China Buys 47% of the World's Gold
Posted by Wealth Wire - Thursday, March 10th, 2011
China is panicking.
Rampant inflation is driving Chinese consumers to buy gold on a massive scale...
In fact China is already set to buy almost half of all the gold that'll be mined this year.
You read that right: The Chinese may buy nearly 50% of total world gold production in 2011.
This incredible demand will no doubt put significant strain on global supplies.
Today I want to talk about how this soaring demand may be the catalyst that pushes gold prices over the $1,500 level in as little as a few weeks.
Over 1.3 billion inflation-nervous Chinese eye gold
In January 2010, China recorded an inflation rate of 1.5%. But just 12 months later, the rate of Chinese inflation has climbed to 4.9%.
Rising inflation has sent food and property prices in China skyrocketing.
The price of food in China, for instance, has increased 10.3% on an annual basis; grain saw an increase of 15.1% and fruit is up 34.8% since January of last year:
China's rising inflation stems from the $585 billion economic stimulus package its leaders pushed through in the depths of the financial crisis two years ago.
In dollar terms, China's stimulus was much smaller than the $800 billion package the U.S. created. But it was much larger as a percentage of the nation's GDP...
And now, all of that money sloshing around the Chinese economy has driven inflation rates to nearly 5%.
The Chinese government has already made some big moves to keep domestic inflation from spiraling out of control:
- raising interest rates multiple times;
- toughening price-fixing rules;
- tightening lending requirements and raising the minimum down payment people need to buy a home.
So far, none of these measures have managed to curb inflation. Fears of uncontrollable inflation — even hyperinflation — are quickly circulating throughout the Chinese economy.
This has prompted a rapidly growing number of China’s 1.3 billion citizens to start devouring gold as wealth protection.
Panic in the East
According to the gold-specializing Swiss Bank UBS, Chinese gold demand exceeded 7.05 million ounces in the first two months of 2011 alone.
This incredible demand is equal to roughly 47% of all the gold produced during the same two months!
The Chinese are buying nearly half of all the gold that is being produced worldwide.
Extrapolated over the full year, Chinese consumers could be in line to buy over 42.3 million ounces of gold just this year.
Let me put that into perspective for you. That's more gold than is being officially stored as reserves by China's Central Bank...
The Financial Times recently quoted a senior executive at the Industrial and Commercial Bank of China ICBC, who spoke of the “voracious” appetite for gold in China...
China's largest bank by market capitalization started a physically-backed gold savings accounts in December with the World Gold Council. Account openings have already surpassed 1 million, with more than 12 tonnes of gold already stored on behalf of investors.
Zhou Ming, deputy head of ICBC's precious metals department, said the nation's largest bank sold nearly 250,000 ounces of physical gold in January — the equivalent of 50% of all the bullion ICBC sold last year.
| China Produced $35 Billion in Gold in 2010 |
According to China's Ministry of Industry and Information Technology, gross output from domestic production increased 67% to 230 billion yuan ($35 billion) in 2010.
Of this, China's gold industry realized 5 billion yuan ($3.8 billion) in profit — 78% more than in the previous year.
China's gold mines produced 9.9 million ounces of gold in 2010 — an increase of 7% over 2009. Meanwhile, total domestic gold output grew 9% to 12.0 million ounces.
Zhou also said there was heavy demand for silver, with ICBC selling about 13 tonnes of physical silver in January alone, compared with 33 tonnes in the whole of 2010.
The demand for gold in China is exploding before our eyes. It seems that demand by individuals is reaching almost frightening levels.
And none of this includes what the country's Central Bank may be squirreling away...
We know that China has been buying on gold price dips. Various officials have confirmed this in the past, although we have no idea of the volumes involved.
The People’s Bank of China is almost certainly continuing to diversify their massive $3 trillion currency reserve into gold and precious metals in order to protect themselves from their large exposure to the weakening U.S. dollar.
We also know that China has been accumulating gold surreptitiously through buying up domestic production.
This suggests that increasing gold production was part of a long-term strategic plan to become a global leader in gold investments among governments.
The World Gold Council even reported:
Some market participants believe that China may also be continuing to buy local mine production, which it has done regularly in the past. There is certainly no shortage of experts, both domestic and from overseas, advising China to do so.
The World Gold Council estimates China’s gold demand could double in 10 years as more investors embrace precious metals.
But even in the short term, the expected demand for gold in China over the coming month will be enough to put significant strain on global supplies.
I expect this heavy demand to help push precious metal prices to record highs in 2011.
Prices of $1,500 an ounce for gold and $40 an ounce for silver remain viable short-term targets.
Any price dip should be seen as a buying opportunity.
Greg McCoach is an analyst at Wealth Daily
Gold Aimed at $6,500/oz, Silver... $600/oz
By Greg McCoach
Get ready. We are now entering the final stages in the collapse of the U.S. dollar...
And it's not going to be pretty.
The massive increases in money supplies will tank the value of the dollar and erode the very fabric of America's economic security.
As a result, gold and silver prices are will no doubt skyrocket, despite the short-term major volatility we've recently seen.
Many investors have been rushing to me asking if it's too late to buy precious metals with gold in the $1,500/oz range and recently spiking to nearly $50/oz. I keep telling them the same thing...
Despite whatever the price of gold or silver is today, both metals will be worth more than twice as much within 12 months.
That means $3,000 gold this time next year! After that, I think gold could break $6,500 an ounce.
And as you know, silver's gains will be much greater. When the bull market is all said and done, there's no doubt we could be looking at silver prices exceeding $600 an ounce.
And we can all thank the crooks in D.C. for it...
In his first ever press conference after a policy meeting two weeks ago, Bernanke told us all the ways he has saved our economy.
What a crock!
The Federal Reserve can't prevent the coming financial meltdown.
So far this year, the U.S. Treasury has raised $293 billion in net cash by selling debt securities. And so far this year, the Federal Reserve has purchased a net $330 billion of Treasury notes and bonds.
This translates to the Fed providing 100% of the net new cash the Treasury has raised this year — plus another $37 billion needed to mop up even more mess!
But who will buy Treasuries when the Fed doesn’t? China? Germany? Japan? You? Me?
Going to Hell in a Hand Basket
We are now getting very close and even accelerating toward the end game for the U.S. dollar and the American Empire as we know it. Have your life boats ready.
It won't be much longer before people really start buying both gold and silver to protect themselves from this enviable collapse.
The only way out of our dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways:
- Outright via contractual abrogation (surely unthinkable)
- Surreptitiously via accelerating and unexpectedly higher inflation (likely, but not significant in its impact)
- Deceptively via a declining dollar (currently taking place in front of our very eyes)
- Stealthily via policy rates and Treasury yields far below historical levels (paying savers less on their money and hoping they won’t complain)
Following the Smart MoneyThis past month, the University of Texas bought a billion dollars' worth of gold and is having it stored in a private depository. This is huge news.
More and more, the intelligent group of our population is starting to figure things out. Unfortunately, however, the unsuspecting masses are being led perfectly by the well-oiled government/media propaganda machine like sheep to the slaughter.
This is going to be a terrible reality for so many unfortunate Americans who have no idea as to what is coming shortly down the road.
And you can rest assured the politicos in Washington will do what all politicians do when they are trapped in such a manner: lie, cheat, steal, spin the facts, cover their asses at all costs, abuse their power, and misinform on a massive scale.
But even with the help of the government-controlled media, the time of consequences can no longer be held at bay.
Free market forces will win; governments, banksters, and their power structures will come tumbling down just as we have been seeing elsewhere around the world these past six months.
The spoils will go to those who were prepared and understood the debacle years before it hit.
The precious metals and the junior mining shares will reward those who understood, and punish those who didn’t.
Yes, the precious metals market will be extremely volatile in both directions at times, but buy the dips as gold and silver will keep heading to higher and higher ground.
As long as the Fed and U.S. government follow the course of “Quantitative Easing” or anything like it, you can rest assured that gold and silver prices will soar!
If you leave your money in U.S. banks in dollars, you will lose most of the purchasing power of your money.
Use the downside volatility to buy any dips you see in the metals. Whether you bought gold at $600, $1,000, or $1,500 an ounce, it really won’t matter much when gold is trading at $6,500 an ounce or more.
The same thing can be said for silver. Don’t worry so much whether you bought at $25 or $50; silver will be priced in the hundreds of dollars an ounce, possibly $600 or more as the silver to gold ratio descends to 15 to 1, and possibly even 10 to 1.
In fact I believe silver stocks will actually be one of the biggest winners over the next 24 months.
Time is of the essence.
The lies of the Fed and the U.S. gov't are becoming bigger and more complex, their noses growing longer and longer as the fiat currency-economic-insanity comes to a head.
Analyst, Wealth Daily
Investment Director, Mining Speculator
Gold and Silver Aren't in a Bubble, The Dollar Is
By Greg McCoach
The price of silver has really taken a haircut over the past several days.
Silver prices have fallen some 27% since the beginning of the month, and is now leading commodities to the downside.
The sell-off has been dramatic, to say the least. Gold has been hit as well, but not anywhere near as badly as silver has...
Word on the street is that several large hedge funds have been liquidating commodity positions across the board over the past few weeks.
The Wall Street Journal reported last Tuesday:
George Soros's big hedge fund, a firm operated by high-profile investor John Burbank and some other leading firms have been selling gold and silver, according to people close to the matter, after furiously accumulating precious metals for much of the past two years.I suspect Soros was holding more silver than gold, considering its price volatility...
Last week, silver prices suffered their worst one-day drop in dollar terms in three decades. And with such a stir in the market, the iShares Silver Trust (NYSE: SLV) was one of the most actively traded investments on the U.S. market on several days last week.
This extreme volatility is setting us up for the ever-increasing moves to the upside in precious metals — and in commodities in general.
And this is really a short-term pullback and buying opportunity.
I expect precious metal prices to settle down in the next few days and begin to form a new base. From there, we'll launch to the next set of new highs in gold and silver.
Expect for this to occur. Plan your buys and sells accordingly as we head into the next rally.
The big boys like Soros will continue to sell into the short-term rallies with their paper profits, just as they have this past week or so. But the rallies will continue to higher and higher levels.
We should just start factoring this type of market behavior into our thinking from here on out. It's going to get extremely volatile, which will push our markets into parabolic levels. I suspect money flow to pour back in at some point.
But the question now becomes How long does the exodus last, and how long will the big boys who have left the trade sit on the sidelines?
Jim Sinclair said the other day, “The drop at this time will in retrospect be seen as the foundation for gold trading not at $1,650, but rather at $5,000 an ounce.”
Central banks around the world have become net buyers of gold after two decades of heavy selling pressure. There is not a week that goes by anymore without news of major physical buying of gold or silver by "this country" or "that group".
These are the signs that gold is once again considered the ultimate form of money.
The physical silver market is still extremely tight despite the heavy selling on the paper side, which has severely impacted our market in the short term. But I don’t think this will last long...
Gold and silver are not in a bubble; the U.S. dollar and United States bonds are in a bubble!
For now, precious metal prices have taken it on the chin. But the fight is far from over...
In the end, it will be gold and silver as the last men standing.
So watch carefully as things once again go our way. I don’t think we will have to wait too long.
Analyst, Wealth Daily
Investment Director, Mining Speculator