"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, February 18, 2011

Nice Story on Chinese Gold Demand

The following story from Dow Jones is a good read that details one of the reasons that those Western "analysts" who continue to denigrate gold and its prospects, just don't get it.

Also, not mentioned in the story is the main driver for the impressive gold demand that we are currently seeing, negative real rates of return on savings. When we are reminded of the difficulties with rising inflation that China is facing as we were overnight with the release of data detailing the problems afflicting their real estate market and its apparent non-response to recent interest rate hikes, we can see why their public is so keenly interested in acquiring the metal.

DJ China's Roaring Gold Demand Lifts Prices

Fri Feb 18 07:37:01 2011 EST

  (This article was originally published Thursday.)

   By Tatyana Shumsky

  NEW YORK (Dow Jones)--Chinese gold demand nearly tripled in the last 10
years, helping fuel gold's record-breaking bull run.

  Gold futures set a fresh five-week high Thursday, with the most actively
traded April-delivery contract settling up 0.7%, or $10, at $1,384.70 a troy
ounce on the Comex division of the New York Mercantile Exchange.

  Prices for the yellow metal reached an all-time record of $1,432.50 a troy
ounce in December on strong purchases from investment and jewellery sectors.
The precious metal has rallied 400% over the past decade, gaining around 27% in
2010 alone, as instability in global financial markets and a more streamlined
system for investing in physical gold boosted prices.

  Chinese investors, who bought 579.5 metric tons of the metal last year
according to the World Gold Council, were a key factor behind the soaring
prices. Around 400 metric tons of gold were consumed in the form of gold
jewelry, with the remainder coming from the bar and coin sector. They are
considered investment purchases due to the high gold-carat content of jewellery
sold in the region.

  China is the world's largest gold producer, making a record 340.9 metric tons
in 2010, up 8.6% on the year, according to the China Gold Association.

  But local demand for gold outstripped supply, as investors worried about
protecting their wealth from escalating inflation that hit a two-year high of
5.1% in November 2010. Investors consider gold as a store of value and a hedge
against inflation.

  China's demand growth for gold investment could be 40%-50% in 2011, with a
corresponding rise for gold jewelry 8%-10%, Wang Lixin, the council's China
managing director, told a press briefing Thursday.

  At the same time, Chinese authorities continue to loosen policies affecting
how people invest in gold. November saw Shenzhen-based Lion Fund Management Co.
win regulatory approval to invest in gold exchange-traded funds outside the
country, opening the door for mainland investors to purchase physical gold on
the world market.

  Earlier in 2010, the WGC partnered with China's largest bank, Industrial &
Commercial Bank of China Ltd., to jointly develop investment products and
programs for the mainland market.

  Investment demand for gold has skyrocketed in recent years, in large part
boosted by the rise of physical gold exchange-traded funds. For a small fee,
these funds remove the trouble of purchasing, transporting and storing gold,
while allowing investors to buy and sell their stakes on a shares exchange.

  Gold ETFs have fanned investment demand for the metal, which is estimated to
reach 876 metric tons in the first half of 2011, up from 785 metric tons in the
same period of 2010, according to metals consultancy GFMS.

  Physical gold held by SPDR Gold Trust (GLD), the oldest gold ETF, currently
holds the largest private store of gold at 1,224.1 metric tons.

  Gold producers, meanwhile, remain upbeat about their price outlook for 2010.
Despite gold's recent price records, the world's largest gold producer Barrick
Gold Corp. (ABX) sees more upside on the horizon.

  "We're not inclined to view the gold price as being anywhere near the top,"
said Barrick's Chief Financial Officer Jamie Sokalsky.

  Meanwhile, South Africa's largest gold miner AngloGold Ashanti Ltd. (AU)
noted rising political and financial concerns as a likely factor to push gold
prices higher.

  "It could easily break above $1,500/oz given issues across the globe," said
Chief Executive Mark Cutifani.

  -By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095;

  --Chuin-Wei Yap and Devon Maylie of Dow Jones Newswires contributed to this

  (END) Dow Jones Newswires

  02-18-11 0737ET

  Copyright (c) 2011 Dow Jones & Company, Inc.

07:37 021811


  1. Trader Dan, kudos on your new blog.

    Great charts, good writing and relevant, timely content… as always. Nicely done, sir.

    Being a relative newcomer (and neophyte) to precious metal and commodity investing, since late 2007, following your work has been a Godsend in terms of my own investing education. That, and being assured by your voice of reason and entertained by your witty perspective make me an avid Trader Dan fan. Thanks for all you provide.

    The China posts and charts have been interesting, if not illuminating. While it’s always seemed a good idea to take information coming out of China as possible strategic spin (expecting the opposite of their stated activities being a safe bet), today they are obviously working like one-armed paper hangers pulling all the levers to control their own heated real estate market, scratching their heads over the ineffective interest rate hikes, unloading US Treasuries and scarfing up all things that are made of natural earth elements to avoid out of control inflation that may very well become pandemic.

    How they manage the near-term months and years will tell us how soon and far the Chinese Empire will rise above all others, to take their place as the number one superpower. That is, if they don’t stall and become mired in fiat currency wars, or mismanage commodities and become overwhelmed by social chaos. If they don’t go all Mao on themselves again, and per conventional wisdom, they are on track to own the 21st century.

    In my humble opinion and not to take away from their vast resources and intelligence, but China’s rise to world economic superiority will not be due to their own economic, political or social prowess, but by the western world’s self-destructive shenanigans that will be more than the western monetary elite can manage to control, as usual for centuries.

    Perhaps the currency challenged UK is covering for the currency challenged US by taking up where China is leaving off and buying the Treasuries that China is dumping? Will China promote gold and silver to their own citizens to bring it onshore in the hands of many and, if the going gets tough, confiscate ala FDR? Maybe I’ve just become a cynic.

    There are no easy answers to the questions posed by the goings on in the economic/social/monetary world today, but it is becoming readily apparent that even the “analysts” that denigrate gold may still not get it, but will soon wish they had it.

    Pardon the long rambling opine. Just seemed like a good time and place to let some out. ☺

  2. Thanks for taking the time to "let some out"!


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