Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek Radio: Harry S. Dent Jr. and Bob Hoye, and Chris Waltzek
By: radio.GoldSeek.com

Your Comprehensive Crash Survival Guide
By: Clive Maund

European Threats
By: John Mauldin

Yet Another Trillion-Dollar Unfunded Liability: WHY California Is Burning
By: John Rubino

Gold And Silver Prices Rise As The Markets And Oil Decline
By: Steve St. Angelo

BIS gold swaps fall in November but bank continues secret trading
By: Robert Lambourne

Listen to what gold is telling you
By: Gary Savage

Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Over 2% and 3% on the Week While Stocks Drop Nearly 5%
By: Chris Mullen, Gold Seeker Report

Gold Stocks Acting as They Should During Market Stress
By: Gary Tanashian

Craig Hemke Warns of Fraud in Fractional Reserve Precious Metals MarketsÖ
By: Mike Gleason

 
Search

GoldSeek Web

 
Why China is a positive and not a negative for the gold price going forward


 -- Published: Sunday, 20 April 2014 | Print  | Disqus 

By Peter Cooper

Last week a report from the World Gold Council suggested that around 1,000 tonnes of gold is being used as collateral in Chinese commodity financing deals that would be unwound if the shadow banking complex was to collapse. Not surprisingly news of such a supply overhang depressed the gold price.

Since then analysts have pointed out that this is an assumption and based on little more than an estimate of gold imports. Moreover, last year gold experienced significant volatility and high local premiums in China that would not have made it ideal for financing. Copper is the usual commodity of choice for such deals. You donít use assets carrying large premiums either.

Facts, facts

So it looks like a rather poor piece of work that has unnecessarily damaged the gold price based on supposition rather than facts. Indeed, ArabianMoney has always argued that China is a valuable support for the gold price and also a reason why it will eventually head much higher.

Certainly the selling of 880 tonnes of gold last year by ETFs would have depressed the price far further if it had not been for the uptake in China where the retail market for gold is particularly hot at the moment. Local retail investors want a little gold in their portfolios because perhaps deep down they know that good times cannot last forever. China has seen many episodes of paper money becoming worthless in its long history.

We have also flagged up the fact that this gold is on a one-way trip to China. It is not coming back. The Chinese have not sent a bar back in the other direction for years. Gold exports are illegal. Thus the supply shortage in the West will be evident when the ETFs want to stock up on gold again as would happen with the slightest whiff of inflation or problems in the bond markets. Thatís positive for prices, not negative.

If money printing is going to get out of control then China and Japan are the two most likely culprits. Japan is already printing three times more per capita than QE3 at its height. Gold is a hedge against currency devaluation. Itís not something you can print.

Shadow banking crisis

Sure at the margins there would be gold sales if the Chinese shadow banking system imploded. Then again a far more probable scenario is a series of controlled detonations that will scare more local investors into buying something with a value that does not depend on any third party bank or financial institution.

From the Western side there is the view that recent money printing will finally result in inflation as economic growth gathers pace. Thatís gold positive too. Then again if China and Japan get into trouble it is hard to believe over-inflated Western asset prices would hold up under the deflationary tsunami. US economic data splutters forward even now.

Precious metals are a hedge against falling stock and real estate markets, or at least fall by less and rebound more quickly. Gold remains an attractive buy at current price levels.

http://www.arabianmoney.net/

 


| Digg This Article
 -- Published: Sunday, 20 April 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com 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 GoldSeek.com. 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


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, 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 GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, 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.