Watch for the return of the Chinese gold and silver buyers after New Year
Posted on 04 February 2011 with 3 comments from readers
The Chinese are likely to emerge as the largest buyers of gold and silver this year, and that could start in just over a week when they return from their long New Year holiday.
Traders note that physical gold in Shanghai is trading at a $20 premium to London prices, and that in the run up to the Chinese New Year gold imports more than doubled against a year ago. Chinese imports of gold over the past three months of 200 tonnes amount to the same as all the gold imported last year.
Inflation surges
Fear of inflation is the big driver, and in China rampant inflation is already far more of a problem than in the West. It is not only the rising price of commodities that has been hitting manufacturers but huge salary increases to compensate for surging food prices and to prevent Egyptian-style unrest.
This is the unintended consequence of Fed money printing, although actually the Chinese authorities panic bailout and stimulus measures were much larger as a percentage of GDP, and consequently still more inflationary.
Good reason then to buy gold and silver as a hedge against inflation if you live in China. It is interesting that China has just been replaced by the Federal Reserve as the largest holder of US treasuries. The Fed holds $1.1 trillion of this paper mountain while China has $896 billion and Japan $877 billion.
According to a report published by the Economic Information Daily, the People’s Bank of China, is buying more gold and silver for its reserves now that gold and silver prices are down. Replacing US treasury bonds for precious metals? That is indeed what seems to be happening.
Gold currency
China has previously voiced support for a new gold-backed global currency, and these reserves would be very useful in making that happen. You can also look at the weakness of the dollar over the past few weeks as a contrarian indicator, for in foreign currency terms the surging US stock market has gone nowhere.
ArabianMoney has strongly tipped silver as the best investment opportunity for 2011 (click here). But to turn this opportunity into an investment you should read the advice on how best to actually invest in our newsletter (click here).
3 Comments posted by readers:
In a complete societal meltdown, you want silver coins more than gold ones. You can trade some silver for a goat, sheep, bread or gasoline. Gold is too valuable, unless you want to buy the entire herd (or whatever they call a group of goats).
I can remember a TV interview of a soldier of fortune about how to get out of a dangerous country in a crisis. He said hand the people at the checkpoint a few one dollar bills with one five dollar bill, but NEVER pull out big bills. Wear dirty, worn clothes so that you look poor. Cigarettes make good bribes too. Hopefully, I’ll never need such knowledge myself.
The news reporters need to get a few more satellite phones. I think they have tiny dish antennas that will even let you send video up to satellites from just about anywhere with electricity. I have heard that the signal is very difficult to intercept. They would be needed in a 3 part YouTube video I just watched. Some fellow put a still camera inside his car and drove from Alice Springs to the Australian coast. He then used software to put the many thousands of still images together into a movie like sequence that takes you the entire way in about 30 minutes! You can freeze frame it at any time to see a clear still image. It is amazing. But you will have to spend a bit of time if, like me, you want to see their faces. That bright red sign says ‘SORRY NO GAS’. I envy that DARK Australian outback sky. Except for being an all paved surface, the view of the Australian outback along that highway probably won’t look much different when those teenagers are my age, around 2050. They won’t be burning gasoline or diesel for trips like that by then. They will need to stop at a lot of battery changing stations.
The stars won’t change.
Impact of Chinese on Precious Metals Price Direction:
As this website has stated several times, the Chinese have been, and will continue to be avid buyers of gold and silver. The recent “lull” in these physical metals is impacted, in part, to the Chinese New Year celebration. So the natural question is: How long can we expect this “lull” to continue? Several bloggers on this site have suggested that the precious metals prices won’t turn up until two weeks after the Chinese New Year. Here are some alternative views.
Length of Time that Chinese Celebrate their New Year:
Yesterday, my Chinese-born wife of many years and I celebrated the Chinese New Year (3 February). She sometimes reminds me of old Chinese customs, and the extent to which China practices those customs. In essence, she indicated that many years ago, the Chinese celebrated their New Year for approx. 7 to 10 days, but that was “then.”
Nowadays, she indicated that the duration of their celebration often lasts for only 2 or 3 days on average. What is interesting to watch is the fact that, immediately prior to the Chinese New Year, the gold and silver trading activity increased sharply in China, sending the metals prices up sharply. Today, 4 February, these metals prices are up sharply again.
Methinks that the Chinese government itself has been doing a lot of buying during the trading hours of the fraudulent US COMEX, since China can be secret buyers, as the US FED/ JP Morgan gang continue to short the futures markets. One should never underestimate the intellect and the “bartering ability” of the Chinese! The FED and JPM should be very, very worried, because China is eating their lunch, and will continue to do so!
Got gold? Got silver?
Here’s an Excellent Set of References, Relative to PM Prices:
Go here to ZeroHedge, where they comment on “morning gold fixing.”
http://www.zerohedge.com/article/morning-gold-fixing-bernanke-%E2%80%9Ccatastrophic%E2%80%9D-implications-us-economy-if-143-trillion-debt-cei