Wow! China Gold Imports Spike 4,000% y-o-y

UK-based International Business Times reports China’s gold imports spiking 50 percent in October from September, and soaring 4,000 percent from October of a year ago, to an all-time single-month record high of 85.7 tons.  Sign-up for my 100% FREE Alerts

Though India’s anticipated record gold imports of a 1,000 tons this year could slow due to signs of slowing jewelry demand from a recent 20.3 percent crash in the rupee, since August, investors can no doubt count on China to, not only take over the gold market slack, but soon-to-dominate the New York-London gold cartel

As a reminder to evolving drama in the gold market, WikiLeaks exposed China’s plan to break from its sadistic recycling of trade surpluses into U.S. Treasuries, a shift in strategy by Beijing that’s prompted other Asian nations to follow suit.  See BER article, WikiLeaks Drops Bombshell on gold Market, GATA right again!

Source: U.S. embassy cable – 09BEIJING1134

According to China’s National Foreign Exchanges Administration, China’s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the United States and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the renminbi.

And the promotion of the “internationalization” of the renminbi has noticeably accelerated this year.  On a year-over-year basis, the amount and rate of increase of gold purchases by the People’s Republic of China is no less impressive than the $3.2 trillion of foreign reserves slated to be deployed by Beijing.

IB Times quotes Credit Suisse analysts Thomas Kendall, who sees “Chinese imports of the yellow metal hitting 470-490 tonnes for the full year, up from last year’s 245 tonnes,” a near-double spike in volume anticipated at the close of 2011.

And it appears that the Chinese are patient when accumulating gold, outside of its steady purchases from its own China-based mining industry, buying on opportunistic dips created by periodic hedge funds selling.  In fact, the notorious sell offs in the gold market plays into the hands of the masters of Sun Tzu (1), as September’s swoon from one large hedge fund manager provided attractive prices for Beijing’s rapid gold accumulation program.

“Analysts said the [gold] buying, led by emerging market central banks intent on diversifying their growing foreign exchange reserves, helped explain gold’s rebound from a low of $1,534 a troy in September as large hedge funds such as Paulson & Co were forced to sell some gold to cover losses elsewhere,” stated the Financial Times of London on Nov. 17.

After dominating the world economy in production and exports of the past two decades, Beijing’s next Mao-like ‘Great Leap Forward’ enlists 100s of million of China’s middle class in a joint venture with its central bank to now wrest control of the gold market away from New York and London.

As the world witnessed the powerful rise of China, post Tiananmen Square, the power of 1.3 billion Chinese, encouraged and mobilized by a centrally-commanded political structure to achieve an objective vital to its national security can produce awesome results.  As the WikiLeaks cable exposes, today, Beijing is out to break the gold cartel with its awesome population might.

Since 2002, after lifting the 53-year ban on gold ownership under Mao Zedong, the Chinese have eagerly scooped up gold coins and jewelry at rapid rates, to numbers which now rival India’s colossal demand for the yellow metal.

Forbes Magazine reported in March, “Believe it or not Ripley! The People’s Bank of China (PBOC) recommended yesterday that 1 billion Chinese consider buying gold as a hedge against inflation and to preserve values in a world where currencies can fall. . . . Wow! Be like the Fed telling you to buy oil stocks or crude oil futures due to expectation higher gasoline prices this summer.”

According to the World Gold Council, total gold demand in the PRoC will reach 750 tons in 2011.  In the third quarter, consumer demand for the precious metal continued to soar, led by a 24 percent increase in demand of 60.2 tons of gold bars and coins, from last year’s third quarter total of 48.5 tons, while demand for jewelry rose 13 percent.

Front-running China’s demand

Frank Holmes, contributing editor for Forbes Magazine penned an article, today, titled, Central Bank Appetite And The Monetary Case For $10,000 Gold.  Holmes sees what the Chinese see: a tsunami of money creation coming out of the U.S. and the ECB, whose combined currencies comprise approximately 88 percent of all central bank reserves.

In the Forbes article, he quotes long-time friend and founder of Goldcorp’s Silver Wheaton, Frank Giustra:

The bottom line is that the money needed to bail out Europe and to fund America’s spiraling debt and future unfunded obligations is in the tens of trillions. IT DOES NOT EXIST.

It has to be created by printing money in massive quantities, and despite all the rhetoric you will hear against such policies, in the end it’s the path of least resistance. Printing money is an invisible tax on savings, much easier to initiate, than, say, raising taxes or cutting back on services and entitlements.

Under the Holmes scenario, which, incidentally, has become an ever-increasingly common conclusion, drawn by many well-respected analysts, the gold price could move as high as $10,000 per ounce in coming years.  That means: the dollar and euro are expected to erode significantly in purchasing power during that time period.

As far as the question: when is a good time to buy gold?  Stephen Leeb, author of Red Alert: How China’s Growing Prosperity Threatens the American Way of Life, has researched China and its strategic initiatives for the coming 20 years.  According to him, just jump in and wait, because a few hundred dollars here, or there, won’t amount to much in the long run.

“So how low gold will go here is literally meaningless,” Leeb told King World News on Monday.  “My advice to investors is don’t try to catch a bottom and be a hero.  It could happen any time.  It could be happening as we speak, it could be happening today.  But it’s really irrelevant.  Let’s say gold is at $3000, $4,000 or $5,000 in three or four years, which I think is very, very likely–are you really even going to remember that it went to $1,650 or $1,550?  No.”

(1) From Wiki: The book was first translated into the French language in 1772 by French Jesuit Jean Joseph Marie Amiot, and into English by British officer Everard Ferguson Calthrop in 1905. Leaders as diverse as Mao Zedong, General Vo Nguyen Giap, Baron Antoine-Henri Jomini, GeneralDouglas MacArthur, Napoleon, and leaders of Imperial Japan have drawn inspiration from the work. The Art of War has also been applied to business and managerial strategies.