Tuesday, November 22, 2011
Is China cornering the gold market?
China is currently buying gold as fast as the west can sell it. This appears to be a long term strategy to preserve its wealth in the face oif currency deterioration in the west, primarily in Europe and the US. China carries massive debt from the west and is evidently looking to convert this debt to asset value as the value of debt deteriorates.
The Chinese government is now encouraging its citizens to invest in gold as well as itself buying up all the gold it can get its hands on.
According to Paul Mylchreest's Thunder Road Report, China is pushing the idea of buying gold and silver for investment purposes to its citizens virtually in the same way that Western media sells soap powder and comments that, "If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market!"
The report also notes China's Central Television, has been running a news program actively encouraging its citizens to buy gold and showing how easy it is to buy gold as an investment. Even on silver investment the news announcer is quoted as saying, " China has introduced its first ever investment opportunity for silver bullion. The bars are available in 500g, 1kg, 2kg and 5kg with a purity of 99.9%. Figures show that gold was fifty times more expensive than silver in 2007, but now that figure has reached over seventy times.
Analysts say that silver has been undervalued in recent years. They add that the metal is the right investment for individual investors and could be a good way to cash in."
Paul ends the piece on Chinese gold and silver potential with the following quote from Christine Verone, the first (and only) foreigner in the country to become a certified "expert" on the Chinese gold markets, a designation awarded exclusively by the Shanghai Gold Exchange...and also the first foreigner in history to ever be licensed in any professional capacity by a Chinese commodity exchange.
"Simply put, the Chinese government is trying to trigger a national gold craze...and its working. The Chinese public now has gold trading platforms on steroids.... ...Also, for the first time in history, Chinese investors can even trade gold abroad (in London) with the swipe of a 'Lucky Gold' card. I can't even get Bank of America to open a foreign currency account."
The existing LMBA and New York gold markets will also pale into insignificance if the Chinese gold market takes off. With the Chinese population now surpassing 1,338,299,000 the potential for the gold price to rise to astronomical heights is becoming more real each day.
Especially with the recently opened Pan Asian Gold Exchange (PAGE) enabling buyers to bypass the bullion banks and the LBMA as well as open the door for the international investor to buy renminbi. The financialsense.com website recently pointed out, "PAGE also provides a new way for international investors to own Chinese currency - the Renminbi (RMB). Here's how: The buyers will purchase gold contracts denominated in RMB. They can then hedge out the gold in the dollar-based gold markets. As a result, they effectively own RMB.
"We see here yet another example of multiple Beijing initiatives opening the RMB to world investors. Over time, these innovations will enhance the value of the RMB and create a deeper, more liquid foreign exchange presence for the Chinese currency. PAGE is another internationalization step forward for the RMB in the direction of world reserve currency status.
"The advantages of being the world reserve currency, as well as the responsibilities involved, have not been lost in the Chinese government."
If China is indeed actively working on cornering the gold market, perhaps now is a good time to buy gold while it is still cheap and available.