Is it Ukraine? Is it Chinese corporate bond defaults? It’s both! Gold is at a six-month high this morning, with spot gold over $1,368 an ounce. News from Ukraine that Russian troops are once again massing on its eastern border have combined with a worsening picture in the Chinese financial markets to send investors both East and West scrambling for safe haven.
Silver and platinum are also seeing gains, and palladium is flat to slightly lower. The price crash in copper this week is dragging them down, with other industrial metals. Copper is near four-year lows (a level some traders feel is an overreaction) due to the economic difficulties in China. Chinese companies have been amassing huge stockpiles of copper to use as collateral for loans for a good length of time. Now that Chinese banks will no longer accept the copper as loan guarantees, it is flooding the domestic market.
A second Chinese solar panel company has had trading halted on its corporate bonds. This follows the default of Shanghai Chaori Solar on its March 7th bond payments. Chinese regulators are now asking brokerages to report their holdings in corporate bonds rated AA- or below, in an attempt to find out how deep the problem may go.
Regarding the Ukrainian crisis, the prime minister of the new Ukrainian government is meeting with President Obama at the White House today to appeal for help. Russia has decried as illegal, any financial aid to the new government, which is trying to resolve the economic crisis that helped spur the ouster of pro-Russian prime minister Viktor Yankunovych.
The Ukrainian government has announced that Russia is massing troops and vehicles along its eastern border, including a paratrooper regiment, and has called for Ukrainian veterans to answer the call for raising a National Guard. Ukrainian army, air force, and navy personnel stationed in Crimea remained trapped in their barracks, if not run out of their posts at gunpoint by Russian troops.