I am becoming a gold bug. While conspiracy theorists have been telling us, wrongly, for years that the price of gold is being manipulated, that doesn't mean that there is no current fix going on now to shove down yellow metal price down. In fact, an unexpected player in the precious metal market almost certainly intervened to cut the gold price back at 9:30 pm EST on Sunday night right before the market opened in what was Monday morning in Shanghai.

By what market experts are calling “a bear raid”, in a 4-minute period more than 21,000 future contracts for gold were dumped, covering 5 tonnes of gold bearing a nominal valuation of $1.7 bn. Who could have had that much gold to sell in the first place?

The answer is China, a gold-mi​ning country. Market experts are convinced the seller was the People's Republic of China, its central bank. Within minutes the sell-off spread to the just-opened Chinese exchanges which also trade gold, and then to Asia markets. And when other markets opened, stop-loss positions led to further selling in Europe and America. Later Monday gold prices recovered somewhat after the Comex woke up.

Here is why China wanted gold prices to fall. The country's rulers are battling to boost the stock markets a month after they fell into the red (in Chinese, called the green, because red is a lucky color.) By eliminating an alternative to stock investing, the regime was triggering more share buying in the Shanghai and Shenzhen struggling stock markets.

This week, China's Securities Regulatory Commission reiterated that it will continue to support share prices via boosts in market liquidity, bans on short-selling, delaying IPOs, and other measures. Curiously, it is investigating alleged investor pools which violated market rules by pushing share prices down. It is not, however, investigating maneuvers to push share prices up, also in violation of market rules.

Chinese investors traditionally have a taste for bullion. About 25 years ago I visited Hong Kong (then a Crown colony) at Chinese New Year. A shop window held a statue of the Buddha, about 18 inches high, made of solid gold, which was being raffled off. There was a line around the block to buy raffle tickets. To discourage its superstitious citizens from switching away from underperforming shares and phantom real estate placements, I think Beijing deliberately undermined the gold price Sunday night by triggering a flash crash. It did something similar in January in the copper market, also during Sunday Asian market hours.

Market-savvy observers point out that a legitimate gold seller would not pick a time when almost no buyers were around or even awake. Ross Norman, CEO of Sharps Pixley, a London gold broker, pointed out in the Evening Standard: “If you wanted to get out you would do it when your buyers are there and not when there is extremely low liquidity.” He concludes: “Clearly it was somebody who was extremely keen to trade the market short.”

China before the weekend had already hurt gold market prices when its central bank, the People's Bank of China, released figures showing it had only bought 600 tonnes of gold since 2009. This was about a third of the figure market experts had estimated. Since China has gold mines, that meant it has sold on via markets like Switzerland far more gold than anticipated.That release coupled with lower gold holdings by the gold ETF GLD also released last week, started the gold sell-off which went into overdrive Sunday.

Earlier this week gold closed from its day low of $1088.05/troy oz and recovered to $1109. Gold has lost ~40% of its value from the highs of $1900 in 2011 in part because the predicted inflation from monetary easing in western countries did not occur.

Long-term gold is a recommendation, but wait for the dust to settle. A bear raid takes time to reverse, but if the fundamentals do not support the sale, bear raids reverse. We do not own any gold producer common shares, and the gold mine bonds we own will continue to pay interest.

*Our gold producer US$ bonds 06849RAF9 (the 4.25 of May 30, 2021) are from Barrick North America (ABX). ABX is on track to cut its total debt by 1/3 this year by shutting in or selling high-cost mines and delaying capex. It closed out 2014 with $10.6 bn in total debt; to be cut  to $7.6 bn by Dec. 31. Like all bonds they bear risk if the Fed raises interest rates. Lazard Freres upped its stake in gold-mining closed-end fund ASA to over 20% last week, a long-term bet.

*While the currency market does not explain the whole story of gold pricing, it is still chaotic as the dollar rises and as commodity prices fall. The most liquid currency from south of the border, the Mexican peso, has fallen to 16 to the $. The euro is at $1.15. These lows are likely to reverse as market optimism increases, also because the currencies are easy to trade.

*Indian IT giant Infosys (INFY) beat on revenues but not on earnings (in dollars.) In rupees its results were better. INFY revenues rose 4.5% sequentially in its Q1 of FY 2015-6 to $2.256 bn, about 3% over analyst forecasts, and 5.7% y/o/y. But despite more disciplined management, profits failed to match sales in US$. Net profit at $476 mn was off 4.5% sequentially and off 1.3% from prior year levels in US$, at $476 mn, but up over 5% in rupees.

Importantly, INFY raised its revenue forecasts for the 2015-6 FY to the end of next March to 10-12% in current currencies and 7.2-9.2% in constant currencies (dollars). Other signs of better times ahead were the sharp drop in client attrition rates, to 14.2% in the last quarter from 23.4% in the prior quarter. Customer retention may have cut profitability levels.

In Q2 INFY signed 6 large customers up in deals worth over $50 mn, bringing in a total of $688 mn from new customers. Again this may have nipped profit margins. It now has 79 global clients in a range of sectors: core banking (directly and via its Finacle sub); mobile commerce via recently-acquired Kallidus (Skeva); health-service (brought back in house in Q2); mining; oilfield services (via a jv with SAP reported when it was signed); fashion; logistics. With such a far-ranging set of customers, the Infosys platform is a play on global economic recovery. It also should gain from lower oil prices which will help boost the Indian rupee. India is a big oil importer and quite near Iran, which will resume shipments soon.

A nice touch. Infosys via its code.org US non-profit is teaching high school students from poor neighborhoods how to write computer code.

Note that Vedanta Ltd (VEDL) will report next Wednesday (July 29). VEDL is part of Abhimanyu Sisodia's focus on heavy industry rather than brainpower from India.

*Schlumberger Ltd (SLB) picked up two upgrades yesterday after its results proved better than anticipated last week. Global Hunter Securities raised its rating to buy from neutral with a target price of $105. Wells Fargo rated the Dutch hydrocarbon drilling services firm outperform, upped from market perform citing its sustainable results. The optimism has spread to Halliburton (HAL).

*HERE, the map and location software system of Nokia (NOK), is now available for testing by automated vehicles in the US, France, Germany, and Japan. It has already been tested in NOK's native Finland.

*Fitch rated structured mortgage-covered bonds issued by Bank of Nova Scotia (BNS) with a rare AAA.

*Standard & Poor's affirmed the rating of Banco Latino Americano de Comercio, (BLX). It avoids being sold off with sinking Latin American currencies because Panama uses the US$.