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Is This Why Gold Prices Are Rising?
While there are numerous reasons why precious metals prices rise and fall - from supply, demand, manipulation, money-printing, and jawboning - it is abundantly clear that as prices drop, Asian demand has risen rather notably. But what is the reason? Why are Asian 'people' and central bankers - most notably China - buying gold now? We suspect the following chart from SocGen provides considerably color when answering that question historically (and more importantly - going forward).
Via SocGen,
Chinese economic policy uncertainty and gold prices Clearly, huge negative economic developments (tail risks) like a China hard landing are hard to predict. Accordingly, economic “policy uncertainty” (rather than the actual event) is something that our SG Economists have looked at in detail and in particular how economic policy uncertainty influences business confidence and economic activity. The natural question for us, given China’s large proportion of gold demand (and to focus on just one commodity for brevity), is what is the resulting effect of increased Chinese economic policy uncertainty on the gold market?
To measure Chinese policy-related economic uncertainty, we use an index from www.policyuncertainty.com based on a scaled frequency count of articles about policy-related economic uncertainty in the South China Morning Post. Chart 17 shows that increasing and then decreasing uncertainty since 2010 have coincided with gold prices risisng then falling. For most of 2013 the two series appear to be moving in tandem.
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SocGen further finds, through co-integration analysis, that there is a causal linkage where gold prices reacted significantly to policy uncertainty.
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We cannot predict increases in policy uncertainty in China, but can undertake a simulation using our index and price time series, and simply ask ourselves what a change in Chinese economic policy uncertainty would do to gold prices. The model above suggests that if uncertainty in China jumps 20%, back to the level of August 2011, the flat price of gold should rise by roughly 3%, or almost $40/oz at today’s price levels.
A hard landing in China, with 2% GDP growth, would pull gold higher initially, but even before this, more policy uncertainty would also drive prices higher too.
With uncertainty over whether the PBOC and Chinese government reforms will be upheld or folded on, we suspect this rising uncertainty over Chinese policy is major factor in the safe-haven stacking of precious metals in the last month or two.
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I would say it is due to the distrust the Chinese have of their banks and their government.....kind of like us.
If China (or India) "buying" affected the price of gold, it would be at $20K/oz by now !
I think there is a big difference between the price of gold and the Value of Gold.
Soon we may see the true Value if the manipulation amplitude decreases.
Meanwhile, get silver pandsa.
CHina has been stacking gold and silver the whole last decade. Nothing new to gold bugs.
Deflation deflation deflation. Gold is dead, bitches.
Which is why JPM has gone long in gold and amassed the largest hoard of silver since the Hunt Brothers......
Yeah... you can bet PM's are going to go down..... not Follow the money and look at what the big boys are doing.
Following the money would lead you to the inevitable conclusion that regardless of any long position or horde of silver they may have, the real money is made by keeping the monetary metals from rising very far. With those metals leveraged 100 to 1 they can do a lot of damage. It is in their interest to keep gold and silver down because that is a key component to keeping the paper fiat scheme going longer, which is where they make that vast majority of their money
but even with preshy metalz suppression, the system is falling apart at the seams
so there's gonna be a point - in iether the near or mid term - that the oligarchy flips the switch and rides the golden tide back in
suppression of the gold price alone doth not a successful maintenance of the fiat system make, so dont miss this historical opportunity
mister kitty, via mister angry sinner, suggests
Nietzsche believed that Christians are essentially anarchists who weaken the fabric of the state. Therefore, he detested the religion. And guess what? The deranged philosopher was absolutely correct. The best Christians are anarchists. Allegiance to God is much more important than loyalty to a nation. In fact, extreme patriotism is nothing more than a form of idolatry.
and that's why mister kitty gets the down votes today
because nothing says patriotism like medal counts
http://msn.foxsports.com/olympics/standings
hugs,
harald http://en.wikipedia.org/wiki/Harald_V_of_Norway
yep, and deflation is good for precious values
deflation in Chinese assets, begtting deflation in EZ bank and US bank assets means precious money as an asset is relatively more valueable vs issued liabilities, as well certain contract (derivative) values will fall as the otherside rises such that netting works despite bail-ins -- plus, the reinflation is always expected, none of it good for faith in the fiats as a store of value
A ton of money is coming into the miners the last several days, trading 3X the daily volume. Follow the money.
sold to you
Yeah, I agree that the price of gold shows little relationship with the Chinese buying. Plus, I don't see enough correlation from the chart. What's the coefficient for the series? Maybe this uncertainty index simply mirrors something else, say, inflation.
If you me us as in ZHers then I agree. If you me US as in the collective sheeple, then you are way off the mark. The Chinese US has a long term affinity with gold, the US, not so much.
rosiescenario
Barron's agrees with you
There is a category bizillion hurricane coming....I think I need some insurance...is the answer.
They know that supply is running out. The more endangered something gets the more the chinese just gotta have it. Rhino horns anybody?
Solid chart/information no doubt but I'm still focused on the GOFO rates as they've moved negative yet again and had a strong move yesterday. Pressure clearly remains in the physical market based on the current rates. It's really been this way since mid 2013 when the GOFO rates stayed negative for over a month (very unusual). Just not enough physical to go around these days (as Germany is well aware).
yeh, jostle for Feb COMEX delivery
Sorry, South China Morning Post is not trusted...
"To measure Chinese policy-related economic uncertainty, we use an index fromwww.policyuncertainty.com based on a scaled frequency count of articles about policy-related economic uncertainty in the South China Morning Post."
Actually, you are wrong. The SCMP is an excellent newspaper which was established under British rule and remains independent. It is, in fact, one of the best, if not THE best paper in Asia. In general, Hong Kong has a free press, unlike most other countries in Asia, including Singapore where all media are State controlled.
Ha Ha. An english newspapaer (plus free press) does not make SCMP more trustworthy.
Would you trust the editor-in-chief of SCMP? Mr. Wang Xiangwei?
The media culture is changing in Hong kong. The editor-in-chief of many newspaper is replaced by the Pro-China counterpart
Germany got her 5 tons , the ungrateful lot
That was then. Nowadays, China has infiltrated almost all major newpapers. Sadly, I see a " June 4 " in the making in Hong Kong. One never underestimate the stupidity of those in power.
No media outlet in China should be trusted.
This is a meta-analysis of articles, not their opinion. They aren't going to manipulate the number of articles published to adjust an analysis like this.
The statement I was refuting was:
"Sorry, South China Morning Post is not trusted..."
Every media outlet in China has government officials on site that approve content. I know this.
Hong Kong is not actually China but an SAR (Special Administrative Region) within China. Don't criticize things you don't understand. I have lived in Asia for almost 40 years, 5 of them in Hong Kong, so I do actually know which end is up.
Sorry that I didn't know the South China Post isn't in China I guess?
Everything I said is still valid. Anyway, my point that the trust in the paper is irrelavent to this analysis is true.
What did I criticize and what didn't I understand (aside from not knowing where the South China Post was published)?
More from Wiki about editor-in-chef Wang Xiangwei of SCMP
http://en.wikipedia.org/wiki/South_China_Morning_Post
Reporter Paul Mooney, whose contract with the paper was not renewed in May 2012, said that the Li Wangyang story was not an isolated incident: "[Wang Xiangwei has] long had a reputation as being a censor of the news... Talk to anyone on the China reporting team at the South China Morning Post and they’ll tell you a story about how Wang has cut their stories, or asked them to do an uninteresting story that was favorable to China."[23]
NSA Phone tapping intercept between the PBOC and the Bundesbank;
Ring, ring, ring... ring, ring, ring...
PBOC:
> "Hello."
BUNDESBANK:
> "Hello, dis is da Bundesbank calling, we are having problems getting our Gold from the US Govt.... could you spare a few bars?"
PBOC:
> Click noise... blank dial-tone.
c'mon - gold is @ the zero bound, it can only go up.
Mining / scrap supply about 3700 tons of the global 4700 ton demand. The gold price is @ the all in cost of mining, so any further price decline leads to mining output destruction and scrap sales destruction. '13 was a one off whereby ETF's were raided of 1000 tons to meet the demand (ie, the largest GLD gave 500 tons...but to do so again would see GLD go from 790 to 290 tons...or in other terms the price of gold falling to about $300).
The only cures are higher price or much stronger caps / tax's / restrictions on gold demand...
"A hard landing in China"? Dream on. The western media is totally out of touch. China is doing just fine. Chinese import and export were both up last month. I was in China last summer for a whole month. I did not see any trace of hard landing. A lie repeated for 30 years is still a lie. The track record is far worse than a broken clock. I am fed up.
"I was in China last summer for a whole month. I did not see any trace of hard landing."
Hard to see anything through that smog.
That may well cause hard landing, of planes. Joke aside, the smog was pretty light in the summer so I did not have a feel for it. I heard it is stronger in the winter.
i was in the US in 07...i didn't see a trace of a hard landing
Agreed, and $3.5 Trillion (Equivalent) and probably about 15K Metric Tonnes of Gold in reserve go a long way to help. What are US reserves? The current financial crisis is truly "The American crisis".
"Chinese import and export were both up last month."
You believe their numbers? Really?
I don't believe in anybody's number
I think China is the true definition of a "Fecal speedball". I'm stealing that line "I_call_you_my_base".Most original ever,thanks.
Please, nobody adds 15t to a banking system in 5 yrs without commie misallocation and true "asset" values realized by someone -- evergreen-ing -- inefficient -- aging population. You jumped Blankfein as he has some assets to unload to pensions and other funds populated by common folk diversified cash prior to their 'year of the 4' remark/clean-up, commies want to go market and the western cb's need a cycle ne wayz.
Ham-bone has it right.....1000 tonnes was offloaded in 2013 (much to my chagrin) from the ETF's...that won't happen again. (Btw gold price held up remarkable well even so....).The Chinese are just getting warmed up...they have encouraged the buying of gold and that isn't going to stop because Yellen decides to taper/untaper. India will come back onstream and all hell will break loose....should be fun.
And wait until the MOMO crowd start BUYING GLD. Where will they get the physical Gold from? It won't be from China, that's for sure.
Last time the hoard started buying gold TPTB monkey hammered Au and the folks that bought it. I consider the masses to be weak hands.
SocGen is one of the major recipients of "gold deposits" from central banks, mostly idiotic simplistic central banks, who have left multiple tonnes of gold 400oz bars on "deposit" in unalloated accounts for multiple years. SocGen then re hypothecates this gold multiple times, along with the other bullion banks, with special favors to BNP Paribas and Natixis.
Like, why do I have to tell you guys this.... It's so obvious. Open your eyes and look at the web
It was not stupidity or by mistake. It was part of a downpayment by CBs. CBs knew exactly what the banksters would do with it.... And agreed with it all along. Remember, the CBs are in a war with real money (Gold and Silver). They will do ANYTHING to defeat them.
Just asking....wouldn't a China hard landing lead to lower gold prices as people are forced to expend whatever capital (gold) they have to deal with the debt/leverage that they are up to their ears in? Wouldn't this be a reason for TPTB to crash China and get the gold back cheap?
people think they'd simply yell a bit then reflate, like the rest of history, whist accumulating physical -- families and property developers may let debts die, but sell gold locally to pay off CN banker deals en masse?
.
.
Gots to tell ya... I totally missed out on nearly 100% gains in some decent sized gold stocks over the last couple weeks.
China has most of gold - Ask Edmundo Antkowiak
Is he a friend of Boris Alatofkrap?
.
f...the pboc too.
Ohhh, so this week its because of china???? last week it was because of the citbank technicals team, the week before because of india, last month because of some make-believe raid on JPMorgan's vaults. Can you at least get your story straight Tyler? Next week its gonna be because Peter Schiff told people to buy the new super limited edition gold maple eagle jubillee coin from the royal mint of myanmar!!!!!
The only thing we know for certain is that there are certain things we are uncertain of. And there are also uncertain things we are certain of. And finally, we are certain there are uncertain certainties of which we are uncertain.
I am sufficiently certain of the uncertainties that I am reluctant to enter any long term contract.
Sincerley,
Uncertain Certain
:)
2 words, OK, 3:
Buy Gold Pandas.
yeah those charts really match.. are Tyler's kids working the front desk now?
No shit, if anything gold prices appear to be a leading indicator of the index of "Chinese policy uncertainty". Not much use to me. Others.....?
Ye can't get good interns these days
Probably because stocks are overvalued and there's a lot of free money sloshing around, so the smart money is looking elsewhere.
Gold has inherent scarcity (via mother nature), significant barrier to entry (huge land, mining, and refining costs), durability, and uniqueness (by atomic arrangement).
Bitcoin has stained T-shirts, bags of Cheetos, high speed internet lines, Zap cola, and Mom's basement--probably in Russia.
These "causal linkages" are very speculative and incomplete. Therefore they're not causal linkages but just methods to speculate on time/space relativities.
certainly approaching the debt ceiling contributed too
Gold Goes Vertical, Breaks $1,290 During Janet Yellen Testimony
Gold goes vertical with short squeeze in action after the $1,270 level today. The highest print was $1,292 so far and the real game of music chairs will be started after $1,300 and tomorrows headlines. The big boys are loaded as well as flood of articles positive for Gold in WSJ, Reuters and Bloomberg can indicate. General public is still chasing the last Bubble in the general equites and GDX - ETF with Gold miners is breaking above 200 MA today. The real reason for the run are actual Chinese numbers from Koos Jansen report of 2,181 t of Gold consumed in China in 1213 and the coming shortage of physical Gold.http://sufiy.blogspot.co.uk/2014/02/gold-goes-vertical-breaks-1290-durin...
frigging clueless economists at SocGen. Uncertain policy......HELLO ANYONE HOME IN THE BRAIN DEPARTMENT.......Thats why they have the plenum. Unlike the western world right now which acts more like policy day traders. If anything, the uncertainly lies in the West. But then conventional media uses group psychology to tame the sheep whilst they are getting skinned alive to feed the banksters.
I can find a correlation between Obama giving Jamie Dimon head and the S&P shooting to the moon.
Well I live here in Thailand. And the credit debt bomb is going off now. Along with Turkey, China is much worse. Thailand, Russia, Phillipines and Indonesia are just getting started. This whole place is melting down. Trust me the motocycle taxi guys are getting 5% loans. This will end in tears.
The need to expand consumer spending using easy debt always ends with a problem. One only hopes it's gradual.
Thailand is relatively blessed - a good King, no oil.