Commodity Trade Mantra

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Gold Prices may be Slow to Rise, but the Direction seems Completely Certain

Gold is challenging the $1300 level for the third time this year. If it breaks upwards out of this consolidation phase convincingly, it could be an important event, signalling a dollar that will continue to weaken. The factors driving the dollar lower are several & disparate. Here is a summary of these trends & explains why the consequence appear certain to drive gold, priced in dollars, much higher.

Chinese Gold Holdings Estimated at a Whopping 19,500 metric tons

Because of the obscure nature of the Chinese gold market and the reluctance of Chinese officials to show their hand, nobody has been able to accurately calculate how much gold the Chinese have amassed since about 2000, when they began amassing it. Jansen came up with an estimate of total Chinese gold holdings: 19,500 metric tons, or 21,495 U.S. tons, at the end of January 2017.

Massive Debt Pain in China Could Be a Blessing for Gold Investors

Although the economy grew by 6.7% in 2016, the debt is causing a host of problems in China. The main reason many Chinese are buying gold is to preserve wealth against the backdrop of massive fiscal stimulus & lax credit conditions. Never has a big economy piled up so much debt so quickly without serious repercussions. It could be wise to take a lesson from Chinese investors & buy physical gold.

China will soon own the Largest Gold Reserves in the World

The US remains the world’s largest gold owner. But for how much longer? There are changes afoot. China is now the world’s largest gold producer. It has held this title since 2007. Not only that, but China is the world’s biggest importer too. Since 2011, China has imported more than 5,000 tonnes. Another 3 years at a similar rate & China will have imported more gold than there is at Fort Knox.

Will China & India's Falling Demand Impact Gold Prices? Can Central Bank Gold Demand Help?

The demand for gold has been weak in India & China. The cash crunch in India contributed to the falling demand. In an attempt to constrain the outflows of the Chinese yuan, China has curbed the import of gold. US federal debt is growing at a fast rate. When major central banks increase debt as a percentage of GDP, their gold holdings often rise – a positive for demand & gold prices.

China On A Gold Buying Binge Despite Massive Debt For Obvious Reasons

Similar to that of other developed nations, China’s debt has also reached “bubbly” proportions. But they know that during the next crisis those nations with a large gold backing will not only survive, but will be prosperous as well! China will most certainly increase its gold reserves even further. Imagine if only a portion of their $1.22 trillion US treasury holdings are shifted to gold. BOOM…

Chinese Appetite for Gold Assets Reaching Significant Levels

China’s $40 billion Silk Road Fund is looking at buying its first gold mine – it’s biggest acquisition anywhere in the mining space since its creation in 2014. It shows that Chinese appetite for precious metals assets in reaching significant levels. In fact, two other Chinese miners might actually make an opposing bid against the Silk Road, showing that interest in quality gold assets is running high in China.

Are Copper Prices and China Set to Rally?

In marked contrast to gold, copper looks to be set up for a sizable rally here. On its 1-year chart we can see that after its significant drop, it is down on an important support level that is certainly capable of generating a rally, despite its still bearishly aligned moving averages. Chances of copper rallying soon are greatly magnified by its latest COTs, which show that Commercials are now heavily long.

Is Silver The Next One For Chinese Momentum Investors?

Individual investors tend to be most active when markets are rising, and have dominated past rallies in Chinese futures. Open interest in silver on the Shanghai Futures Exchange has been steadily increasing this year (ballooned from less than 200,000 contracts in 2012 to over 600,000 since April 2016), with open interest now roughly equal and equivalent in size to that of COMEX.

China's Increasing Presence in Gold Market - An Obsession to Prop up Yuan

No doubt that Chinese officials see gold as an important asset for the future. Is China’s quest to put the yuan on the world stage closely related to this involvement in gold? Will China actually come up with some kind of a gold-backed currency? Actually, China’s fixation on gold is a story of diversification that can lessen the devastation of central planning gone wrong.

Falling Chinese Demand Could Intensify The Crude Oil War

For exporters of commodities & industrial materials, the shrinking of the world’s largest source of demand is bad news. Nowhere is this more evident than in the Chinese energy sector, as crude oil accounts for 6% of total imports. China’s economic slowdown, combined with a global push towards renewable energy, could threaten the already fragile levels of its crude oil demand.

Gold Buying by China in a Very Aggressive Motion Right Now

China has gone from being the price taker to the price maker. China wants its currency to be as prominent as the euro, yen & the dollar for global trade. As in the SDR, when you go and borrow the only thing they’ll take for collateral is gold, so the Chinese have been on a very aggressive program of buying gold every month, and we’re seeing that in motion.

How China will Continue to Gain Influence in the World Gold Market

The gold market will soon be very different than from what we see today, largely due to the current developments in China. China’s influence will impact not just gold investors but everyone who has a vested interest in the global economy, stock markets, & US dollar. The Chinese understand that owning gold means economic power, & are accumulating both at a rapid rate.

While America Debates the $20 Bill, China Moves Closer to Gold

By trading physical gold in renminbi, China is slowly chipping away at the dominance of US dollars….The gold reserve on the China balance sheet has almost doubled since 2009. By holding gold, and moving away from a US-dollar centric system, we actually require less US dollars. Of course the true measure of China’s gold holdings is still a closely guarded secret.

China Embraces Gold In Advance Of Post-Dollar Era

To challenge the US dollar hegemony & increase its power in the global realm of finance, China has firmly embraced gold in its economy. With a staggering pace the government has developed the Chinese domestic gold market, stimulated private gold accumulation, increased its official gold reserves to ensure financial stability & support the internationalisation of the renminbi.

China needs a lot of Gold to make-up for the Loss Expected on Treasuries

Right now, China’s reserves are about $3.2 trillion, of which about $2 trillion is denominated in US dollars, and most of that are U.S. Treasury Securities. They can’t dump them. So what the Chinese are doing instead is they’re acquiring gold as a hedge. China is going to be in this position where they lose on the paper, but they make it up on the gold.

Could China's Housing Bubble Bring Down the Global Economy?

China’s stated intent is to move from a fixed-investment/export dependent economy to a consumer economy. But if we consider what happens when housing slows or even grinds to a halt, we realize the impact on incomes, wealth and consumption will be extraordinarily negative, not just for China but for every nation that sells China vehicles and other consumer goods.

Which Commodities Are Most Levered To A Chinese Crash

A key drawback of this larger and more integrated role in commodity production is that lower commodity prices are now far less stimulative for China than they would have been several years ago. Yet, lower prices in commodities, other than copper, are likely to reinforce weakness in some of the key Chinese heavy industries centered on commodity production.

The Reality Behind the Numbers in China’s Boom-Bust Economy

The US Federal Reserve orchestrated an artificial boom from 2001 to 2007 through artificially low interest rates, paid for it with millions of destroyed jobs, wasted labor & wasted resources, but has resumed doing so once again. The Chinese Central Bank learned nothing from the Fed’s catastrophic experiment for its economy. They will reap the same rewards.

We're Nowhere Near Peak Coal Use in China and India

China and India collectively consume about 60% of all coal produced in the world. Consumption is expected to continue expanding as their populations balloon and the energy-thirsty middle class expands. Unlike China, India has no present interest in reigning in its use of coal & it’s possible that if China’s coal consumption declines, India will be there to fill the hole.

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