China Becomes World’s Larest Gold Buyer

China Becomes World’s Larest Gold Buyer - Buys 93.5 Tonnes of Gold Coins / Bars in Q1 - Gold Ownership Rising From Miniscule Levels

Gold and silver are higher again today with the debt laden dollar, euro and yen all being sold. News that China has become the world’s largest buyer of gold bullion and has seen investment demand double continues to reverberate in the markets and may have contributed to this morning’s strength.

Both gold and silver are marginally higher for the week and after last week’s gain appear to have regained their poise and are consolidating after the recent sell off.


Gold Investment Demand in China - Courtesy of the Wall Street Journal

China becoming the world’s largest gold buying nation is very important. While informed analysts have been saying that this would inevitably happen much of the commentary and most of the public remain completely unaware of the huge implications that Chinese gold demand has for the gold market.

Indeed, there continues to be a huge level of ignorance regarding the scale and sustainability of China’s, but also India’s and other large and increasingly wealthy Asian countries, demand for gold and silver bullion.

Chinese investors bought 93.5 tonnes of gold coins and bars in the first quarter. China produced 340 metric tons of gold last year and consumption was about 700 tonnes, leaving a gap of nearly 360 tonnes.

Demand is forecast to increase due to the growing wealth of the Chinese middle class and deepening inflation in China.

What is most important and rarely covered is the fact that gold ownership by the Chinese public remains minuscule. Especially when compared to other Asian countries such as Vietnam and India.

Gold ownership is rising from a very, very low base which means that the investment demand and demand for an inflation hedge from 1.3 billion increasingly wealthy Chinese people is more than sustainable.

The not realized important fact that the people of China were banned from owning gold bullion from 1950 to 2003, means that the per capita consumption of over 1.3 billion people is rising from a tiny base.


Cross Currency Rates (Including Gold and Silver)

While the recent increase in Chinese demand has been very significant, it is likely to continue and the demand is sustainable due to Chairman’s Mao’s half-century gold ownership ban.

Should the Chinese economy crash as some predict, demand could fall. However, sharp declines in Chinese equity and property markets and a depreciation of the yuan would likely lead to significant safe haven demand for gold.

Indeed, should high inflation continue in the Chinese economy or should higher inflation or even stagflation occur than Chinese demand could even increase.

Chinese demand alone likely puts a floor under the gold market at $1,450/oz.

The inflation adjusted high of $2,400/oz remains very likely given Chinese and Asian demand alone for gold bullion.

Many market participants and non gold and silver experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” major change in the fundamental supply and demand situation in the gold and silver bullion markets – particularly due to investment and central bank demand from China and the rest of an increasingly powerful and wealthy Asia.

It is worth noting that the People’s Bank of China’s gold reserves are very small when compared to those of the U.S. and indebted European nations. China appears to be quietly accumulating gold bullion reserves. As was the case previously, they will not announce their gold purchases in order to ensure they accumulate sizeable reserves at more competitive prices.

SILVER

The recent bear raid on silver is being challenged by silver’s very favourable supply and demand fundamentals.

The Comex Registered Silver Bullion Inventory Data shows that silver bullion inventories are now at record lows (see chart).

Speculative paper players on the COMEX may have been successful in again manipulating prices lower but as ever the physical reality of supply and demand for the underlying commodity, asset and currency will dictate prices in the medium and long term.


Comex Silver Bullion Inventory Data/Registered

Gold

Gold is trading at $1,500.90/oz, €1,049.95/oz and £922.95oz.

Silver

Silver is trading at $35.10/oz, €24.55/oz and £21.58/oz.

Platinum Group Metals

Platinum is trading at $1,763.50oz, palladium at $728/oz and rhodium at $1875/oz.

News

(Financial Times) --Chinese set new standard in buying gold
http://www.ft.com/intl/cms/s/0/8843dbb8-824a-11e0-961e-00144feabdc0.html

(Wall Street Journal) -- China Is Now Top Gold Bug
http://online.wsj.com/article/SB10001424052748704816604576333080229436072.html

(Bloomberg) -- Gold May Gain on Europe Debt Concern, Inflation, Survey Shows
http://www.bloomberg.com/news/2011-05-19/gold-may-gain-on-europe-debt-concern-inflation-survey-shows.html

(Reuters) -- PRECIOUS-Gold regains strength on bargain hunting,silver steadies
http://www.reuters.com/article/2011/05/20/markets-precious-idUSL4E7GK0OB20110520

(Bloomberg) -- Gold Advances as Europe Financial Turmoil, Dollar Weakness Spur Purchases
http://www.bloomberg.com/news/2011-05-20/gold-advances-as-europe-financial-turmoil-dollar-weakness-spur-purchases.html

(Bloomberg) -- Gold Imports by China May Rise After Demand Gains to Record, Council Says
http://www.bloomberg.com/news/2011-05-20/gold-imports-by-china-may-rise-after-demand-gains-to-record-council-says.html

Today's newsletter is published on the GoldCore Blog here.

Theft - $27,000 Buying Gold Coins

Investing in Gold for Beginners

 From:

Gold and Silver - The Monetary Metals

 

Investing in (PHYSICAL) Gold for Beginners

Gold in New Zealand dollars: $1885.28 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $56.77 per oz
Previous all time high: $48.58 per oz

You want to put some of your savings into gold? How much should you invest in gold? Should you buy gold and take delivery?

Here are 5 tips for the new Gold Investor.

1. How much should I invest in Gold?

This is a personal decision, but most commentators would recommend anything from 5 – 25% of your wealth should be in gold. It depends on how ‘bullish’ (or brave, or trusting in paper) you are.

Gold is an insurance for the bad times. Primarily an insurance against bad government. In the second world war, and other conflicts, many displaced people had much of their wealth in gold and actually carried their gold out with them when they had to leave countries. Will society ever break down like this again?

Gold will never go to zero value. Many other investments have that possibility.

2. How much gold bullion should be in my possession and how much in a vault?

It is sensible to have some physical gold bullion in your possession. The ratio is yours to decide. Small gold bars and gold coins are the best option. But remember that small gold pieces hold a large premium over spot price, so don't get too much. Buying large amounts form bullion companies and having it stored is the cheapest option.

For bullion storage I recommend The Anglo Far East Company. This company matches your gold investment with the actual physical gold. It is custodial, allocated gold and silver. You own it, they don't. It is a highly personalized, white glove service and has a minimum purchase amount.

3. Where do I store my physical gold bullion?

Most people buy a safe and install it in a secure place in their home. Some put it in paint tins in their shed (but don't let anyone else clean out your shed!!) Others put gold into Bank Deposit boxes. Or you can split between the two. Remember it may be difficult to get YOUR gold out of a bank deposit box.

4. When do I sell my gold bullion?

Gold is very liquid and can be quickly sold in times of monetary stress. If you are looking at gold as an investment, then look at some of the better commentators on the internet for advice of when to sell. There are experts that will give this sort of advice for a fee. A well known gold company will tell their paid subscribers 24 hours after they have personally sold their precious metals.

5. Who will accept my small gold pieces when I need to trade them or sell them?

Most bullion dealers will be happy to buy pure gold. Also, in times of financial collapse gold will be acceptable as money to most people in exchange for goods or services.

In New Zealand we have little understanding of the world of gold. Those from Asia and the Middle-East and Eastern Europe have such a history. I suggest they would readily exchange goods and services for gold and silver.

Gold Buying in China Jumps as Inflation Flares, Boosting Demand, UBS Says - Bloomberg

Bloomberg - Kim Kyoungwha, Mar. 2, 2011

Gold purchases in China, the world’s largest producer, climbed to 200 metric tons in the first two months of 2011 as faster inflation boosted consumer demand, according to UBS AG, which said the price may gain to $1,500.

SEE FULL STORY