Could China Push Gold to the Moon?
Sep 18th, 2009 | By David Galland | Category: Featured, Gold
Inside sources have recently confirmed the Chinese government is actively promoting gold and silver investment to the masses.
Some analysts now contend that China can no longer afford to let the gold or silver price slump. The rationale behind that contention is that with the Chinese government now telling the general populace to buy precious metals, it would be highly problematic should gold and silver subsequently take a nose dive.
In many cases, what a government wants and what ultimately occurs can be wildly different, due to unintended consequences rarely foreseen by officialdom, and because once the masses get it into their heads to break one way or another, government’s desires are largely ignored.
“You shall not smoke marijuana,” says the government. “Roll me another,” says John Q. Public.
But in the case of gold, interestingly enough, the Chinese government has the means at its disposal to actually do something about prices. Namely, at $1,000 an ounce, the total value of all the gold ever mined comes to about $5 trillion.
Of that amount, less than $1 trillion is held in official reserves, the rest under mattresses, in jewelry and family heirlooms, and in various ETFs – GLD being the biggest, by far, holding about $34 billion worth of gold.
Against these totals, China has foreign reserves in excess of $2 trillion. In other words, more than enough to push the tiny gold market around in any way it wishes. Given that much of its reserves are now denominated in fragile U.S. dollars that it would sorely love to replace with something more tangible, and that China is the world’s largest gold producer, the country’s involvement with gold is something more than just a passing fancy.
Simply, there is a new gorilla in the room in global gold markets. The extent to which the broader market hasn’t yet figured this out is the extent to which you as an early mover can ultimately profit. Especially in the more leveraged gold stocks, which continue to be strong even as the broader markets show weakness.
That all of this comes before the dollar hits the wall it must hit, or before the inflation that is now baked in the cake arises, lends a lot of credibility to the idea that when the gold bubble begins to expand, it could reach all the way to the moon.
No need to chase gold at these levels, as opposed to buying on dips. But buy.
Regards,
David Galland
Managing Director, Casey Research
September 18, 2009
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Dear David:
Great article, but I wish you had written twice as much! We’re cycling through buying opportunities. Last year was ammunition; earlier this year was a fine time to stock up on silver; is gold the flavor of the month? Linda Brady Traynham
Great article!
‘Share’ button, please! Where did the ’share’ buttons go?
Wonk
Good read,enjoyed it.
All the gold ever mined ( at $1,000 oz ) is five trillion…sort of puts a trillion into perspective doesn’t it.
And wasn’t it 7 trillion wiped off the stockmarket in the 2001/3 bear market.. a lot of money…how much got wiped off this time.
When I can demand 600 ozs of gold for my house instead of $600,000.00 then we have game on.
What I can’t figure out is this…
If the US have been seeling their gold to keep the price down so as to keep their greenback buoyant and as the reserve currency…so that they can keep printing money and living in the land of nod..
Surely at some point,they must realise the gig is up…so why don’t they print a whole lot of extra money…and buy all the gold back…and then some more…and then some more….then they have the gold…and can reset the gold standard to what ever they want…I mean it seems soooo simple to me.
I appreciate your insight and agree that gold is one of the few investment alternatives that appears to make sense given the current macroeconomic environment. I recently read some good articles at http://www.goldalert.com about the policies of the central banks around the world and potential effects on fiat currencies, gold, and particular gold mining companies with leverage to the gold price. There are numerous unintended consequences from the often reckless and unprecedented actions of the central banks that the world is going to have to deal with soon, in my opinion. And I think gold and gold mining companies with leverage to the gold price should continue to benefit from the efforts by central banks to try to prevent deflation.
Does anyone have Q3 supply and demand data for gold?
Leaving Q2 the fundamentals were not looking great. Is this right?
http://www.planbeconomics.com/.....verbought/
[...] Commies Love Gold, Too. While Ron Paul has been talking about China as a world badass in both power and economics for a long time, we’re seeing some real tippers on the road to Oz. Do your kids speak Mandarin? Might be a good idea… so is buying gold. [...]
Cyber warfare is on the same level as psychological warfare and information warfare. ,
Eventually, at Satriale’s, Tony notices Christopher talking to Julianna in her car down the block. ,
This has been asked in every interview I have ever had, even if I was not applying for a job. ,