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China and Gold

jigs

Well-known member
I got an email from an investor friend. I trust his knowledge on things like this, as I do not know a lot about it. BUT to summerize his email, China is going to a gold backed currency. and well over half of the worlds gold is in China. when they do this, the dollar will be almost immediatly worthless. he is suggesting putting a portion of your investments into precious metals or foriegn currency.

myself, I like dirt as an investment. they ain't making any more of it, and no matter how bad the dollar gets, it will have a value.


his last suggestion was to get a Chinese language tape, and start learning Chinese...they will be your banker soon.
 

Steve

Well-known member
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Conclusion

This analysis leads us to speculate that while divergences caused by inflationary expectations can last for a very long time, even decades, the long-term price of gold is driven by global money supply.

Resources:

As an interesting aside, one may note that the present US debt of US$10.5 trillion easily exceeds the value of ALL circulating currencies in the world PLUS the value of all gold ever mined! A naive person may wonder just exactly how the American government ever intends to pay this debt off...

dirt is about the best asset to own.. if looking at precious metals for a doomsday scenario.. lead is by far the best investment..

if looking for a hedge against inflation and an easily transferred metal.. I would recommend silver .9999 troy ounce rounds. (coins without a set currency value), such as the American eagle silver rounds

beyond that energy resources such as oil, Nat gas, coal and nuclear energy are a better gauge of sovereign wealth then limited gold supplies.
 

Mike

Well-known member
Food. If food becomes scarce, as some believe it will, it might take a wheelbarrow full of gold to buy a loaf of bread.

A fiat currency system such as ours is never sustainable for long periods of time. It takes growth and borrowing to make it work.

At present, China is buying & mining 100% of the world's gold production.
 

Steve

Well-known member
We produce about 9% of the world gold, in the US and hold 30% of the world supply in our federal reserve..

this graphic takes a big picture look at gold..

http://www.mining.com/infographic-the-history-of-gold-part-ii/

over the next few years that will change.. both in china buying gold and mines..

"unconfirmed speculation" that China – the world's number one producer and second-placed consumer (at the moment) – is gearing up to buy up to at least 5,000 to 6,000 tonnes starting before the end of the year.

[Kerr said] "If China buys this much gold, that would exceed annual, global production of gold, he said. “We do not have enough gold for China to buy that much, and it will take China time to purchase this amount of gold.”

“We will know in time, but the bottom line is that China is … consuming an ever-growing portion of global gold production,” he said. “This forms a floor under the gold price

Global gold mine production has averaged roughly 2,600 tonnes per year over the past five years, according to the World Gold Council.

Central banks went from net sellers to net buyers during 2009 while recycled gold supply has declined over the same period to constitute around a 1,000 tonnes or less than a third of annual supply.

China produced 380 tonnes of gold during 2011 – over a 100 tonnes more than its nearest rival. The country is preparing to launch direct interbank gold trading – a banned activity at present – at the end of August as part of a broader set of banking reforms.
http://www.mining.com/heard-the-rumour-china-is-buying-6000-tonnes-of-gold-it-may-not-be-as-crazy-as-it-sounds-11560/

China has a lot of its reserves in US dollars. As of June this year, data from the US Treasury showed the country held $1.2 trillion of US treasury bills. The country has long been rumoured to be seeking to diversify the reserves held at the People’s Bank of China. Buying gold mines could help with this task.


When you add in another trouble maker.. the dollar may be in for a huge shock..


There was also news last week in an SEC filing that both George Soros and John Paulson had increased their investment in SPDR Gold Trust, the world’s largest publicly traded physical gold exchange traded fund (ETF).

Mr Soros upped his stake in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares, bringing his stake to 21.3m.

At the current price of about $156 a share, these are new investments of about $88m of Mr Soros’ cash and more than $700m from Mr Paulson’s funds. These are significant positions.

However, Mr Soros’s words of wisdom on the gold price have not always been worth following. At Davos in 2010 he declared that “The ultimate asset bubble is gold”. The price was at about $1,100 at that time. Also, Mr Paulson’s gold fund has slumped by almost a quarter this year.

However, most of the bulls currently have their eggs in the quantitative easing basket, waiting for a new round of money printing to devalue the dollar and boost the gold price. Should QE3 fail to emerge, there could be some big disappointment.

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/9486294/Are-we-about-to-see-a-Chinese-gold-rush.html

with this all said and done.. China is going from an emerging market, to a stable trader, and holding gold is a predictable step in stabilizing their currency.. they have a huge investment in our dollar and debt and commercial credit... to not diversify would be a foolish policy..

in the long run.. if we had leadership to force them to properly value their currency.. we would influence the trade imbalance..

gold will not solve that issue for US ... energy will..

in reality a destabilized middle east and active production in the US will drive a new era of prosperity for US.. if Obama can show some leadership.. if not.. by 2016.. the market will start making the decisions for him... and US









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