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Gold's record rally has been attributed to many things, but one big overlooked factor: huge...

Gold's record rally has been attributed to many things, but one big overlooked factor: huge buying from China, which imported five times more gold in the first 10 months of this year compared with the same period last year. China may have created its own virtuous circle as it buys more gold, but the cycle has begun to turn vicious as it presses into other markets like oil.
Comments (4)
  • China does have a bearing on the price of oil but is not solely responsible for that. Everyone touts how China has become the biggest user of oil. Look behind the door. China and India per capita, use 2 barrels of oil per citizen. In the US we use 20 barrels per person! All depends how you look at it. Does it not?
    3 Dec 2010, 02:36 PM Reply Like
  • Agreed i was just about to post that during the oil bubble everyone kept pointing fingers at China, except the numbers didn't work. And then.. pop.
    3 Dec 2010, 04:50 PM Reply Like
  • China has increasingly demonstrated its concerns with current international currency exchange and the hazardous role of the US dollar as an international reserve currency; especially with the unfetted intervention of the Fed seeking to reign in the global markets. The active role of Fed in pushing out liquidity even to non-US banks; the persistent unfunded push for even more government spending, and the very quick escalation of the government and trade deficits all point to an increasingly precarious US economy. The speedy rise in government and total debt, especially just over the last two years has shaken the Chinese governments in way they see now as misplaced trust in the US dollar and US economy.

     

    The Chinese are now seeking to carefully undo, especially their almost a trillion dollars in US dollar assets. They will continue to push for a change in international exchange, and creation of a World Currency based on a PPP model. They have proposed a strawman framework for realizing this in the next several years; and I believe this has legs although it will not materialize right away. Several BRIC and other countries have echoed similar concerns and are also seeking alternate solutions. There is great distrust in currency in general, and major currencies in particular: dollar, yen, sterling, euro; and a shift to an alternate World Currency is viewed by many as increasingly inevitable.

     

    Part of this will entail establishment of a strong US dollar alternative with some form of backing like what Zoelick of World Bank alluded to. Gold is one such major components. They have started active management of such investments and created local alternatives, including Chinese gold ETFs. This plus other concerns will see a strong push into gold buying. Gold in dollar terms may appear somewhat overpriced, but has moved up but quite little from a real price standpoint.

     

    3 Dec 2010, 02:52 PM Reply Like
  • Since they have such a large population, and are a big producer, they can just about corner the market. Each citizen will stockpile what they can afford (to absorb foreign production), and they will cease to export any of their production. As far as a new currency backed in gold, that will occur only once they have all of the stuff. Let's not forget the big picture here and allow the Chinese to own everything of value around the world. We must hold onto our gold folks...
    5 Dec 2010, 02:53 PM Reply Like
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