Chapter 28 - London Bullion Market

In the new week, Chinese Online scored two consecutive daily limit-ups, with its stock price hitting 41.65 yuan—a new all-time high. It made it to the Dragon and Tiger List for the third time, becoming the most hyped stock in the market this year following Baofeng Technology. "A voice won't fade even if its prediction misses the mark, but the outcome can deviate due to human interference." Over the past two days, Lu Liang chose to stay fully cashed out and watch from the sidelines. Though he missed out on the two daily limit-ups, this move indirectly confirmed his hypothesis. The information provided by the voice was not 100% accurate—and his very existence was the biggest variable. Having made 12 million yuan off the stock, Lu Liang had dumped his holdings violently twice, cashing out at the peak and nearly crashing the market each time. The major players had no choice but to drive the stock price even higher; otherwise, their capital would easily get trapped in the market. "The voice will ring out at midnight.""Could the trigger be related to the matters I'm dealing with?" Lu Liang jotted down his observations in a notebook, then tore out the page and tossed it into the ashtray. He lit a cigarette, took a deep drag, and exhaled a cloud of smoke, watching the flame flicker in the ashtray. The crumpled paper burned to ashes. That night, Lu Liang sat alone in his study, scrolling through financial news, waiting quietly for the midnight bell to chime. The Shanghai Composite Index closed higher for the fourth straight session that day, breaking through the 5,100-point mark officially—sending the entire market into a frenzy. His former colleagues were posting photos on their social media feeds of long queues snaking outside real estate registration centers. This frenzy had lasted for weeks, with crowds of people selling their houses or taking out mortgages to pour money into the stock market. "Is this kind of frenzy even allowed in the country?" With his capital sitting idle over the past few days, Lu Liang had plenty of time to study the market. As a seasoned real estate professional, he knew full well how critical the property sector was to China's economy. It wouldn't be an overstatement to say that the combined size of the country's three major financial boards paled in comparison to the real estate market. For a house priced at one million yuan on the market, the potential tax revenue alone exceeded 500,000 yuan. After deducting labor costs from the remaining sum, what was left went to the real estate developers. The property industry was intertwined with hundreds of sectors—from building materials and furniture to home appliances—and created a massive number of jobs. Now, everyone was selling their houses or diverting money earmarked for home purchases to trade stocks. Was this really what the country wanted to see? Probably not. "The bull market should be coming to an end soon." Lu Liang stubbed out his cigarette and took a sip of coffee. The midnight bell rang, and a voice echoed in his mind as if it were coming from another world: [June 5th, London Bullion Market, 1517.2500 points] Lu Liang was stunned. He'd considered many possibilities, but he never expected it to be international spot gold. Originating in London, London Gold had a history of over 300 years and was the world's largest spot gold trading market. With a daily trading volume of around 20 trillion US dollars—equivalent to 25 times the size of China's A-share market—no consortium or institution could manipulate it artificially; it was regulated purely by market forces. "The current price is 1347.1200 points. That's a potential gain of nearly 160 points." Lu Liang narrowed his eyes, a glint of excitement flickering in them. Since ancient times, gold had been the most stable form of primitive currency. Unless major powers clashed or a financial crisis hit—prompting large sums of capital to seek safe-haven assets—the gold price would only rise steadily in line with inflation. Because the price fluctuations were minimal, leverage of up to 100 times was offered, which explained why the price was quoted to four decimal places. A 160-point gain might seem insignificant, but with the right moves, turning 100,000 yuan into 1 billion yuan wasn't out of the question. This also confirmed Lu Liang's suspicion from another angle: the domestic bull market was drawing to a close, and big money was flowing into the gold market as a safe-haven. The night wore on, but the light in the study remained on. Lu Liang chain-smoked and kept sipping coffee, familiarizing himself with the trading rules and mechanics of the London Bullion Market. London Gold trading was different from A-shares—or rather, A-shares were unlike any other financial market in the world. A-shares were the only market globally that adopted the T+1 trading system, where stocks purchased on one day could only be sold the next, and investors could only take long positions (bet on price increases), not short positions (bet on price drops). Every other stock market, fund, and foreign exchange market in the world operated on a T+0 system, allowing same-day buying and selling, as well as both long and short positions. While this system was initially designed to protect retail investors, it ultimately benefited institutional players, who exploited the loopholes relentlessly. Unlike China's stock market, London Gold not only used the T+0 system but also had distinct trading hours. It traded 24 hours a day, non-stop, from Monday evening to Saturday morning, closing only on weekends. Starting at 3:00 PM Beijing time, the market was divided into the European Session, American Session, and Asian Session, roughly aligned with the daylight hours of each region. The most active trading period was between 10:00 PM and 5:00 AM Beijing time, when the European afternoon session overlapped with the American morning session—this seven-hour window accounted for nearly half of the daily trading volume. By 3:30 AM, Lu Liang had a solid grasp of the basics. Though some details still confused him, he planned to learn through hands-on practice. He logged into his brokerage account, exchanged 10,000 US dollars, leveraged it 400 times, and dived headfirst into the London Bullion Market. London Gold offered such high leverage partly because of its low price volatility, and partly because the trading threshold was extremely high. A standard lot was 100 troy ounces, with one troy ounce equal to 31.1035 grams of gold. At the current international gold price of 272 yuan per gram, one standard lot was worth 3,110.35 grams—totaling 846,000 yuan, or approximately 133,200 US dollars. With his 10,000 US dollars, Lu Liang set aside 5,000 as margin, using the remaining 5,000 as trading capital. Even with the 2 million US dollars in financing he'd secured, he could only afford 15 lots. Unlike his all-in bets in the A-share market, Lu Liang proceeded cautiously this time: he bought 5 lots to go long, waiting to see how the market would move. He planned to add 1 lot every time the price dropped 3 basis points—because a drop of more than 5 basis points would trigger a margin call and force him to liquidate his positions. If his margin ran low, he would inject more capital to top it up. By 5:00 AM, the price hadn't skyrocketed yet, but the upward trend was already evident, with the gold price edging up slowly. Lu Liang's total investment had reached 80,000 US dollars, with 40,000 as margin—his holdings were now worth a whopping 16.17 million US dollars. Of that sum, 14 million was financed capital; only 170,000 US dollars was truly his own. After deducting his principal, he was already sitting on a profit of 130,000 US dollars. "The exchange rate is 6.35... That's over 800,000 yuan in profit just like that?" Lu Liang couldn't help but marvel at how quickly the money was piling up. He'd barely lifted a finger—just topping up his positions when the price dipped, and holding on as it climbed. There was one heart-stopping moment, though: the price plummeted 4 basis points in an instant, nearly triggering a margin call. Luckily, Lu Liang had deep pockets—he quickly added another 20,000 US dollars to his margin, narrowly avoiding forced liquidation. High leverage trading is a game of nerves—you have to stay focused, never letting your guard down for a second. Early June marked the start of summer. By 5:00 AM, the sky was turning pale with the first light of dawn. The American Session was drawing to a close, and market activity was slowing down drastically. Lu Liang rubbed his eyes, forcing himself to stay awake—because the Asian Session was about to take over. If his guess was right, the Asian Session during the daytime would be just as active as the European and American Sessions. Lu Liang exchanged his yuan for US dollars in advance, converting 5.84 million yuan into 920,000 US dollars, which he transferred entirely to his London Gold account. He still had over 4 million yuan available in his account, but he'd already used up his annual foreign exchange quota. With everything in place, Lu Liang left his study, planning to take a shower, grab some breakfast, and recharge his batteries. Now that he had over 900,000 US dollars in margin, he no longer had to worry about being forced to liquidate his positions due to market fluctuations.