Chapter 133 - A 500 Million Dollar Futures Contract
"But Mr. Lin, leveraged futures trading is extremely risky. Are you sure you intend to engage in such a large-scale futures transaction?" Before Lin Haoran could respond, John Reed continued speaking. Although John Reed was not yet fully aware of how much capital this wealthy young man from Hong Kong planned to invest, from Lin Haoran's casual question about "how much capital could impact the gold futures market," he had already sensed the ambition in this young man. Such a person was either a naive fool or a deeply knowledgeable investor with real power. Considering that Lin Haoran had accumulated a massive fortune at such a young age, if not through family inheritance, it must have been due to his exceptional investment wisdom and boldness.
Even John Reed himself foresaw that the gold market would continue its bullish trend in the short term. A sudden sharp drop was highly unlikely unless some unforeseeable external shock disrupted the market. As for how high gold prices could climb, no one could predict accurately, not even the experts.
Lin Haoran smiled and replied, "Indeed, Mr. Reed. I am very confident about the future of the gold market and am not afraid of a sudden collapse. Since Citibank can offer up to 10 times leverage, I plan to invest 50 million U.S. dollars as margin, and I hope your bank can assist me in purchasing up to 500 million dollars' worth of gold futures. Is there any obstacle on your side to executing this transaction?"
Since 10 times leverage was available, Lin Haoran had no intention of putting in all his cash. After all, he still needed liquidity to operate back in Hong Kong. If he only used 50 million of his 140 million dollars, he would still have 90 million dollars left for other ventures. Leveraged futures trading essentially involved borrowing from the brokerage, similar to a loan. Besides the initial 10% margin, the remaining leveraged funds were effectively loans from the brokerage and would bear a certain interest cost. However, compared to the huge potential profits from rising gold prices, Lin Haoran considered these costs negligible.
Lin Haoran was very confident about the future trend of gold prices. The rise of gold was an inevitable trend. In such a globalized market, even a 500 million dollar investment by him was still too small to move the entire gold market. The surge in gold prices was driven by profound and complex factors. First, high inflation was a major driver. This year, U.S. inflation had soared to 13.3%, the highest since World War II, strengthening gold's position as a safe-haven asset and attracting massive investment. Second, heightened geopolitical tensions, like the Soviet invasion of Afghanistan and the Iran hostage crisis, fueled global fears and drove investors toward safe assets like gold. Third, the depreciation of the U.S. dollar after the collapse of the Bretton Woods system made gold more attractive. This year alone, the dollar's purchasing power against gold had dropped by an astonishing 98.6%, further boosting gold prices. Finally, many central banks had started buying gold aggressively to bolster their reserves, adding even more momentum to the gold rally.
Given all these factors, Lin Haoran knew his five hundred million dollars, while a large sum, was insignificant in the grand scheme of the gold market. Therefore, he had to seize this rare opportunity to reap massive returns.
"Of course, Mr. Lin, please rest assured," John Reed said. "Citibank, as a leading financial institution, has full capability to handle your investment. Your possession of our Black Card already reflects our recognition of your financial strength and investment insight. However, before proceeding, I must remind you of the risks. With 10 times leverage, both profits and losses are amplified. If the market moves against your position and your margin falls below the maintenance level, we may have to execute a forced liquidation to protect both parties. In extreme market conditions, like continuous price limit movements, if liquidation is delayed, your losses could exceed your initial margin. Although rare, we must fully disclose these risks. But again, Citibank has a world-class risk management system, and we will monitor the situation closely and communicate with you to ensure your investment security," John Reed explained professionally and sincerely.
Lin Haoran laughed and said, "Haha, Mr. Reed, I understand the risks well. If I lose it all, I accept it. After all, investment always carries risk. But now is the golden era for gold prices. I firmly believe the peak is still far away. How could gold possibly fall now? That's where my confidence comes from!"
"Excellent," John Reed said with a smile. "Now, let me briefly explain the trading process. First, Mr. Lin, you will need to open a trading account at the New York Mercantile Exchange. Then, we will sign a futures contract with a clear term. You can choose to entrust us fully for the execution. Before trading, you must ensure your account has sufficient margin to cover potential risks. During the contract period, you have full authority to decide when to buy or sell futures and when to close positions. Of course, our professional brokers will provide real-time market analysis and advice to assist your decision-making. Our goal is to help you make the best investment decisions."
Hearing this, Lin Haoran glanced at Su Zhixue, who nodded slightly, signaling his approval. John Reed then picked up the phone and made a verification call to Hong Kong, clearly checking Lin Haoran's background. After confirming Lin Haoran's financial strength and investment record — especially the fact that he had 140 million dollars deposited in Citibank Hong Kong and had legitimate sources of funds from Japanese petrochemical companies — John Reed's last doubts vanished.
After all, although this was their first meeting, any major bank had to assess risk before proceeding with a massive transaction. Lin Haoran, as a public figure in Hong Kong and chairman of two listed companies with a combined market capitalization of over 60 million U.S. dollars, met all their requirements.
With Citibank's assistance, Lin Haoran quickly opened a personal account with the New York Mercantile Exchange. Then, he signed the futures trading agreement with Citibank and transferred 50 million dollars into the designated margin account. The futures contract was thus formally in place.
At the current gold price of approximately 253 dollars per ounce, Lin Haoran's 500 million dollars could control approximately 1.9763 million ounces of gold. Such a large transaction would overwhelm an ordinary brokerage, but not Citibank — one of the world's financial giants.
As for the trading operations, Lin Haoran didn't need to bother with the details. Once he gave his instructions, Citibank's professionals would handle everything. It took over three hours to complete the procedures for this massive 500 million dollar transaction.
"Mr. Lin, it's been a pleasure working with you. Since you're based in Hong Kong, you might not stay long in the U.S. If you need anything, you can contact us here or our Hong Kong branch — both will provide you with top-tier service," John Reed said as they shook hands.
"Likewise, Mr. Reed. I'm very pleased to meet you, and I hope we can cooperate even more in the future," Lin Haoran responded warmly. Standing before him was the future CEO of Citibank — building a relationship now would surely benefit him greatly.
At noon, Lin Haoran and his team left Citibank's headquarters. His goal for coming to America had been achieved. Although Hong Kong had a futures market, it was much smaller than the New York Mercantile Exchange. Conducting such a massive trade in Hong Kong would have been impossible. Here, even a 500 million dollar order barely stirred the waters — this was the ideal platform for his ambitions.
Although everything was now settled, Lin Haoran wasn't in a rush to return to Hong Kong. In his previous life, he had never visited America. Now that he had the chance, he was determined to enjoy it a little before heading home. There was no urgent business waiting for him in Hong Kong; both Qingzhou Cement and Wan'an Group were under professional management. Thus, he planned to take full advantage of his time in America before returning.
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