China plans to double gold consumption in three years, how high will gold prices go now?Posted on 06 December 2012 with 2 comments from readers
China’s Ministry of Industry and Information Technology announced that it expected Gold consumption in the country would be running at more than double national gold production by the end of 2015, more than double Chinese gold consumption forecast for 2012.
According to the MIIT statement, domestic demand is set to surpass 1000 tons by the end of 2015. It said this would ‘widen the fundamental market shortage’ and noted that the shortage of supply will persist in the coming few years as domestic gold supply ‘might only reach 450 tons by that time.’
Official gold policy
The ministry promised: ‘In order to strengthen the gold industry the government will increase gold mine investment, speed up industry consolidation and international cooperation. It also said it would ‘develop gold trading platforms and investment variety (presumably meaning ETFs).
‘With regard to acceleration of industry consolidation, the government aims to lower the number of gold producers in the country to 600 companies by the end of 2015 from the current 700. And, the top 10 gold producers could be responsible for 260 tons of total output, up from 100 tons, by the end of 2015.’
ArabianMoney readers will not be too surprised to hear that China now has big plans for gold. Only recently we published the thoughts of ‘Mr. Gold’ Jim Sinclair who forecasts $3,500 an ounce gold and higher is coming on the back of Chinese demand (click here).
China is looking to diversify its assets away from the US dollar and to protect its national savings against devaluation and inflation by investing in one currency that no central bank can print. Ironically the nation faces quite a challenge in achieving this because it cannot raise gold output anything like as fast as it would like.
The impact of Chinese demand for an additional 500 tons of gold per annum on the gold market will be enormous. This is more than all the gold bought by the global central banks last year.
Mr. Sinclair knows what he is talking about in predicting very much higher gold prices from the current stalemate in the gold market. This is about long-term global macro trends that have little to do with day-to-day market trading.
The big picture is still hugely gold positive and now the Chinese are jumping on the bandwagon. Investors do you need more than that?