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Return of Chinese buyers from New Year holiday to rally gold as central banks buy most in 50 years

By: Peter Cooper, Arabian Money

-- Posted Friday, 15 February 2013 | | Disqus

Bearish noises in the gold pit have lowered prices again this week but the real reason for the price fall is the absence of the world’s most voracious buyers, the Chinese who are on a national holiday this week for their New Year, though they have been buying in the gold souks of Dubai instead.

Global central banks bought more gold last year than at any time in the past 50 years, according to figures published yesterday by the World Gold Council. They added 535 tons to reserves, 17 per cent more than in 2011. Gold prices rose for a 12th successive year.

Gold bears

The bear argument against gold is that economic growth is picking up in the US and China and will divert investment into stocks and away from disaster insurance like gold. That can only really stack up if you believe economic growth is actually about to accelerate.

Unexpectedly GDP in the US did not grow at all in Q4 and recent Chinese trade data is a fiction according to many Asian economists. Besides if the world economy does grow a bit faster this year it will be entirely down to money printing by the global central banks who continue to hedge their own inflation risk with gold.

Individuals are likely to do the same and hedge funds could quickly switch back to being bullion positive. Our local ‘Mr. Gold’ in Dubai thinks the gold price will bottom at current levels and not test the $1,500 an ounce level that chartists have as a potential floor.

Chinese liquidity coming back into the bullion market is probably all it takes. China is the biggest global gold consumer and overtook India sometime last year. They always love to snap up a bargain and with gold on sale should be back with a bang from their holidays.

China bulls

ArabianMoney does not buy the argument about Chinese growth being bearish for gold. If it is true then the inflation risk is elevated again and the Chinese know gold is the best way to diversify their foreign exchange reserves.

Gold legend Jim Sinclair has highlighted the Chinese as the savoirs of the gold price in 2013 with the first Chinese ETF on the horizon (click here). We think the current price weakness is just down to the absence of Chinese buyers for their New Year.

Sell your gold cheaply now and you will regret it as the price goes up again. Mr. Sinclair’s conservative price target is still $3,500 an ounce.

-- Posted Friday, 15 February 2013 | Digg This Article | Source:

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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, 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 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 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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