Sino Silver and Gold Sales Soar

Includes: AG, GBG
by: Goombarh

Silver sales in China by the Industrial and Construction Bank of China apparently accelerated 600% for January, 2010. This author is always watching for world news that may affect my investment portfolio. The author spotted this on February 19, 2011. Robert Lenzner's blog on Forbes reports:

In January alone ICBC sold 7 tons of gold– almost half the 15 tons it sold in all of 2010. It also sold 13 tons of silver in January– almost half the 33 tons of silver it sold to clients during the past year.

The author was aware that ICBC, China’s Industrial and Construction Bank, the world’s largest bank, was a pace setter in China with innovative new sales of Silver certificates for their customers introduced last fall. However, what marketing have they performed to accelerate their sales like this, selling 6 months' worth of the precious metals (relative to 2010) in just one month in January? Given that January was the precursor to the beginning of the new lunar year of the rabbit, some of the sales may have been related to new year celebrations.

Gold sales, not to be outdone, are also doing well in China. The World Gold Council (WGC) reported on January 17th, 2011 that Gold sales were up 113% in China:

According to the report, gold investment in China more than doubled year-on-year to 17 billion yuan ($2.58 billion) in the last quarter of 2010. The gold investment for the full year totaled 48 billion yuan, up 113 percent year-on-year.

The article goes on to explain that the demand drivers included the following:

  • inflation pressures, China's consumer price index was 4.6; inflation hedge in Gold.
  • government policies to rein in the zooming property markets; Gold is an alternative to property.
  • Shanghai Composite Index dropped 14%; Gold is an alternative to stocks.

As there were few other investment choices for the masses, Gold and Silver are fast becoming a popular vehicle for investment in China. The two Asian giants, India and China, now form 51% of the world demand for Gold as investment and jewelry in 2010.

Silver is experiencing tightness in the American physical markets as the COMEX silver stocks fall to a four year low. Reuters reports that as of this week, the US Silver Futures market is in backwardation, as near-term prices are more distant than the months further out:

The stocks are being pulled for all the high grade and better materials, and that essentially put a squeeze on the physical market," he said.

Perez-Santalla said that silver futures have not been in backwardation since billionaire Warren Buffett bought 130 million ounces of silver between 1997 and 1998."

Tightness in physical supply market for Silver has come from the following sources:

  • booming industrial demand.
  • record silver coin sales.
  • mining companies borrowing Silver for hedging purposes.

Almost un-noticed by the public, Silver has quietly set a new 31 year high of $32.66 USD on Friday February 18, 2011.

The author is positioned for the precious metals rise in Gold with Great Basin Gold (NYSEMKT:GBG) and in Silver with Silvermex (GGCRF.PK, TSX:SLX).

Disclosure: The author is long junior precious metals stocks including GBG and SLX.

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