LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page >> News >> Story  Disclaimer 
Latest Headlines

Palladium Melts Up
By: Ed Steer

What Expiring Bubbles Look Like
By: Gary Tanashian, NFTRH

Where Did the Housing Market Go, and Where is it Going Next? My first 2020 Economic Prediction
By: David Haggith

Gold Stocks Wavering
By: Adam Hamilton, Zeal Research

Precious Metals Update Video: A trade deal with China and what kind?
By: Ira Epstein

Looking on the Bright Side
By: John Mauldin, Thoughts from the Frontline

COT Gold, Silver and US Dollar Index Report - January 17, 2020

The Genius of JPMorgan
By: Ted Butler

Precious Metals Update Video: Gold Market Trying to Figure out Where Next?
By: Ira Epstein

A Tale of Two Markets
By: Gary Christenson, The Deviant Investor


GoldSeek Web

Why is China promoting Gold Investments, if the Yuan is going to appreciate?
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch -

-- Posted Friday, 11 June 2010 | Digg This ArticleDigg It! | | Source:

The Chinese government is encouraging investments in gold and is working to expand the range of gold investments there.   But the U.S. and others believe that the Yuan is going to appreciate.   Surely the Chinese investor will be hurt if this happens?


Chinese Gold Promotion

The Chinese government has been adding to its gold reserves, for at least six years now, we believe.   Local gold production is not leaving the country, nor will it for years to come.   At the same time the Chinese government favors the development of new gold investment products, has opened up gold markets and encouraged the major Chinese banks to sell gold across China.


This is a particularly important development for the global gold market in the light of the fact that per capita, the Chinese hold the least amount of gold amongst the Asian nations.   The savings propensity of the average Chinese earner is remarkable, for they save around 40% of their disposable income.   To date these have been held on deposit at the banks, with the more sophisticated venturing into the equity markets there.   But these in times of volatile ‘spikes’ can behave more like gambling casinos than investment sources.   Gold in the Chinese mind represents true value and leads to financial security.   Consequently, the potential for gold buying in this nation of 1.4 billion people who are in a rapid process of financial empowerment is tremendous and could well, in time make China one of if not the most important investment markets for gold.


The main restraint on Chinese gold buying, whether by individuals or the government, is the small size of the global gold market.   Persistent long-term buying is the only way the acquisition of large quantities of gold can be approached.   Higher prices over time may well flush out sellers of gold.   So we expect Chinese gold buying to remain persistent for the foreseeable future.


Will The Yuan Appreciate as the U.S. wants?

For years now the U.S. in particular has been calling for an appreciation in the Yuan.   Even the I.M.F. has told them that it is in the interests of China to let the Yuan appreciate.   But no heed has been taken of such demands.   Yes, the inscrutable Chinese have allowed the West to get the impression that they may well let the Yuan appreciate, but a look at the advantages to China of a pegged Yuan to the $ tell us the story.


The original reason for the pegging of the Yuan to the U.S. $ was to capture the price advantage Chinese good had over the equivalent made everywhere else.   As the $ is the global reserve currency, such prices were easily translated into other currencies.   As we see by yesterday’s export report for May from China the rise of 48% shows what advantages such pegging and pricing brings as the world slowly recovers.   Yes import could be cheaper, but that would only save money not promote industry.   After all China wants and needs to develop its economy.


We have been touting the future role of the Yuan as a global reserve currency for well over the last two years now.      Since then we have seen the tentative steps that the Chinese need to take to ensure their banks can cope with this changed structure.   Since expanding Yuan trade in just Hong Kong, it is now spread throughout the main manufacturing hub of Southern China.   When they are ready, we do expect to see a flood of Yuan to all their international trading partners, to pay for imports and then to make Yuan available to pay for Chinese exports.   As Chinese trade is already global, there will be a point when Chinese importers will price imports and exports in the Yuan.   While this process is in transition, we also expect their pricing policies to widen to include allowing payment for Chinese exports in the broad spectrum of global currencies.   This will allow China to diversify its reserves and lower its exposure to just the $ or the €.  


When the internationalization of the Yuan happens there would normally be a tremendous fall in the value of the Yuan as it floods markets, but in today’s context that fall would be absorbed by the pressure for the Yuan that is now being experienced.   When it does happen, we believe that China will want the Yuan to either hold current levels of in fact fall.


The Gold Price in the Yuan

Having said all the above, we have to ask you if you expect the Chinese government to promote gold so strongly to its citizens, then knowingly engineer a fall in the Yuan price of gold?   Our view is that the Chinese government would not wish to hurt its own like that, but with a large dose of forethought, would have blended to two policies to the benefit of its own citizens.   If they didn’t what would happen to Chinese gold demand.


Where will the price of gold head to in the Yuan?

Subscribers only – Subscribe through



Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.  Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

-- Posted Friday, 11 June 2010 | Digg This Article | Source:

Contact us:



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to >> Story

E-mail Page  | Print  | Disclaimer 

© 1995 - 2019 Supports

©, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


The views contained here may not represent the views of, Gold Seek LLC, its affiliates or advertisers., Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of, Gold Seek LLC, is strictly prohibited. In no event shall, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.