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Chinese Gold Imports Surge By 500% Through October

Tyler Durden's picture





 

All who thought that China was merely posturing when it announced a few days back it was creating a fund to allow its domestic investor base to allocated capital to foreign gold ETF, may wish to reconsider after it was disclosed late last night that China gold imports jumped by 500% in the first 10 months compared to all of 2009 on concerns of rising inflation according to the Shanghai Gold Exchange.Other concerns probably include what is happening to the FX and stock market which have now moved on from cash flow to Keynesian failure discounting mechanisms: ironically the higher the S&P is pushed by the Brian Sack cabal, the more sovereign bonds are bought by the ECB, and the more bankrupt European countries are said to be doing perfectly ok by their new dictator Olli Rehn, the more gold will be bought across the world. China does not disappoint: from Bloomberg: "Imports gained to 209 metric tons compared with 45 tons for all of 2009, Shen Xiangrong, chairman of the bourse, told a conference in Shanghai today. China, the world’s largest producer and second-biggest user, doesn’t regularly publish gold-trade figures and rarely comments on its reserves." And that would be in the form of JPM's bogeyman: physical.

This is only the beginning:

“The central bank may now be approving all gold import” applications, Albert Cheng, managing director of the World Gold Council’s Far East department, said in an interview. “The government hasn’t officially said that China is encouraging private gold investments, but we in the industry suspect it. And you can see the big jump in the delivered gold imports through the exchange has to be approved by them.”

Gold demand in China gained in the first half as government measures to cool the property market and falling equities spurred investment, the gold exchange said July 7. About 70 percent to 80 percent of the imports in the first 10 months were made into mini-gold bars, which Chinese investors like to hold, the exchange’s Shen said.

“Given China is the world’s biggest gold producer, the sharp increase in its imports is a big surprise,” said Hiroyuki Kikukawa, general manager of research at IDO Securities Co. in Tokyo. “People there need to buy gold to hedge against inflation as the country’s tightening monetary policy drives investors from stocks and properties to gold.”

At this point even the staunchest critics of gold may have to admit that price is determined by the intersection of the supply and demand curves. And demand is growing:

China’s investment gold demand may reach 150 tons this year, up from 105 tons last year, the World Gold Council’s Cheng said. That compares with 3 to 4 tons 10 years ago, Cheng said.

“The investment demand we estimate already reached 120 tons in the first three quarters, and it usually spikes in the fourth,” Cheng said. Global investment demand for gold of 1,901 tons last year exceeded jewelry consumption of 1,759 tons for the first time in three decades, according to London-based researcher GFMS Ltd.

China’s gold market may double in the next decade as retail investment and jewelry demand gain, the World Gold Council said Nov. 3. Consumption may climb to 800 tons to 900 tons in the next ten years, said Wang Lixin, the council’s Greater China general manager. China’s jewelry and investment gold demand was 428 tons in 2009, according to the council.

Which is not to say there won't be a speculative bubble about to rumble into the gold market:

China’s central bank in August said that it would let more banks import and export gold and allow overseas companies more access to trading. Gold demand growth in China will likely be supported by rising disposable income levels and the country could surpass India as the world’s biggest bullion consumer, Deutsche Bank AG said Aug. 6.

China’s plans to relax gold-trading rules may boost demand and increase trading volumes on the Shanghai Gold Exchange, the bank said. Demand will continue to grow, making China one of the top importers together with India, IDO’s Kikukawa said.

But the nuclear question is when will the PBoC itself start bidding gold: after all the country has less gold than the GLD (allegedly) has stashed away in HSBC's London cellars:

Gold accounts for 1.6 percent of the reserves held by the
People’s Bank of China, according to the World Gold Council. The
country increased reserves by 454 tons to 1,054 tons since 2003,
the State Administration of Foreign Exchange said last April.

At last check GLD "owned" 1,293 tonnes of gold.

 


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Thu, 12/02/2010 - 11:56 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Multi trade idea:

Long gold 1.392 till 1.450

Long Silver till 31$

Short EUR/USD till 1.2670

Long DUG till oil hits 80$

Regards,

Thu, 12/02/2010 - 12:17 | Link to Comment hugovanderbubble
hugovanderbubble's picture

200 MA in SPX500 acting as resistance

Thu, 12/02/2010 - 12:00 | Link to Comment Spigot
Spigot's picture

My personal thanks to China for helping me to achieve my financial goals via gold. I will send you a Chinese New Years card as a token of my appreciateion.

Thu, 12/02/2010 - 12:19 | Link to Comment High Plains Drifter
High Plains Drifter's picture

Do you think the gold bull will ever end?  Myself, I say no. How can it end? For it to end, would mean that the bankers would be doing the right thing. Will they ever do the right thing? Nope. End of story.  Maybe Douchinger is buying gold now, (out of the money of course) ha ha .

Thu, 12/02/2010 - 16:21 | Link to Comment midtowng
midtowng's picture

The gold bull will end one day. I just don't see it happening anytime soon. All bull markets eventually end, so you should figure out ahead of time what it would take for you to sell.

I'm waiting for Mister and Miss Joe Sixpack to line up in front of coin stores to buy bullion.

Thu, 12/02/2010 - 23:54 | Link to Comment l1xx3r
l1xx3r's picture

I agree with you, when all my neighbours are begging for gold and silver, I will trade my gold and silver for their houses.

Thu, 12/02/2010 - 12:25 | Link to Comment hugovanderbubble
hugovanderbubble's picture

gold 1.400 coming baby¡¡'¡¡¡

and funny equity completly travested¡¡¡¡

Thu, 12/02/2010 - 12:27 | Link to Comment LeBalance
LeBalance's picture

The "spank you vedy much" token is a Fortune Cookie. (get w/ the program).

Thu, 12/02/2010 - 23:23 | Link to Comment StychoKiller
StychoKiller's picture

Confucius say:  "Golden rock always crush paper Gold!"

Thu, 12/02/2010 - 12:37 | Link to Comment GNH
GNH's picture

No mention of the headline today -- thought ZH would be all over this (maybe I missed it?).

Hong Kong gold market hit by sophisticated scam
Hong Kong goldsmiths have been sold hundreds of ounces of fake gold this year in one of the most sophisticated scams to hit the Chinese territory’s gold market in decades, the FT reports. Industry executives say the scam - while not massive and hitting only the retail sector - uncloaks the increasingly elaborate gold swindles perpetrated by criminals in Asia as bullion prices soar to record highs of $1,400 a troy ounce.

 

 

 

Thu, 12/02/2010 - 13:15 | Link to Comment SilverRhino
SilverRhino's picture

From your article

In one case, executives discovered a pure gold coating that masked a complex alloy with similar properties to gold. The fake gold included a significant amount of bullion – about 51 per cent of the total – alloyed with seven other metals: osmium, iridium, ruthenium, copper, nickel, iron, and rhodium.

 

The complexity of the latest batch of fake gold would have reduced the profitability of the scam, since it used a significant amount of bullion, and because iridium and osmium are expensive.

Someone's got a GOOD materials science guy on the bad guy's team.

Melting / Boiling points

Gold - 1604/2807
osmium - 3045/5027
iridium2410/4527
ruthenium - 2250/3900
copper - 1083/2567
nickel - 1453/2732
iron  - 1535/2750
rhodium - 1966/3727

Cant imagine WHY they would do this for such low profit margin.  Hell I'd call it some variant of 12K gold and market it at a premium.

Thu, 12/02/2010 - 16:26 | Link to Comment midtowng
midtowng's picture

That's a lot of trouble to go through. It's much easier to fake bars than bullion.

Thu, 12/02/2010 - 12:05 | Link to Comment truont
truont's picture

Of course gold will go into a parabolic blow off top move at some point.

Real estate did.

Internet stocks did.

The mere fact that gold will be one day in a bubble does not mean you do not ride it up.

It just means that you have an exit plan, so you don't get left holding the bag.

Thu, 12/02/2010 - 12:13 | Link to Comment scatterbrains
scatterbrains's picture

actually I think JPM will help contain any blow offs with a nice gradual sustainable increase while they fight their losing battle against the trend.

Thu, 12/02/2010 - 12:21 | Link to Comment High Plains Drifter
High Plains Drifter's picture

Yes we always hear things like this. But what we are seeing has never been seen. What is happening has never happened. Parabolic top? What would it really mean? In the end, the sheep will all go in the direction of PM's and finally maybe, in that time, such stand by attributes such as supply and demand actually will start coming into play.

Thu, 12/02/2010 - 12:25 | Link to Comment Yardfarmer
Yardfarmer's picture

and where do we go after the collapse of fiat and the "parabolic blow off top" of gold? back to tallysticks? gold and silver are here to stay for a long, long time.

Thu, 12/02/2010 - 12:31 | Link to Comment LeBalance
LeBalance's picture

Gold is a limited resource, it can not be duplicated to infinity.

Say it again.

Say it again.

The two infinitely duplicatable commodities that you quote and similar ones CAN and WERE duplicated beyond the Demand level.

This is very very easy stuff.  I hope you get it.

FOFOA and predecessors FOA/A for your advanced class in Gold Fu.

Thu, 12/02/2010 - 12:45 | Link to Comment Dr. No
Dr. No's picture

The FED can kill this rally any time they want.  They have done it in the past and one day, when things are bad enough, will do it again.  I own gold but recognize they FED holds alot of cards I wont get too carried away.

Thu, 12/02/2010 - 16:13 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

The Fed can kill the rally by raising interest rates which will make government debt unserviceable which will lead to default or additional printing from thin air which will re-establish the rally and push it to the moon.

Ya know?

Thu, 12/02/2010 - 16:22 | Link to Comment Dr. No
Dr. No's picture

Raising rates will do it as you pointed out.  This will kill the economy and put the US in a depression.  Why would the FED do that?  because the FED is PRIVATE and does not serve the government.  If inflation starts to undermine the FED's private shareholder's wealth and power position, they will yank Bernak's leash.  Skeptics should read some of Rothbard's work on money.  Inflation rewards the people early in the stream and punishes people at the end.

Thu, 12/02/2010 - 16:36 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

Why would the FED do that?  because the FED is PRIVATE and does not serve the government.

The Fed maintains its monopoly by government fiat. Bring down the government (or sufficiently endanger the sitting politicians) and the Fed will lose the monopoly. Suppose the Fed raises rates which makes the debt unserviceable and so the government simply begins printing US Notes on its own?

Can you provide a reasonable scenario in which the Fed acts as you posit and the politicians sacrifice themselves to save Ben Bernanke?

Thu, 12/02/2010 - 16:45 | Link to Comment Dr. No
Dr. No's picture

From Wiki on Paul Volker:

Paul Volcker, a Democrat,[5] was appointed Chairman of the Federal Reserve in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan.[6]

Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.[7]

The federal funds rate, which had averaged 11.2% in 1979, was raised by Volcker to a peak of 20% in June 1981. The prime rate rose to 21.5% in 1981 as well.

Volcker's Fed elicited the strongest political attacks and most widespread protests in the history of the Federal Reserve (unlike any protests experienced since 1922), due to the effects of the high interest rates on the construction and farming sectors, culminating in indebted farmers driving their tractors onto C Street NW and blockading the Eccles Building.[8]

 

The last paragraph highlights how the FED withstood the political pressure.  Granted that was then and this is now.  With the Bernank playing all of these games and putting the FED under the spotlight, he may have weakened the FED significantly enough to not withstand the pressure.  We do live in interesting times.

Thu, 12/02/2010 - 17:55 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

Volker's actions did not make the US Government insolvent so you've basically got an apples and oranges thing going there. Please tell me how Bernanke will stand up to the criticism (just criticism?) and the Fed will maintain its mandate when it bankrupts the very people who oversee its charter?

Thu, 12/02/2010 - 18:32 | Link to Comment Dr. No
Dr. No's picture

The government is bankrupt/insolvent now.  Regardless of any actions by the FED.  I have no direct evidence of how Bernanke will stand up to the pressure, since it has not happened.  I do believe once we get 13% inflation rate, people in power will be screaming for the FED to shut off the spigot.  The FED will.  The poeple on the bottom will suffer, as always.

Thu, 12/02/2010 - 23:32 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

What will stop the government from simply printing its own notes? What makes you think that they need the Fed to create pieces of paper with dead white guys pictures on them?

Thu, 12/02/2010 - 12:04 | Link to Comment RobotTrader
RobotTrader's picture

Breadth surge today is huge.

Investor's Business Daily will likely call this a "follow through day" and all the mo-mo lemmings who stepped aside during "market in correction" will be jumping back into the pool with full force.

Thu, 12/02/2010 - 12:09 | Link to Comment SheepDog-One
SheepDog-One's picture

OH sure...everyone in the rigged casino of course sold high to someone, then bought da dip of course. Youre a fuking idiot Robo.

Thu, 12/02/2010 - 12:11 | Link to Comment Rogerwilco
Rogerwilco's picture

So we'll see CMG at $400 by Christmas? Ho ho ho, boo-ree-to. Let's party like it's 1999!

Thu, 12/02/2010 - 12:23 | Link to Comment High Plains Drifter
High Plains Drifter's picture

Speaking of Christmas, I think we should get a pot going and get Robo something real nice for Christmas since he has been such a wonderful contributor all year long. Ha ha. How much are blow up dolls?

Thu, 12/02/2010 - 12:34 | Link to Comment LeBalance
LeBalance's picture

You're just trying to get a mailing address for the metric ton of hog shit you have been saving for just such an occasion.

Thu, 12/02/2010 - 12:35 | Link to Comment High Plains Drifter
High Plains Drifter's picture

Oh come on. Where does Robo live?  In Truth or Consequences, New Mexico?

Thu, 12/02/2010 - 12:39 | Link to Comment Rogerwilco
Rogerwilco's picture

Robo is like Sgt. Friday, just the facts ma'am, and I have no problem with that. The "facts" do seem similar to a time eleven years ago when momentum was everything in the markets, and fundamentals (EBITA anyone) didn't matter. IIRC, the NASD was around 5K at the time...

Thu, 12/02/2010 - 15:38 | Link to Comment bbtrader
bbtrader's picture

As you're the tech guy, is there a big long head & shoulders top on the bank ETF (KBE), I mean lasting over a year?

Sure looks like one to me, and obviously, the $NDX is nearing its 2007 highs but the banks have been stuck deep in $hit for this long.

Thu, 12/02/2010 - 12:06 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

Gold will be parabolic as China needs to dump their worth less dollars into something that will retain value. Gold, Silver, and PMs will go parabolic. They already see rampant inflation and will be looking to secure a hedge with PMs.

Thu, 12/02/2010 - 12:06 | Link to Comment Clint Liquor
Clint Liquor's picture

It is interesting that China is not only is the #1 producer of the world's Gold but will soon be the #1 importer of the world's Gold.

 

Thu, 12/02/2010 - 12:16 | Link to Comment Rogerwilco
Rogerwilco's picture

Gold is an important metal for high-reliability electrical contacts, the kind used in military equipment. Just sayin'.

Thu, 12/02/2010 - 12:26 | Link to Comment Arius
Arius's picture

its all about CASH and they got it...

Thu, 12/02/2010 - 12:06 | Link to Comment HuFwungDung
HuFwungDung's picture

follow the money inflows.  Chinese invest in gold.  Fed invests in DEBT (own debt).  Useless.   It will not be successful.

Thu, 12/02/2010 - 12:09 | Link to Comment RobotTrader
RobotTrader's picture

Yamana Gold is basing out just like Krispy Kreme which finally exploded out.

Perhaps Eric King will finally get his payday???

LOL...

Thu, 12/02/2010 - 12:10 | Link to Comment SheepDog-One
SheepDog-One's picture

Beat yourself to death.

Thu, 12/02/2010 - 12:17 | Link to Comment A_MacLaren
A_MacLaren's picture

At least you're trying now Robo...

In the mean while, you've entirely missed: RBY, UXG, EXK, SLW, HL, NG, NGD, CDE, MVG, and others I have been to busy to research and track.

Thu, 12/02/2010 - 12:20 | Link to Comment Turd Ferguson
Turd Ferguson's picture

ROBO!!!

For once, you and I agree on something! That AUY chart looks very good.

Thu, 12/02/2010 - 12:48 | Link to Comment Dr. No
Dr. No's picture

AUY is a heart breaker.  If you buy into the miracle, she will break your heart.

Thu, 12/02/2010 - 12:21 | Link to Comment Al Huxley
Al Huxley's picture

The smaller junior players (most only trade on Canadian exchanges) are generally way better plays than the more well-known ones like Yamana, Goldcorp, Barrick, etc..., but maybe Yamana will finally get its breakout.

Thu, 12/02/2010 - 12:26 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

VGGCF continues its 6 month climb Lol'

An upstart. I bought a few thousand shares at .62 a dice roll VG Gold is focused on developing its four gold projects situated in the heart of the world class Timmins Gold Camp in Canada.
Thu, 12/02/2010 - 12:21 | Link to Comment Pladizow
Pladizow's picture

"You buy gold now, britches!"

Round eye sooooo sirry!

Thu, 12/02/2010 - 12:12 | Link to Comment koeleköpke
koeleköpke's picture

who is the fucking communist ?

Thu, 12/02/2010 - 12:32 | Link to Comment Jason T
Jason T's picture

God protect Ron Paul.    

Thu, 12/02/2010 - 13:44 | Link to Comment Hephasteus
Hephasteus's picture

God doesn't protect the good. The only thing keeping Ron Paul alive is a bunch of pissed off citizens.

Thu, 12/02/2010 - 12:34 | Link to Comment firstdivision
firstdivision's picture

Does anyone else see the disconnect in AUDJPY and ES?

 

Also, can anyone point me to historical data availability (for free) of MBA purchase apps?  Found it.

Thu, 12/02/2010 - 12:18 | Link to Comment RobotTrader
RobotTrader's picture

Wow, housing must be on the rebound.

Lowe's has gone vertical the last few days.

Thu, 12/02/2010 - 12:25 | Link to Comment High Plains Drifter
High Plains Drifter's picture

Those number 2's look real.

Thu, 12/02/2010 - 12:34 | Link to Comment Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

something else went vertical

Thu, 12/02/2010 - 13:06 | Link to Comment Vergeltung
Vergeltung's picture

wOOt!

Thu, 12/02/2010 - 12:19 | Link to Comment Horatio Beanblower
Horatio Beanblower's picture

For your enjoyment...

 


Hallelujah (Christmas Sucks) - http://www.youtube.com/watch?v=VqSwLKJwg3o&feature=sub

Thu, 12/02/2010 - 12:43 | Link to Comment A_MacLaren
A_MacLaren's picture

Thanks - Nice surprise ending.

Thu, 12/02/2010 - 13:33 | Link to Comment Horatio Beanblower
Horatio Beanblower's picture

Agreed.  I didn't know that the great Edward Current was a goldbug.

Thu, 12/02/2010 - 12:19 | Link to Comment Turd Ferguson
Turd Ferguson's picture

And all this Chinese buying surprises whom?

Thu, 12/02/2010 - 16:18 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

They do their best to be inscrutable. Isn't that working anymore?

Thu, 12/02/2010 - 12:23 | Link to Comment erik
erik's picture

The SPY on the 10 minute chart has had green candles all day.  Not one red candle.  I don't think I have ever seen that before.

Thu, 12/02/2010 - 12:28 | Link to Comment D-Falt
D-Falt's picture

They commodity-hedged US stupidity since the mid 00's.  Spengler's column "Rice, Death and The Dollar" gives us a pretty good idea as to what China is doing and why they do so.

 

http://www.atimes.com/atimes/Global_Economy/JD22Dj01.html

Thu, 12/02/2010 - 12:34 | Link to Comment bernorange
bernorange's picture

I'm eagerly awaiting the next Chinese or American margin limit changes to give me another holiday discount buying opportunity for the physical stuff.

Thu, 12/02/2010 - 12:40 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

It's ironic. We export inflation to China, and they use our money to buy an asset that retains value, never decays, and hedges against a global currency meltdown or meltup. I'm curious to know what their Silver numbers look like. 

Thu, 12/02/2010 - 16:21 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

I'm curious to know what their Silver numbers look like.


It's 47, just like everyplace else. Of course they write it in that wedge-type script.

Thu, 12/02/2010 - 12:48 | Link to Comment steve from virginia
steve from virginia's picture

This is very interesting because one of the signals that I use to determine when China hyper- inflation going mainstream would be if they allowed dollars to circulate.

(Slaps self upside head) what if gold rather than the dollar is the circulating yuan- alternative?

There needs be a 'black market' currency to keep the savvy out of hyperinflation's death grip: S African rand for Zimbabwe, goldmark/pound sterling for the Weimar Republic, the US dollar for post-war Hungary, etc. The dollar does not circulate in China currently. Allowing a dollar black market would offer a place for well- connected elites to dump yuan.

So would allowing a gold black market. This is something to keep an eye on.

Thu, 12/02/2010 - 13:02 | Link to Comment youngman
youngman's picture

on a serious note....I think they are amassing gold so they can have the new reserve world currency....remember they think long term

Thu, 12/02/2010 - 14:42 | Link to Comment proLiberty
proLiberty's picture

Gold is a finite resource, both in terms of above ground inventory and the ability of new supplies to respond to a market price that is sufficiently above development costs.   On the other hand we compare this to the willingness of people who will not restrain themselves from reaching for power via their ability to command government printing presses.  This greed is boundless.

As long as we have government-sponsored expansion of the money supply, those running the government will not be able to stop spending more than they raise in taxes.  Inflation of the currency is guaranteed.  The only question is to be able to see when it is appropriate to invest in precious metals and when it is better to invest in equities or bonds. 

Since August, gold has been slightly outperforming SPY, but that was not aways so.

see:
http://stockcharts.com/charts/gallery.html?gld:spy

Thu, 12/02/2010 - 17:57 | Link to Comment JimSmithAZ
JimSmithAZ's picture

Hey Guys,

What's you favorite/trusted place to buy gold? I heard some good and bad ones about Kitco.

I know most of you prefer to posses it physically, rather than buying paper gold, or keeping it in custody of some firm. So I won't ask that question.

But I read in comments some days back, that the wise people prefer bullions over coins, what's the logic behind it? I mean, if the prices are comparable, and the purity is comparable, aren't coins easier to manage?

Thu, 12/02/2010 - 18:07 | Link to Comment RECISION
RECISION's picture

Way back when, it used to be that the Chinese only accepted gold for their exports (porcelain etc). The British decided that was going to bankrupt them, so they set up a trade in Junk(heroin) and only accepted gold in payment. That served to rebalance the books.

Fast forward - China now exports (different)junk to the world - how long before they only accept gold as payment again???

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