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Rule:  “Today’s news and yesterday’s news, with gold declining, is very interesting.  The most important reason put out by the bullion banks and the mainstream media had to do with the study released by the World Gold Council that suggested that not all of the gold that’s been imported into China has been used for central bank reserves or has gone into retail safekeeping.....

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“They suggested that a substantial amount of gold was imported into China to be used as security for lending transactions.  And the supposition of the study, of course, is that this is somehow other than a good thing for the gold market.

I would point out that what that means is that a whole class of creditors and debtors in China believes that gold is good security.  There are a lot of other assets that they could have used for ‘good’ security such as U.S. Treasuries.  One suspects that China has enough U.S. Treasuries already and that an alternate asset class is what is required to effect the financial transaction.

At any rate, I have a very difficult time as a lender understanding why somebody would be willing to loan money on an asset they wouldn’t ultimately be willing to own and didn’t view as good security.  So far from viewing this as a reason to sell gold, instead I think it’s another affirmation of gold’s timeless value, particularly through periods of stress.

I also think it’s important to understand that if these types of transactions were taking place, first of all it’s testimony to the cultural affinity that the Chinese have had for centuries, and to the potential cornerstone position that gold continues to have in the most interesting financial services business in the word, which is China.”

Rule added:  “The chaos in the world comes and goes, and when you’ve been in the financial business as long as I have, what others see as a crisis, I see as an opportunity.  So, as an example, I’m looking very carefully at 10 or 12 Russian stocks.  Nobody wants to own the Russian market.  The Russian market was oversold a year ago, before the current drama took place.

The big risk on everybody’s mind is, of course, sanctions and how these sanctions might affect the Russian companies.  But in my experience, money has been made by being brave when other people are afraid, and people are certainly afraid of Russia.  As a consequence of that I am trying to be brave.  There is a problem with opacity in the Russian market, but the Russian issuers that are in London are held to a different standard.  So I think there is a real opportunity in Russia right now.”

IMPORTANT - KWN has more interviews being released today.

© 2014 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The audio interviews with Grant Williams, Dr. Paul Craig Roberts, Bill Fleckenstein, Gerald Celente, Dr. Marc Faber, Egon von Greyerz, Rick Rule, Ben Davies, Andrew Maguire, Art Cashin, Eric Sprott and John Mauldin are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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