China, gold, the big picture

Today we posted an excellent article from Jeff Clark of Casey Research.  If you don’t have the time to read it we want to list the key takeaways as we think they are critical:

  • You should likely ignore the main stream press reports on falling Chinese imports.
  • China is importing through Beijing as well now and we only get to ‘see’ the Hong Kong figures. 
  • China’s central bank hasn’t updated their holdings since 2009 and is unlikely to do so until they have their ‘fill’ as it will likely be high and will drive up prices. They last reported holding 1054t, or only 1.3% of foreign reserves.
  • People talk about the US having c73% foreign reserves as gold but forget the USD is the reserve and hence the US holds little in the way of foreign reserves.  As a % of GDP it is only 2% (IFF they have the gold they say, and that is the subject of much speculation and doubt).
  • If analysts of China now holding 4,500 t are correct their % of GDP would be 2% also.
  • Clark debunks theories of China’s sliding GDP being bad for gold as there is a reverse correlation.  
  • The WGC estimates a 25% increase in gold demand by 2017 simply through 300m more Chinese becoming more affluent within 6 years.
  • Whilst the gold spot price is largely determined by paper trades on COMEX, a tangible shift away from this is underway, spearheaded by the physical trading (and long term holding) China via its Shanghai Gold Exchange.
  • Clark present a good little summary of the pressures mounting on the USD.  Whether its collapse is slow or sudden it is looking more likely and imminent.
  • 20% of your wealth in gold should protect you from the ramifications.