See also:
– TOTAL DESPERATION: G20 Asks Germany To Pledge Its Gold For EFSF Rescue Fund – Bundesbank Refuses
– Chinese gold demand at record highs (IBTimes, Nov. 8, 2011):
Gold and silver prices logged decent gains yesterday on the back of the on-going crisis in the eurozone. The November Comex gold contract gained $35 (2%) to settle at $1,790.30 per troy ounce, with the equivalent silver contract gaining 2.2% (74 cents) to settle at $34.81 per troy ounce.
As Trader Dan notes at his blog, irrespective of what hedge fund algorithms are doing on any given trading day, more and more people are looking to acquire physical bullion as a safe haven asset. This is in contrast to speculators, who are only interested in the leveraged gains to be had from playing in the futures market, and are not looking to acquire the actual metal.
As pointed out in yesterday’s News commentary, there may be days or even weeks when gold and silver are smacked down hard by panic selling in the paper market, with large financial institutions eager to raise capital in the face of difficulties elsewhere on their balance sheets. But this merely offers those interested in holding physical metal more opportunities to buy gold and silver on price corrections. Over time, this process means that more and more metal is transferred to “strong hands” – that is, people who aren’t nearly as likely to sell as those trading paper gold. Higher prices are the inevitable result of this dynamic.
The Chinese are a great example of these strong hands. As the Financial Times reported yesterday, imports of gold from Hong Kong to mainland China, said to be a proxy for the country’s overall overseas buying, leapt to a record high in September – 56.9 tonnes, which is nearly half the total for the whole of 2010. Janet Kong, managing director of research for CICC, notes that bargain hunters were encouraged to buy in September owing to the price dip that month. She notes that Chinese gold imports will continue to rise during this month and December: “We’ve noted a quite strong seasonality in gold prices, typically prices go up in the months before the Chinese New Year.”
Chinese buying is being encouraged by persistent (and rising) inflation, as well as fears about economic problems in Europe and America. Aside from purchases by private citizens, along with other central banks in the developing world, the People’s Bank of China remains committed to diversifying out of US dollars and into gold bullion. The problem they face in trying to do this is that buying on a meaningful scale in the physical market would push the price up too high too quickly – further devaluing their vast stash of dollars relative to gold. Thus, they are looking to acquire gold directly from mines in China (which is now the largest producer of gold in the world).
But with annual mine supply from all of the world’s gold mines just under 2,500 tonnes a year, and gold demand now close to 4,000 tonnes annually, central banks face an uphill battle if they are looking to newly mined gold as a way of increasing their reserves. Thus, if they are serious about selling dollars – and fiat currency reserves generally – in exchange for the yellow metal, they will have to do more buying in the physical market. This will of course lead to greater gains in gold prices.
Google translation (original article in German below.):
– New strategy: China buys gold mines abroad (Deutsche Mittelstands Nachrichten, Nov. 8, 2011):
China exploited its dollar reserves to buy gold mines: a first deal is in Central Asia before the final, the Chinese also be interested in mines in Canada and Mongolia.
China will in the coming weeks, a spectacular first acquisition: According to a report available to the South China Morning Post, the agency responsible for international business subsidiary of China National Gold Group state immediately before the completion of the purchase of a gold mine in Central Asia.There were a “relatively large acquisition,” said the Vice President Jerry Xie Quander company at a convention. He further said that China is considering the introduction to the mines in Canada and Mongolia. Among the objects that look at the Chinese, are established as well as those who have only just started production. China already owns two gold mines, one in Inner Mongolia and Tibet.
China wants to contribute to the increased demand for gold on the world market. The country is the largest gold producer in the world.
Observers trace this development, especially regarding the use of foreign exchange reserves of China. If China uses substantial amounts of its dollar holdings for the purchase of mines, this would explain why the euro versus dollar has remained so strong – despite the known current problems in the euro-zone.
– Neue Strategie: China kauft Goldminen im Ausland (Deutsche Mittelstands Nachrichten, Nov. 8, 2011):
China nützt seine Dollar-Reserven, um Goldminen zu kaufen: Ein erster Deal steht in Zentralasien vor dem Abschluss, die Chinesen interessieren sich auch für Minen in Kanada und der Mongolei.
China wird in den kommenden Wochen eine erste spektakuläre Akquisition tätigen: Einem Bericht der South China Morning Post zufolge steht die für das Auslandsgeschäft zuständige Tochter der staatlichen China National Gold Group unmittelbar vor dem Abschluss des Kaufes einer Goldmine in Zentralasien.Es handle sich um eine „relativ große Akquisition“, sagte der Vizepräsident Jerry Xie Quandes Unternehmens bei einem Kongress. Er sagte weiter, dass China auch den Einstieg in Minen in Kanada und der Mongolei prüfe. Unter den Objekten, die sich die Chinesen ansehen, sind etablierte ebenso wie solche, die die Produktion eben erst aufgenommen haben. China Gold besitzt bereits zwei Minen, eine in der Inneren Mongolei und eine in Tibet.
China möchte damit der gestiegenen Nachfrage nach Gold auf dem Weltmarkt Rechnung tragen. Das Land ist der größte Goldproduzent der Welt.
Beobachter verfolgen diese Entwicklung vor allem Hinblick auf die Nutzung der Devisenreserven Chinas. Wenn China erhebliche Summen seiner Dollar-Bestände für den Ankauf von Minen verwendet, wäre dies eine Erklärung, warum der Euro im Vergleich zu Dollar so stark geblieben ist – trotz der bekannten aktuellen Probleme in der Euro-Zone.