In Beijing, the value of pure gold has surpassed 430 yuan per gram, but consumer eagerness is just as immense as gold prices move higher. Two months to go to celebrate the Chinese traditional lunar Year of the Dragon. Chinese people have cultural and historical demand for gold and silver, as both jewelry and status. The peak season for gold sales this year coincides with the New Year holiday and the Chinese Spring Festival.

Chinese investors have rushed to buy precious metals to hedge against rising inflation, where the Consumer Price Index (CPI) shot up to 5.5 % year-on-year in October, showing the world’s second largest economy is suffering the fastest growing price in almost three years.

The benchmark interest rate of one-year deposits still stood at 3.25 % after the central bank raised the interest rate twice this year to curb inflation. Analysts say the continuous decline of the U.S. dollar and Euro has stimulated investors to choose safe haven products such as gold.

Buying gold as means of investment has become more a common choice for Chinese in the past third quarter as it is viewed as a safe investment during these uncertain economic times, said the World Gold Council (WGC) in its Gold Demand Trends report for the third quarter of 2011.

The most watched and followed couple in the global financial community is known as Merkozy. The future of Europe and the global economy hang in the balance influenced by Chancellor of Germany Angela Merkel and French President Nicolas Sarkozy. How the two European leaders handle the Euro zone crisis will have a ripple effect throughout the world. The situation in the Euro zone is messy and complicated that requires an imaginative and swallow your medicine type of solution. European Unions leaders are meeting on October 23rd to brainstorm and bring about a sweeping plan for tackling the Euro zone debt debacle, but a breakthrough resolution is not anticipated until another meeting on October 26th which could be a far stretch. Whatever they come up with will likely delay the inevitable for the next on the brink disaster.

A popular game is being played by the excessive high debt nations of the world. It’ called kick the can down the road. A few days ago the major central banks of the world converged and agreed to provide a safety net of support in case something unsurprisingly horrific were to occur within the Eurozone. After the announcement, the European equity markets rallied as the U.S. dollar and the price of gold dropped  precipitously. Greece’s fiscal dilemma has not been confronted with a legitimate solution. Instead, a temporary band-aid is placed on the wound and swept under the rug with the notion of dealing with it later. Greece is in the spotlight for now while Italy, Spain and Portugal are waiting in the wings for their turn of attention. The United States  has an incredible challenge tackling its debt headache. It would take a unified resolve and commitment to get over the hefty hump. Does anyone really think that the massive debt problem can be trimmed to a feasible  level without civil backlash and contempt?

Right now gold is hovering near $1,800 per oz even after the CME announcement hiking gold margins by 22%. I like gold but I wouldn’t be injecting fresh capital at these price levels especially after gold’s parabolic surge the past few weeks. Late spring of this year the CME raised margin requirements on silver 4 times  over a period of a week and silver violently crashed to the downside in a blink of an eye. Silver still hasn’t recovered its 2011 price high after the early summer tank job and is struggling to keep up with gold’s up move the past week due to its industrial application in a sluggish global economy. If gold continues to rise from this point there’s a likely possibility of the CME stepping in again to raise margin requirements to slow down gold’s upward momentum. I’d like to see a nice pull back before acquiring more of this yellowish lustrous chemical element.

The investor fear gauge also known as the Volatility Index is widely used to measure market risk. The VIX soared 35.41% higher today to 31.66 reflecting the market mood.

The big market dump started in Asia and worked its way into Europe then finally hit America.

By the end of the day… stocks, gold and oil closed sharply lower. Over the last 10 trading days U.S. stocks have lost more than 10%, the traditional definition of a market correction.

I don’t think we’ve seen the high for the year on the VIX. The American economy is anemic and Europe’s problems are far from over.

Sugar dazzled higher after an industry group said the Brazilian sugar harvest would have a significant output decline compared to last year.  According to Unica, production could tumble as much as 1 million metrics in the current season compared with a year earlier. The sweet white granular substance has gained nearly 73 percent the past year.

Raw sugar for October delivery climbed 1.84 cents, or 6.6 percent, to settle at 29.52 cents a pound at 2 p.m. on ICE Futures U.S. in New York, the biggest gain since Oct. 7. Cane processing will total 535 million metric tons in the 2011-2012 season, or 40 million tons less than the previous estimate and below last year’s harvest of 557 million, based on a report  from Czarnikow Sugar Futures Ltd.

Goldman Sachs and Morgan Stanley recently released upbeat reports with a positive outlook for sugar prices. It looks highly possible that sugar can reach at least $34.00 before the end of the year.

Check out this chart  http://bit.ly/nV2LNo . For non-futures traders, exchange traded funds are available, (SGG) and (SGAR).

Is the Yuan the new world reserve currency of the future? The Renminbi is gaining momentum and is headed in that direction but it would be premature to say it’s a done deal.  Assuming there are no major catastrophic surprises that would derail China’s current economic path it may eventually reach that status. There are some underlying issues within China that may potentially pose severe problems down the road but the impact of these complications are unknown. The declining U.S. dollar and stumbling Euro reinforces powerful evidence for the Yuan’s rising value that affirms China’s expanding opulence. The U.S. dollar has made recent gains due to the drama in Greece but strong U.S. economic growth and an effective plan to reduce debt is the recipe for the dollar to remain mighty long-term.

At least not yet. The American dollar has rallied hard to the upside while commodities and U.S. equity markets have pulled back the past week. In the long run there’s a lot going against the U.S. dollar but for right now it’s fighting to elevate higher. The drama in the European zone is rearing its ugly head again in the headlines which helps make the buck look good. As the dollar continues to rise short-term it may put downside pressure on equities and commodities.

Shorting the U.S. dollar has been a crowded trade and dollar shorties could add more rocket fuel if they cover their short positions. In order for dollar strength to have longevity the massive printing of the greenback has to cease, a significant reduction of U.S. national debt has to happen and the U.S. needs to reclaim economic momentum from China. If these things can occur dollar shorties will head to the exits and run for cover . Otherwise, until that materializes any short-term positive gains made by the dollar may be viewed as an opportunity for new entry points.

Light sweet crude oil May contract surged above $113. Near term oil will hit $120 a barrel and long-term $200 a barrel. Strong demand for oil coming from China (emerging markets), oil supply disruptions in Libya and the steady sinking value of the American dollar are the latest culprits for the recent up move. Oil peaked at $147 a barrel in the summer of 2008 prior to the Lehman collapse. What price per barrel is the demand destruction for oil?