Before deciding how to act, Lin BaoCheng first calculated his current investments in gold futures.
The earliest was around last November: using Galaxy Games' shares, he borrowed 100 million USD from Goldman Sachs. Originally, the funds were intended to acquire Wharf, but after Li JiaCheng's interference the deal failed. Lin redirected the money into gold futures, using five‑times leverage, with a cost price of 163 USD per ounce.
Next was BaiLong Trading Company's 10 million USD principal, invested with ten‑times leverage at a cost of 182 USD per ounce.
Finally, just days ago, he had made several new purchases:
Hutchison Whampoa's 150 million USD principal through HSBC, five‑times leverage, cost 188 USD per ounce.
100 million USD of his own capital through Standard Chartered, five‑times leverage, cost 188.5 USD per ounce.
Another 100 million USD through Mitsubishi Bank, five‑times leverage, cost 189 USD per ounce.
At present, all his gold futures positions were profitable. With five‑times leverage, each had gained at least double‑digit returns.
Counting leveraged financing, Lin BaoCheng had committed 2.35 billion USD to long gold futures — a substantial bullish position.
With such a sum, even a 5% correction in gold prices would mean losses of over 100 million USD, a significant figure for any country at the time.
Thus, Lin BaoCheng could not remain idle.
"First, it must be clear: the long‑term trend of gold won't change. In 1980, the price peaked above 800 USD per ounce."
"So even though many institutions believe gold cannot break 200 USD per ounce and will correct, that's only a possibility, not certainty. I cannot close all my long positions, nor flip entirely short. If gold breaks 200 while I'm fully short, I'd be ruined. That's unacceptable."
"Still, the chance of a correction is real, and not small. A 5% pullback would cost me over 100 million. So I must act to protect myself."
"The long‑term direction remains bullish, but I need to hedge against short‑term losses. The course of action is obvious."
After some thought, Lin BaoCheng made his decision. But he chose to wait for Yuan TianFan's opinion from Hong Kong, using it as a reference.
In the last test, Yuan TianFan's team had achieved a purchase cost 0.5 USD per ounce lower than An Yuan's team. With 750 million USD under management, that difference saved Lin BaoCheng about 2 million USD. Clearly, strong talent was invaluable — worth higher pay for greater returns.
About an hour after contacting Cheng YuFeng, Lin received a report. Yuan TianFan believed that if gold failed to touch or break 200 USD per ounce within the next three trading days, a correction was highly likely. If a correction occurred, one must watch whether it broke below the previous low of 180 USD per ounce. A break would trigger another wave of decline.
Conversely, if gold touched or broke 200 within three days, correction was unlikely, and upside potential greater. The strategy: follow the trend, move with the market.
Lin BaoCheng now had a plan. Futures markets were volatile, especially at critical levels. Short‑term moves were swift, so he needed arrangements in place beforehand. Waiting until gold chose a direction would be too late.
Since Hong Kong and Tokyo were in daytime hours, Lin instructed Cheng YuFeng to hire Yuan TianFan as a consultant for a few days, and send him with An Yuan to London. If gold hit resistance and showed signs of correction, they were to flip from long to short immediately, using five‑times leverage. If gold broke 200, or corrected then broke through, they were to stay long, also with five‑times leverage.
In Tokyo, Lin contacted Mōri Haruko, instructing her to do the same: short if correction, long if not. Her capital remained 10 million USD, always with ten‑times leverage.
As for his own 300 million USD, Lin arranged accordingly. The 200 million through Standard Chartered and Mitsubishi would remain untouched regardless of adjustment. The earliest 100 million through Goldman Sachs would be closed the next day, with funds left idle for now.
Overall, Lin remained primarily long, but allocated part of his capital to short positions, ready to flip back to long. If gold broke 200, he would earn less, but losses would be manageable. If gold corrected, he would profit from 850 million USD in shorts, while the 1 billion USD left idle would show paper losses only — recoverable when gold rose again.
The next morning, Lin BaoCheng took Isabella to Goldman Sachs, where he met Wade Thomas and instructed him to have traders close his futures positions. This portion of capital was secured.
Thomas had no objection and arranged it.
Lin also informed Phil Smith that he had sold part of his positions and left others untouched, leaving Smith to decide his own course.
Though the positions totaled about 600 million USD, in the vast gold futures market it wasn't large. Within two hours, all contracts were closed, at an average price of 195.8 USD per ounce — a 20% rise from his 163 USD cost.
With 100 million USD principal and five‑times leverage, Lin's profit was over 100 million plus another 6 million.
He left the funds in the account, not withdrawing. If he settled now, he would owe Goldman half‑year interest, though only four months had passed. That would waste two months of financing.
Moreover, settling meant paying taxes on the profit immediately, regardless of future gains or losses. If he lost the profit in the next trade, he'd still have paid tax on money no longer his.
By leaving the funds, the profit wasn't yet realized, so no tax was due. If later losses erased the gain, settlement would mean no tax at all.
Since he had no immediate need for the money, leaving it untouched was the most cost‑effective choice. So Lin BaoCheng kept it in the account, un‑settled.