In our column last week we were warning you about Deutsche Bank’s problems and potential issues with its derivatives portfolio and its capital structure. The story continued to unfold in the past week and Deutsche Bank was pushed into a corner as more and more investors started to lose confidence in the bank. A plan to buy back $5.4B in debt in a desperate move to reassure the capital markets. In fact, Deutsche’s move is so desperate it will even start buying back debt that was issued less than six weeks ago.

Where did we see that before? Oh, yes, of course. Lehman Brothers. When the sh** was hitting the fan, Lehman continued to buy (back) assets instead of keeping the cash in-house to have a financial buffer to counter any potential liquidity issue.

Well, the financial world definitely wasn’t assured by Deutsche Bank’s reassurances, and this effect was predominantly felt in the gold market as the gold price jumped to a multi-year high at in excess of $1264/oz. That’s very nice, but what’s even more interesting is the fact the buying pressure actually started on Thursday, right at the moment the Hong Kong Stock Exchange opened.

Source: kitco.com

This is very interesting as the Chinese buyers haven’t been willing to show their eagerness to get their hands on gold, and a strong gold price appreciation during the Hong Kong trading hours was quite remarkable. We’re looking forward to see how the gold price will behave on Monday, as the US and Canadian exchanges will be closed. Will there be another coup coming from Asia?

Let’s have a look how strong the outbreak of the gold price was, and how the Hong Kong trading day played a pivotal role on Thursday.

Source: stockcharts.com

The moment the gold price broke through the 200 day moving average, all bets were off and several traders correctly recognized this could potentially be a real game changer. And indeed just 4 trading days after breaking through the 200MA, the gold price already touched the $1200oz-level, where it stayed at for approximately 3 days without being able to break through this symbolical level (yellow rectangle). Enter the scene: Hong Kong traders (orange arrow). In just one move they lifted the gold price above $1200/oz overnight, taking the Western traders by surprise, who quickly had to unwind their short positions, further strengthening the spike in the gold price to $1264/oz.