Loading ...Chris Hamilton: China Likely Bought 10,000 tons of Gold…and if They Did, Here’s Why–
Gold…the case to go “All In”?
Since Jan 1, 2011 equity markets of the BRICS representing growing economies w/ strong demographics and low but rising wages coupled w/ low levels of consumer debt…are falling. While the slow growth, highly indebted, falling income, demographically backward markets of the US, Japan, and EU are flying. The Brazilian Bovespa is down -23%, Russia’s Micex -20%, Chinese Shanghai -19.5%, India was only up +8% until a gold import ban in Aug of ’13 was implemented and up +44% since. By comparison, the S&P is up +48%, Nikkei +42%, DAX +25%, FTSE +7%, French CAC +5%, and among larger markets only Spain (- 4%) and Italy (-10.5%) are down. This despite collapsing crude oil consumption in the US, Japan, and Europe compared to rapid consumption increases across the BRICS (see chart below from ’05-’13…but the trends have been consistent). Drops in energy consumption of this magnitude typically indicate depression conditions exist, and increases in consumption usually represent economic growth. All I can say is something does not add up.
And China’s gold holdings would act as an insurance policy paying off in the case of a dollar dilution. Of course Chinas’ economy would be harmed by shrinking exports to the US and Europe but that was the “re-balancing” they’ve been talking about all along. Now, whether this will work just as China is likely falling into the third great real estate collapse of the last 3 decades (Japan in ’89, US in ’07, China likely now in ’14)…well China may be protecting itself from itself as much as from the US because if they follow the Japanese and US model to print their way out of a real estate collapse…gold may simply be “priceless” in sovereign currencies.
Gold…the case to go “All In”?
What I’ve explained is how things work for those who make the rules…so while precious metal fundamentals may seem bright vis-a-vi fiat currencies…please don’t go out and sell everything to buy gold. I’m not an advisor and I only write this to inform you in your decision making. I have no crystal ball and the more I know, the more I’m sure I don’t know. So the only advice I’ll offer is follow the old axioms, “all things in moderation” and “hope for the best and plan for the worst”.