The demand for gold from the Chinese people (in addition to the government) is enormous. They have a long history of valuing gold and distrusting paper currency. They are a force to be reckoned with. There are three hundred million middle class Chinese – more than the total population in the U.S. Many of them now have money and a desire to own gold, after decades when it was not allowed. But now, the Chinese government is encouraging it.
You have to ask yourself this about the Chinese, in such dramatic contrast to us, why are they encouraging their citizens, I’m not saying not forbidding them, I’m saying actively encouraging them on TV, etc., to buy gold?
One reason could be that they want their citizens to (eventually) turn in some of their gold, and they (the Chinese government) will turn it into currency for them. That’s great. They are already setting up the mechanism for a gold standard.
The implications here are just phenomenal. You have to believe the Chinese have completely lost their minds in order not to believe that they are looking at gold in the multi-thousand dollar range. That’s the only way this makes sense. They are looking at gold as a central player in a new reserve currency. Who in the world would want (to hold) the dollar from a foreigners’ perspective? You (also) have this incredible alliance forming between China, Russia and Germany.
– Stephen Leeb, King World News, January 2, 2014
The Yuan is rising against the dollar, which is a built-in discount on dollar denominated gold. That, in addition to the manipulated low price is sparking a huge wave of new buying. Recall Andy Hoffman’s articles from last fall when he was in China to pick up his adopted daughter. He sent back pictures of the mobs of Chinese citizens lining up three and four deep to buy gold.
This massive gold buying from China is just getting started. Add to this new demand, the two thousand tonnes purchased by the government in the last two years. Their goal is to unload as many dollars as they can into physical gold, without forcing the price up to fast. They want to accumulate as much as possible at as low of a price as possible. They could buy it all up at one time, if they wished, but they are patient and will not disrupt the market as they sucker the West into dumping it for dollars.
As the chart below shows, in the past two years since September 2011 (ironically the same month we wrote “Wikileaks Discloses The Reason(s) Behind China’s Shadow Gold Buying Spree” namely that the PBOC was quietly seeking to make the renminbi the new gold-backed reserve currency) the mainland has imported an unprecedented 2,116 gross tons of gold from Hong Kong (in addition to the hundreds of tons produced domestically), for the first time crossing the 2k gross ton import barrier in a two year period!
–Zero Hedge, October 13, 2013
How can the West, and in particular Americans, be so blind not to see what is happening.
Every year, the central banks create enough NEW “paper” money to at least cover the interest on public debt, which is $52 Trillion dollars, give or take and growing. That means the central banks have to create the equivalent of several Trillion dollars a year – or deflation sets in (like in Japan where they are creating Trillions of new Yen to hold back the forces of deflation).
It would only cost a little over $60 Billion dollars to buy all of the gold mined this year. That represents just a few percent of the increase in the money supply each year. That’s chump change to the Chinese.
It came as a surprise, but gold finished the year on an UPSWING and CONTINUED to rise today. Another strong performance to end the week on Friday will be encouraging.
Anyone not taking advantage of the short-term lull (the last two years) in gold and silver will look back on these prices and second guess themselves. The handwriting is on the wall. Here is a few interesting articles from Bloomberg.com:
Gold sales from Australia’s Perth Mint, which refines most of the bullion from the second-biggest producer, climbed 41 percent last year as bullion capped the worst annual loss in more than three decades.
Sales of gold coins and minted bars totaled 754,635 ounces in 2013 from 533,333 ounces a year earlier, according to data from the mint. Silver coin sales surged 33 percent to about 8.6 million ounces from 6.5 million ounces in 2012, it said.
Bullion sales expanded 12 percent to 58,944 ounces in December from 52,700 in November and about 51,778 ounces in December 2012, according to data from the mint. Gold sales fell to as low as 30,430 ounces in August and peaked at about 112,575 in April, when bullion slumped 14 percent in two days.
Turkey’s silver imports climbed in December to the highest since at least 1999 and inbound shipments of gold rose to the most since July as the metals capped their biggest annual decline in more than three decades.
Imports of silver gained to 41.6 metric tons last month, 36 percent more than in November and above September’s amount of 39.9 tons, according to data on the Istanbul Gold Exchange’s website going back to 1999. That took the full year figure to 227.8 tons, 60 percent more than 2012 and compared with 42.1 tons in all of 2011. Gold imports increased 64 percent in December to 31.6 tons, the data show.
“Some people took the opportunity of lower prices and bought remarkable amounts of gold and silver,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said today by phone. “Generally, prices are very attractive. Demand is very robust in Turkey and the Arab world as well.”
Here is an article from Forbes.com:
Gold and silver coin buyers used the retreat in prices during 2013 as a bargain-hunting opportunity, with U.S. Mint sales of silver bullion coins hitting a yearly record and gold-coin sales also up from the year before, analysts said.
Data on the Mint’s Web site shows that sales of one-ounce American Eagle silver coins were 42.675 million ounces in 2013, up from 33.743 million in 2012. Last year’s sales were more than double the total from as recently as 2008 and quadruple the level from 2007.
Sales of American Eagle gold coin sales were 856,500 ounces for the full year, while Buffalo coin sales were 239,000 ounces, resulting in a combined total of 1.096 million ounces. This was up from 753,000 ounces in 2012 Eagle sales and 132,000 in Buffalo sales, or a combined 885,000.
It’s unavoidable. Interest rates will (must) rise. And when they do, the central banks will react by printing even more money. The economy runs on increased credit (home mortgages, car loans, etc. and rising interest rates slow down these types of purchases). Gold and silver are far from the peaking. $50 silver and $1900 gold will seem cheap a year or two from now. Gold and silver could fall a bit more from here – or not. It’s not important. Even if they do, it will be short-lived and totally orchestrated.