get.  As I said, when you see the Bundesbank signaling that it may engage in more QE, that is because of fear.  

Everyone is focused on Ukraine, but what they are not talking about are these Baltic states.  These countries are already losing big-time because of the sanctions that the West so unwisely placed on Russia.  You are not hearing talk about more sanctions right now because increased sanctions could destroy the euro.

The bottom line is that in this type of environment, any significant dips in gold and other commodities should be bought.  Any major decline in prices will be a huge opportunity to buy gold, and especially silver as well as other commodities.  I say that because I firmly believe the Chinese have things under control and they are in a hurry to integrate their economy with the rest of the world. 

Again, with $4 trillion of reserves and the massive movement of gold we continue to see from West to East, I think the writing is on the wall.  Yes, gold, silver and other commodities may temporarily be hit, but don’t be shaken by this because they will be headed into the stratosphere before this is over.”

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