How China Will Flood the Gold Market

As you read this, the Chinese government is doing an extraordinary thing. . .something nearly unheard of in the modern world.
It is encouraging citizens to put at least 5% of their savings into precious metals.
The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money. . .and they don't have company pension plans like people in many other countries do.

This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it's cheaper per ounce).
The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don't recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?
In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That's not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.

First, look where China stands as a gold-producing nation.
In 2008, China produced 9,070,000 ounces of gold, exceeding all other countries. Further, its production continues to rise, while many of the top-producing countries are in decline.


Second, China had the lowest per-capita gold consumption of any country over the past half-century. This year, it is widely expected that Chinese demand for gold will surpass that of India. In other words, they'll also become the world's No. 1 retail buyer.

Third, the Chinese government has been using its foreign exchange reserves to buy gold—a lot of it—and doing so on the sly. This past April, Chinese officials made a surprise announcement that they had been secretly buying gold since 2003, increasing their gold reserves by 76% to 33,886,000 ounces. The Chinese government now owns 30 times the gold it held in 1990. And China is believed to be a leading candidate to buy some or all of the 12.9 million ounces the International Monetary Fund says it will sell.

Gold Momentum's Picking Up Dramatically

By: Eric Sprott

Source: The Gold Report

Various members of the G-20 talk about commodity backing and so on. You could create a computer system where you could actually use commodities as currencies. It's pretty easy to quantify all these units, so maybe we will go there. Hardly any hard currency physically trades hands now, you could literally have everything just trade in gold and silver on computers. Maybe it goes to that. We will see.


We have been seriously involved in precious metals for 10 years now. With some obvious ups and downs, it has been 10 great years. I had purchased gold and silver because I knew there would be more demand than supply, and I am sure that is the case today. I could not have predicted quantitative easing in 2009, nor could I have predicted that the financial world might actually buy into it. I still almost pinch myself when I think about it.


I always knew there would be a bonus thrown in by fiat currencies being damaged, and with quantitative easing you know that the values of currencies are going down. That makes the precious metals story just that much more compelling and I am sure that is why India bought 200 tons of IMF gold and others will follow suit. We are also seeing many hedge funds and pension funds moving into gold. Whereas central banks used to sell gold, now they are buying it. Then there are the ETFs. You can just feel the momentum in gold—it's picking up dramatically.



Eric Sprott has accumulated 35 years of experience in the investment industry. After earning his designation as a chartered accountant, he entered the investment industry as a research analyst at Merrill Lynch. In 1981, he founded Sprott Securities. After establishing Sprott Asset Management Inc. in December 2001 as a separate entity, Eric divested his entire ownership of Sprott Securities to its employees. In December 2004, the Sprott Hedge Fund L.P. won the Opportunistic Strategy Hedge Fund Award at the Canadian Investment Awards.

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A good Question From Kitco's reader

Q:    Gold price rise is very unrealistic. How can the price of a metal go up like this. I think manipulators are driving up gold prices. We should stop trading in gold futures at COMEX. ?

A:     Mans People think, that the COMEX is the Place, where the Gold Price is manipulated heavily. But Not on the Long - side. It's a fact, that 2 Banks are responsible for nearly all Short positions on Comex. One is Jp Morgan, acting obviously for the FED because they increase their Short positions steadily to prevent Gold prices to climb on 2.000 USD Level, this would be no help for financing new dept around 12% of GDP. But FEDs problem is that too many people know about FED Situation of having NO GOLD Reserves. According to official Export Statistics, the US have now Exportes all the gold, which is officially in their 8100 to Reserve. John Paulson has invested billions of Dollars into physical Gold this Year - and Mr Greenspan is an advisor for Paulsons Company... Gold is from à fundamental Point of View far Away from beeing expensive: Cash Costs are around 4-500 USD, and total costs including Exploration, financing, Mine Building are around 700-850. Compared to Oil, Gold has a clearly bettet Price/ cost Ratio. Best regards, Andreas

India's central bank buy gold from IMF

On November 3, 2009, India's central bank bought more than 7 million ounces of gold from the International Monetary Fund.

Timothy Green, author of The Ages of Gold, says this is "the biggest single central-bank purchase we know about for at least 30 years in such a short period."
And that's why right now is exactly the time to be buying gold-related stocks, especially those that collect royalties on existing gold mines...
Instead of owning a mining business or trying to hoard physical gold... it can be much, much safer and more lucrative to simply own a stake in the real estate where the best mines are located...

Why stocking up the gold

"We are still contemplating the massive gold purchase by the Reserve Bank of India – the largest in at least 30 years that took up half of what the IMF intends to sell. Look for China to come in next.


"But here is the reality. All India did was bring gold to a 6% share of its total FX reserves from 4%. Fifteen years ago, that representation was closer to 20%. China has increased its gold holdings by 76% over the past six years but they are a mere 1.9% of the aggregate 2.2 trillion of reserves and Russia's gold holdings is just under 5%. This is not the 1990s when Bob Rubin was running a hard US dollar policy, US fiscal deficits were vanishing and gold production was on the rise. Today's world is exactly the opposite.

"Policymakers beginning in the 1990s wanted disinflation and got it. Now they want inflation – it will take years, maybe a decade, but it will come. For the near-term, we are still optimistic on Treasury securities but be forewarned that this view has an expiry date that is earlier than the peak we are likely to see in gold.

"It is very clear that central banks are behaving in a way that would suggest that gold is now again being considered a currency within the global monetary system. As we said before, it is all about relative scarcity and a well-defined supply curve – fiat currency at this juncture does not share that quality. As a good friend reminded me yesterday, when the Fed was created nearly a century ago, it was acceptable to have at least 40% of the money supply backed by gold reserves. The US now has 8,133 tons of gold in reserve, which equates to $285 billion at this year's pricing.

"Meanwhile, the Fed has spiked the punchbowl to such an extent that the monetary base now stands at $1.7 trillion. Do the math – under the old regime (which indeed hamstrung the Fed), the US alone would need to buy an incremental $400 billion of Gold Bullion or the equivalent of what would be nearly four times the typical level of annual demand. We could do the same calculation based on M2 but we don't want anyone falling off their chairs..."

World economy crisis

"The idea that the government of a major advanced country would default on its debt – that is, tell lenders that it won't repay them all they're owed – was, until recently, a preposterous proposition. Argentina and Russia have stiffed their creditors, but surely the likes of the United States, Japan or Britain wouldn't.


"Well, it's still a very, very long shot, but it's no longer entirely unimaginable. Governments of rich countries are borrowing so much that it's conceivable that one day the twin assumptions underlying their burgeoning debt (that lenders will continue to lend and that governments will continue to pay) might collapse. What happens then?

"People have predicted such a crisis for decades. It hasn't happened yet. The currency's decline has been orderly, because the dollar retains a bedrock confidence based on America's political stability, openness, wealth and low inflation. But something could shatter that confidence – tomorrow or 10 years from tomorrow.

"Despite huge deficits, interest rates on 10-year Treasury bonds have hovered around 3.5%. In time of financial crisis, investors have sought the apparent sanctuary of government bonds. But the correct conclusion to draw is not that major governments (such as Japan and the United States) can easily borrow as much as they want. It is that they can easily borrow as much as they want until confidence that they can do so evaporates - and we don't know when, how or whether that may happen."

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Gold Getting Nervous

GOLD HAS ADVANCED towards a new milestone, writes Bill Bonner in his Daily Reckoning, the level of $1100 an ounce.

It makes us nervous. We always feel more comfortable out in the wide, open spaces...that is to say, in trades we have all to ourselves.
But gold is still a marginal holding by marginal investors like us. Central banks – especially those in emerging countries – have very little gold. The man on the street doesn't know anything about gold. He wouldn't know a Gold Coin if it hit him on the head. As gold becomes accepted as a true store of value, we can expect more and more people to want to own it.
Governments are running breathtaking deficits...and accumulating alarming debts. Japan has a national debt of nearly 200% of its GDP. Where did that debt come from? It came from 20 years of trying to buy its way out of a slump with borrowed money. Of course, it didn't work. But now, Britain and America are following the Japanese lead...and the Japanese are still at it!
At the present rate, Japan's government debt will grow to 300% of GDP in 10 years. America's debt could grow to 100%...and then 200% of GDP...over the next decade (depending on whose projections you believe). And Britain, if we read the report in the Financial Times correctly, will have debt equal to 200% of GDP within 3 years.
Just what kind of crisis do these numbers portend? It's hard to say. Probably a combination of confidence, followed by debt default and inflation.

Sax-Gold Enterprise

Segala urusan akan dilakukan di bawah syarikat baru iaitu Sax-Gold Enterprise bermula 11.11.09. Segala dokumentasi akan di "update'kan tidak lama lagi. Alhamdulillah.. saya membuka juga syarikat khusus untuk Emas dan Perak ini setelah banyak permintaan daripada pelanggan. Di harap kerja sama anda akan berterusan selepas ini.

Terima Kasih

Gold May Drop as Dollar Strengthens, Record Prices Spur Sales

Nov. 10 (Bloomberg) -- Gold, little changed today in London and New York, may decline as the dollar strengthens and some investors sell the metal to lock in record prices.

Bullion futures reached $1,111.70 an ounce yesterday. That lifted its 14-day relative strength index, a gauge of whether a commodity or security is overbought or oversold, above the level of 70 viewed by some investors as a signal of an impending retreat. The Dollar Index added as much as 0.3 percent today after yesterday slipping to a 15-month low.

“Gold is clearly overbought, gold is clearly over- participated in by the investing/speculating public, and gold needs a good sound thrashing to take the late-comers out of the positions and in the process restore relative health,” economist Dennis Gartman said in his Suffolk, Virginia-based Gartman Letter.

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Point to Ponder

Michael told me you should keep two things in mind when you buy gold coins. First, you want a good deal. He says you should buy the coins with the lowest premium to the international gold spot price you can find. Right now, there's an orderly market in gold coins and you shouldn't pay more than a 5% premium to spot. As I write, gold is at around $1,060. So you shouldn't pay more than $1,113 an ounce for your coins.


Secondly, you should buy coins with the highest worldwide acceptability, so you'll have no problem selling them anywhere in the world. For example, Michael says Asians prefer 24-karat gold coins, but the American Eagle and the Krugerrand are only 22-karat gold. They aren't so popular in Asia. He also says the South African Krugerrand, the British Sovereign, the Mexican Peso, and the Austrian Corona gold coins are "passé" and not as popular worldwide anymore. You won't get such a good deal when you sell these.

Amazing chart shows October's market action is exactly like September's

Sometimes we feel like Bill Murray's character in the movie Groundhog Day, where he relives the same day over and over again. If you have been watching the market recently and also keep finding yourself getting a feeling of Deja Vu, you're not alone. The S&P 500's performance in October has nearly been an exact replica of most of September. The chart below highlights the intraday trading of the S&P 500 from September 2nd to September 30th (left axis), and compares it to the intraday trading from October 2nd through the 21st (right axis). Although it began from a higher price, the S&P 500 has followed the September blueprint nearly tick for tick!

From the low of the month, both rallies lasted thirteen trading days. In September, the S&P 500 rallied by 8.8%, and in October the rally was 7.9%. Then both rallies ended on the 14th day of the advance, when the S&P 500 hit a new high for the year only to sell off and close at its lows for the day. If (big if) October continues to follow the September script, this implies that equities would continue to trade sideways to lower for the rest of the month.

The best way to make huge gains in gold

Fed Chairman Ben Bernanke can't create a 100 million new ounces out of thin air whenever he wants to buy more bad mortgages. He has to print dollars... and the more dollars he circulates, the more it takes to buy gold ounces.


While lots of hard assets will rise in value for the same reason, gold is the ultimate option for protecting wealth. Solid gold bullion is one of the easiest commodities to buy and sell. Gold bullion should not be our only gold play, however.

From May 13, 2005 to May 12, 2006, the price of gold rose 71% – a nice 12-month return for any investment and a huge move for the metal. But consider that over the same period, the AMEX Gold Bugs Index (which tracks the major gold mining stocks) went up 105%.

That was no fluke. The movement in gold stocks is always more exaggerated than those of the metal. They are said to be "leveraged" to the gold price. That's why to make a lot of money in gold, you must own gold stocks.

Here's why it happens: The share prices for mining companies are driven by their profits. And those profits are based on the gold price because their costs are (relatively) fixed. So let's say a company spends $400 per ounce to mine gold. When gold sells for $700 an ounce, the company books $300-an-ounce profits. If gold prices shoot to $1,000, its profits jump to $600 an ounce. So while the metal has appreciated about 43%, the company's profits (and market value) rocketed 100%.
That's leverage. And that's how investors get rich in gold.