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Will China’s Upcoming Five Year Plan Unveil A 'Golden' Surprise?
The eyes of the entire world will be focusing on China in the final few days of October. The Central Committee of the Communist Party will meet in Beijing from Oct 26-29 to discuss a new five year plan for the country’s economy which will be enforced between 2016 and 2020.
This will be a very important event considering the Chinese won’t want to lose their face and it’s unlikely they will reduce the growth targets. Keep in mind when the previous five year plan was revealed, China promised the markets it would double the size of its economy by 2020, and this would mean it cannot lower its growth target of 7% per year.
Source: tradingeconomics.com
But, will the country be able to achieve that target? The economy has been losing momentum and even though the country reported a huge trade surplus of approximately 60 billion Dollar (or approximately $12B more than anticipated), but the import numbers for goods entering China fell by a stunning 20% and the sales numbers
So, yes, China will have to do ‘something’ to keep its economy going and one of the few instruments the policy makers can use are obviously the interest rates and make more money available to improve the access to cash in the financial system.
But what intrigues us even more is the question whether or not China will continue to buy gold. Even though its economy is no longer what it used to be anymore, China continued to purchase more physical gold to store it in its vaults. In September, the country added almost half a million ounces gold to its foreign currency reserves at a total purchase price of approximately $600M. That doesn’t sound like a lot of money (and the run rate is just $7-7.5B) per year, but there’s more to this story than just the headline numbers. In the third quarter of this year, China has added approximately 1.65 million ounces of gold to the vaults and remains on track to acquire more than 5 million ounces during the entire year.
Source: blanchardgold.com
Even though we all know these numbers probably don’t come even close to the true gold imports in China, it is interesting to see the gold import rate is actually increasing. In the six years in between China’s gold reserves update in 2009 and the update earlier this year, the average gold purchase rate was just 100 tonnes per year. That’s nice, but at 50 tonnes per quarter, China has DOUBLED the official buying pace.
Source: Wall Street Journal
But there’s more to the story than just that. In the Chinese case, it’s not just the ‘official’ gold import numbers that matter, but the total withdrawals of gold from the Shanghai Gold Exchange. Those numbers are showing us a much clearer picture as the total gold import in China in Q2 2015 was a stunning 216 tonnes (or approximately 4 times higher than the official gold imports).
Source: Bullionstar.com
That’s not surprising as the Chinese government has been slowly pushing its citizens to increase its exposure to gold and it definitely looks like a large part of the population has been obeying as the annualized total gold consumption in China is in excess of 25 million ounces of the yellow metal. Just to put things into perspective, in just ONE quarter, the total Chinese gold consumption was higher than the gold consumption in the USA in the ENTIRE year 2014. The previous image also shows the ‘official’ gold reserves are just a small part of the total gold reserves of the country.
Source: freemarketcafe.com
Meanwhile, China’s best new friends, Russia, are still buying more gold as well, as recent filings with the International Monetary Fund tell us the country has bought almost 4 million ounces gold despite seeing the total value of its reserve assets drop due to the low oil price. Whereas the ratio of gold vs total reserve assets in July 2014 was just 9.83%, the ratio has now increased rather sharply to 13%.
The recent increase in the gold price should not be surprising nor be unexpected. Gold is the only monetary asset you can rely on during these uncertain days.
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So who is selling all this gold?
I'm not sure this is the case but imagine this possibility...The futures market (comex, etc. ) set the price of gold. What happens when that isn't the biggest market? What happens if you combine all the miners, derivatives, etfs, etc. together. Maybe by owning all these other equities then moving the price of gold via futures one way other or another you can actually profit on said equities. Even if you didn't profit on that move you could flip those equities and take, say a long position on said equities and let futures price rise naturally (because you really did just manipulate it down). Surely you could profit then. Just speculation though, at the very least you could move the real price down without much risk as long as you were short the other avenues.
Interesting article but HORRIBLE editorial and language skills. The writers and editors need to take a refresher course. Is this an example of USA education? I hope not! If so, they are totally doomed.
That China GDP plot........
What does it look like if you subtract out say......
24 trillion.
Does it still go up like that?
Squid
How many tons of gold in the us figure is actually Chinese and Indians within the us buying it up? Just sayin', there's more Chinese and Indians in the US than there are Americans in either of those countries.
That's a nasty gash! Apply some TLC and kiss it better.
Duh? WTF are you drawing any comparison to? Do not mean to insult but WTF is your question? You think these graphs represent some ethnic breakdown of worldwide ethnicity and purchases? Those stats would be almost impossible to amalgamate. So WTF? "There's more Chinese.....da da da???" WTF?
All countries together bought more gold than gold mining production volumes for the year.
I never see any information about who sells the gold that buy China, India, Russia, USA and so on. Why ?! It says that Russia and China want to create an alternative currency - the banking system based on gold. But this information is available only in Russian, unfortunately.My question is: Which countries are selling this gold?
Now if you had been paying some kind of attention your question would not be so "2010". This question of whom is selling the gold has been addressed so many times by so many reputable people. So instead of asking this question I suggest you do some of your own research.
I suggest GATA...Bullionstar and so many other sites that have tried to trace the dark and hidden bleed of gold from west to east. Mean no disrespect but sometimes you need to think and look for yourself.
please change you picture many gay users here, especially from latvia are offended by pictures of vaginas
Stack On
Wouldnt it be fun if China announced that they are going back to a silver standard....ohh to dream.
Look into the traditional role that silver played in China and look into how Great Britain bled them dry with the opium wars. Theft of Chinese silver. Would it be fun? Not really for many but justice maybe.
Silver is money. 99.999% of all transactions over 3000 years were transacted in silver. The Mandarin word for 'bank' translates to Silver House.
You might not be far off.
Many far more astute people than myself have put forth the "fact" that the Western bankers (read wankers) are far more paranoid about losing control of the silver market paper contracts manipulations than those of gold. Me? These markets are so obscure that IMHO all you can do is read and form your own opinions.
But if I am pressed...I say the silver market prices being capped is a real biggie/tell. Simply because it serves a dual purpose of being both a monetary and industrial metal. Drive down the any profit from extraction while the cost remains and eventually demand will cause a skyrocket in price. Mines are shutting. So what is the motive? Maybe to drive down stock prices in order to takeover companies and control the resource. When this con job starts to fail? Silver, it is postulated is in less supply worldwide than the traditional models of 16/1 or even 25/1 and the gold/silver ratios at the moment are unreal. (by that I mean it bears no resemblance to actual supply of apples/oranges) When wankers manage the value of every chip in the casino prices become so distorted. Society is told that a $100 chip is only paying off a $20. WHY? Please do not ask. Just accept.
The game is rigged and all the little people are being chased out the door, being convinced that the hands they hold at the table are worthless.
early indication about the 13th-Five Year Plan is
investing in North-Eastern (former industrial heart land) part
both in loans and projects...
guess still juggling to maintain 7% growth...
and then there's the movements on land (Russia and further) while sea routes are "seen" being "militarily protected"?