Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Two Recent Events Offer Insights Into China’s Future Gold Plays…

Commodities / Gold and Silver 2010 Feb 22, 2010 - 06:16 AM GMT

By: Miles_Banner

Commodities

Best Financial Markets Analysis ArticleWe’re watching China with one eye on the gold price.

Two recent events offer insights into China’s future gold plays… China has stopped buying US Treasuries and started to dump them. And China has started accumulating gold positions.


China looks to diversify

On Tuesday, 16th February, the U.S. Department of the Treasury released Treasury International Capital (TIC) data for December 2009. It revealed that China sold over $34 billion Treasuries in December ’09.

By affect Japan overtook China as the biggest foreign holder of US Treasuries.

It’s not clear if China has been accumulating Treasuries via a different, overlooked method, and it should also be noted that this is one month… it cannot be taken for a trend until further months reinforce it.

However the implications are already circulating the markets. It has long been predicted a time will come that the reliance of China on the US dollar will force their hand to diversify into other currencies and assets [see our article China’s lack of gold reserves and its young gold mining industry].

With competing foreign reserve currencies all under strain, including the euro and sterling, the dollar has had a brief rally which looks set to continue for the immediate future. But, as we’ve noted before, the dollar rally is usually measured against other weaker currencies like the euro. This creates an illusion of strength. If you look at it in terms of stronger currencies such as the Canadian dollar and assets such as gold it has hardly moved.

The point is the dollar, whilst undergoing a resurgence, still faces an uncertain future. It’s looking good because alternatives are looking weak. Now China, and other countries holding dollars, must bet on whether the dollar will rise, and decide when to use that to buy gold.

The IMF gold sale

Last week the IMF announced plans to sell 191.3 tonnes of gold bullion in a second leg of a grander plan which will see it offloading 403 tonnes of its reserves. The initial sale was announced to India back in October ’09.

With the dollar positions of many countries taken into account, the recent announcement by the IMF to continue it’s second leg of a gold sale should have spurred a competition between countries. This is likely to be one of the only times they will be able to get their hands on such a large quantity of the physical commodity in the near future.

There are other, cheaper ways to accumulate gold and gold positions. Gold mining companies can produce gold typically at a cost of between $400 to $550 per troy ounce… which means Chinese owned gold miners can add to their reserves at a considerable discount. But this IMF sale is a chance to accumulate a sizeable hedge against their dollar positions with one move.

So far nothing has happened, but will the average Joe ever be part of the information feed?… not whilst it’s happening. The news will no doubt filter through once everything has been decided.

We believe China will accumulate more gold positions going forward. And in recent weeks events have signified that they are doing just that… China has increased its exposure to the gold price by buying positions in gold ETFs and gold leveraged mining companies.

China buys into SPDR (GLD) ETF

Last week it was revealed China Investment Corp., the nation’s sovereign wealth fund took a 1.45 million share stake in the SPDR Gold Trust worth $155.6 million. This is the equivalent of 145,000 ounces of bullion.

Recently CNCG (China National Gold Group Corp), a Chinese, government-owned mining conglomerate, announced plans to transfer several of its gold mine assets to Jinshan Mines as well as promising to acquire more projects through its’ Vancouver based subsidiary.

Both the move into ETFs and the promise to acquire more gold based mining companies signifies strength in the gold price.

We’ve long held the opinion that it will be countries looking to diversify into gold that will trigger the next gold rally, and this looks likely to happen over the coming months and years ahead.

How, therefore, will a dollar rally influence the gold price?

As we’ve noted before there is a strong inverse relationship between the dollar and gold. This is likely to be tested over the next few years. If the US economy recovers from the situation it now faces, and economic conditions in alternative markets sours then inevitably the dollar could continue its rally. And typically this would signify a bearish gold price. However in times like these it could also be plausible that gold will also benefit from problems in global markets given its role as an alternative currency.

The most bullish case for gold is against the euro and sterling. In this scenario there is a possibility of gold and the dollar rising together as both attract interest from sovereign funds, central banks and private investors.

If the dollar continues to gain strength as a result of further economic woes from Europe, and continues to display weak economic conditions itself (as seen in high unemployment and a weak housing market) countries with large dollar reserves are likely to consider cashing in on the dollar’s rise.

With few alternatives to compete with, gold looks likely to be a beneficiary of current economic conditions in the long term.

We look to see what will happen as the price of gold moves forward with the problems of Europe and America still in the forefront of investors’ minds. It promises to be an unclear but exciting time for bullion investors.

Continue reading what happens every week, right here.

Digger
Gold Price Today

P.S Digger writes a weekly email analysing the gold price and the gold industry. Visit Digger at Gold Price Today (http://goldpricetoday.co.uk).

© 2010 Copyright Gold Price Today - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in