Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

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

6 Critical Money Making Rules