Breakout of USDX vs gold

It has been awhile since I last mentioned gold (at least as far as price is concerned). That was because nothing significant has been happening. Something seems to be now, however.

The diagram below shows the trajectory of the system defined by the US dollar index and the gold price. Contrary to common belief, the gold price does not simply rise as the dollar falls--

My interest in this is the effect of the US dollar index and the gold price on the profitability of mining companies. For a gold company outside the US, with revenues in dollars and expenses in local currencies, the value of the US dollar may be as important as the price of gold. In fact, the US dollar may be more important, because a rising gold price is sometimes accompanied by "windfall taxes". If the US dollar has fallen in accordance with the rising gold price, the company may not actually have received a windfall at all. Furthermore, if the US dollar were to rise instead (and gold remain roughly constant), this would be a real windfall for these companies, and normally taxes are not raised in such a case.

In some previous articles I introduced the concept of the "isoquant", which is a locus of points where the product of the gold price and the US dollar is a constant. Much of the time, the trajectory of the system follows one of these isoquants--they represent the path of least resistance, being the "default" that everyone expects. Most historical moves at least start along an isoquant.

Given the size of the blot represented by the last three years of activity on the above chart, a move above $1400 is imminent. Such a move would be very small in the chart above. My prediction is for this coming move to approach the cluster in early 2013, before the gold price fell dramatically in the middle of the year. That would put the price near $1600. A move of this magnitude should take about a year to complete.

Dendritic fractures in river ice

We've had a pretty cold winter for this part of the world. Nothing like what you are having in Ontario, though. But still cold enough that I wish I hadn't forgone a winter coat this year.

This is the first time I have ever seen snow in Zhengzhou stay on the ground for more than a week. The canals froze, but that happens at least once every winter. They stayed frozen for longer than usual, until the warm spell that started just before the weekend.

Last weekend, crossing the bridge on Nongyedong Lu just east of Zhongzhou Lu, I saw these.

Cracking and refreezing. The dendritic pattern usually indicates a diffusive process, but am not sure how that translates here.

Tunnel in the Taihang mountains

A couple of hours north of Zhengzhou, in the outskirts of Xinxiang city, is an area with a number of villages built on mountain plateaux. These lie on the Henan section of the Taihang mountains, which is really a large escarpment that crosses three provinces in northern China. I have visited other sections of this escarpment here, here, here, and here.

One such village is Guoliang Cun, which for many years was only reachable by a "sky ladder", which is a goat trail. The village was isolated and remained in poverty until in the 1970s, the villagers decided to make their own tunnel through the cliff so that the village could be connected to the main valley road.

A section of the tunnel, viewed from across the valley

The red cliffs are a distinctive feature of the Taihang mountain complex. They consist of reddish Neoproterozoic sandstones, with cross-bedding on a metre scale. Ripple sets are well defined on some horizons.

Cross-bedded sandstone, about a metre thick

Ripple casts in the ceiling

The tunnel was carved out of the rock using hand tools. Local lore has the men hanging off the side of the cliff at the beginning, although I'm not sure how true that is. The tunnel is uneven and is marked by numerous windows of variable size--apparently these were used more for disposing of rock debris during the construction of the tunnel. They provide the only lighting in the tunnel at present.

 

Gazing out the window

Lookout over the entrance to the village

Still pond near village entrance

The village still has that "land that time forgot" feel, especially when compared to the modern cities of China. Naturally, the town is organized around extracting money from tourists. Most of the buildings are old stone buildings, the exception being the hotels that have been built starting about ten years ago.

Water resources in Ancient China, part 2: Hot springs in Xi'an

In Xi'an over New Years. Xi'an was a former capital of China during several dynasties, particularly the Tang Dynasty, at which time it was known as Chang'an. There is a reconstruction of what the city looked like during the peak of the Tang Dynasty, when it was the most populous city in the world.

Water, was of course, of paramount importance, and I seem to recall that the capital had to be moved numerous times because of drought. Building canals was one of the solutions over the past millenia.

Xi'an (then Chang'an) had something that other potential capitals, such as Luoyang and Xuchang lacked--natural hot springs. What could be better in a cold climate (especially in winter) than an apparently inexhaustible supply of hot (43C) water? The Tang emperors knew a good thing when they saw it, and built a palace (the Huaqing Palace) on the site.

The palace complex is quite considerable, and includes a number of temples. It had been built on the site of earlier palaces as well, all of which took advantage of the hot springs.

The Emperor in question, Xuanzong, was renowned as a musician (and, according to the tour guide, was regarded as the most romantic emperor in history).

Being musically minded, it seems natural he would fall for a dancer.

The story follows that this same emperor really knew a good thing when he saw it, as he next built a special pool for the dancer--his favourite concubine. So the guide asks, "Do you know what made her so beautiful? It was because she was fat." This makes sense. Fat people are well-fed, and well-fed people are more likely to have healthy children.

Hot water bubbles up from the earth, emerging at the foot of Li Shan, and is conveyed by a series of pipes to a number of pools. Note the hot water emerging from the dragon's mouth in the above picture.

The imperial bath is octagonal, symbolizing the eight directions. The upper shape is that of a lotus, which is the symbol of purity.

Part of the imperial changing room

Yang Guifei's (the concubine) pool. The hole in the centre was not a drain--at one time there was a pipe there and the artesian pressure was high enough for a shower. Now that was luxury.

So after all this build-up about how fat the concubine was, we arrive at her statue.

Perhaps I am a bit jaded, but she doesn't seem fat to me at all. And I know fat--I'm from North America. Maybe she's fat by Chinese standards.

Modern Chinese woman in Shanghai.

And as for the "most romantic emperor" in Chinese history? Eventually, there was a rebellion, which he was too busy enjoying himself in the pool with his beloved to pay much attention to. They had to flee for their lives, and his soldiers blamed the young lady for the troubles of the state, telling him that they would not defend him anymore unless he disposed of her. And what does a romantic emperor do? Off with her head! In the struggle between love and power, there can only be one winner. It's a disappointing ending, but not as disappointing as it must have been for the young lady.