-- Posted Friday, 22 June 2012 | | Disqus

Consumers made the most of the dip in the price of bullion and mainland China’s gold purchases via Hong Kong hit a record 101.7 tonnes in April, up 62 per cent, reported Bloomberg.

Meantime, the Russian central bank has again increased its gold reserves by 500,000 ounces. Former Russian finance minister Alexei Kudrin said that a full-blown economic and financial crisis in the euro zone is inevitable and will develop within a year.

Real money

Russia is clearly buying gold to protect the ruble from devaluations and Russia from an international monetary crisis. China is doing the same both by official gold purchases and by encouraging individuals to buy precious metals.

This is eminently understandable and sensible. It is the antithesis of the argument that central banks have everything under control. They know that is not true and so buy gold themselves.

Their action also marks the transfer of real wealth in a global reset of wealth towards the emerging markets. They are the ones with the growing economies – Russia with its hydrocarbon wealth and China as the workshop of the world.

At first it was the almighty US dollar that everybody in emerging markets wanted. Now they worry that too many dollars are being created by the Fed and the obvious and unavoidable consequence is inflation down the road.

It behoves any investor to follow the smart money, and the nouveau riche nations must have gotten something right. They only want to hold on to wealth that has been hard won for many.

Buying opportunity

So when the gold price dips as it may well do this summer as global financial markets sell-off and some investors are forced to dump their precious metals because they cannot afford to keep them, expect more record months of buying by China and Russia.

It makes sense to pay as little as possible for the asset class of the future and to get out of the US dollar while the dollar is strong, rather than to wait until it becomes weakened by devaluation and inflation.

Those who have US dollars stuffed into shoe boxes in the emerging markets will be switching in favor of shiny metals that they can see preserving their wealth in the global economic reset that is coming.

-- Posted Friday, 22 June 2012 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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