EDITOR: | September 13th, 2013 | 2 Comments

China buys our gold – and with it the West’s financial supremacy

| September 13, 2013 | 2 Comments

picbrombygoldAnother sharp correction in the gold price so brace yourselves for another deluge of “gold is finished” predictions. How they must be laughing in Beijing..

But the story is not really about the gold price. What the gold story is about is that the West is again shooting itself in the foot. The West is selling, Asia is buying – and buying more and more when the price goes down. According to the latest report from Thomson Reuters in London, world gold investment slumped by 23.8% year-on-year to 517 tonnes in the first half of 2013 , the lowest since 2009 (and in the first half of 2009 the GFC meant everyone was either broke or scared; so in fact this latest result is worse).

But the latest figures are even more dramatic when you factor in disinvestment – mainly by institutional investors; their holdings actually declined by 456 tonnes over the first half of 2013.

Then have a look at another part of the Thomson Reuters report (they by the way have absorbed Gold Fields Mineral Services, the London-based outfit that provides the most reliable analysis of the gold market). Chinese investment demand from January 1 to June 30 rose – wait for it – a staggering (Thomson Reuters’ word, not mine) 67% compared to the first half of 2012.

Just before we go on, though, here’s a quote from Dr Thorsten Pattberg of Peking University. It comes from an interview broadcast this week by RT (Russia Today), the Moscow cable and video news service now available worldwide (they have picked up Larry King was one of their stars after he finished with CNN). Anyhow, Pattberg was asked whether he thought China was wanting to establish the yuan as a global currency. This is his reply:

“Yes, it’s perfectly reasonable to think that the Chinese want to see their currency become the next world currency, there’s a plan. And of course China at the moment is purchasing more and more gold, this also plays into to this. We heard they recently purchased several hundred tonnes of gold through Hong Kong, the trading hub. And of course, if you hoard gold like a dragon, this is a lot about prestige. The mere presence of gold in your country gives rise to even more self-confidence and to this bling-bling sensation that China is really up to something. The mere intention to buy more gold in the future will certainly have an impact on the rise of gold prices in the world. So China is taking a leap forward to control the world currency and replace it with the yuan”. That is it, in a nutshell.

And here’s another key fact that comes out of the Thomson Reuters report. You would expect the highest gold sales in China to occur in the first quarter during which Chinese New Year occurs. But this year saw the April-June quarter gold consumption higher than January-March. Get this: the increase year-on-year during April-June quarter was 148%. It was all about gold price falling; the Chinese went bargain hunting.

So did much of Asia. Thailand’s consumption was up 55% in the first half, Vietnam (which has tight government restrictions on gold buying) rose 11% and Indonesia rose 27%.

And the Westerners keep selling!



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  • J. Best

    Thank you for this amazing article on Gold. I have always believed in Gold investment and had a hard time understanding why North America in particular is so quick to invest anywhere but in the physical metal. Really enjoying your gold market analysis. Passing this along.

    September 13, 2013 - 9:10 AM

  • Tracy Weslosky

    Powerful piece Robin – and one that those that appreciate global economic interdependence will appreciate. “Another sharp correction in the gold price so brace yourselves for another deluge of “gold is finished” predictions. How they must be laughing in Beijing..” — indeed.

    September 13, 2013 - 6:11 PM

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