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Chinese government pushing silver and gold to
the masses
A report suggests that the Chinese government is
pushing the general public into buying gold and silver bullion, which could
have a dramatic effect on the markets.
LONDON - We are indebted again to Paul Mylchreest's Thunder Road
Report for news that will bring big smiles to gold and silver investors
everywhere. Apparently China is pushing the idea of buying gold and silver
for investment purposes to the general population in the way that Western
television sells soap powder. If 1.3 billion Chinese citizens start buying
gold and silver, even in tiny quantities, imagine what that will do to the
market!
The report notes that China's Central Television, the main state-owned
television company, has run a news program letting the public know how easy
it is to buy precious metals as an investment. On silver investment the
announcer is quoted as saying " China has introduced its first ever
investment opportunity for silver bullion. The bars are available in 500g,
1kg, 2kg and 5kg with a purity of 99.9%. Figures show that gold was fifty
times more expensive than silver in 2007, but now that figure has reached
over seventy times. Analysts say that silver has been undervalued in recent
years. They add that the metal is the right investment for individual
investors and could be a good way to cash in."
What appears to have happened in China is a total relaxation of
strictures on holding precious metals by the individual with the
government pushing gold and silver as an investment option, seemingly at
every opportunity. This is a far cry from the situation only a few years
ago where the distribution of gold and silver was strictly controlled.
Now, the Thunder Road Report notes that every bank will sell gold and silver
bullion bars in four different sizes to individuals and gold related
investments are said to be soaring in popularity.
Around a year ago, Leyshon Resources managing director, Paul Atherley, in an
investor presentation in London - and no doubt delivered elsewhere in the
world too - commented that some employees at the company's gold mining
project in northern China would, on pay day, go to the local bank and buy a
small gold bar as an investment and wealth protector. To an extent we put
this down at the time to mining company hype - but this seems to be exactly
the same phenomenon noted by Thunder Road. The Chinese are being converted
from being the lowest per capita gold consumers in the world to a nation of
small precious metals investors. Now, by next year, Chinese consumption of
gold is likely to exceed that of India, which has been for years the world's
biggest gold market. And one suspects that the potential for gold purchasing
by individuals is only in its earliest stages. As more and more Chinese move
into the cities and individual wealth grows, this trend is only likely to
accelerate.
Paul ends the piece on Chinese gold and silver potential with the following
comment: "Simply put, the Chinese government is trying to trigger a national
gold craze...and it's working. The Chinese public now has gold trading
platforms on steroids.... ...Also, for the first time in history, Chinese
investors can even trade gold abroad (in London) with the swipe of a ‘Lucky
Gold' card. I can't even get Bank of America to open a foreign currency
account."
This may be an overstatement of the case from a precious metals bull - or it
may not! Certainly if China is indeed pushing the public to buy gold then
there may well be a hidden agenda here. It's unlikely they are doing it and
will suddenly pull the rug out from under millions of investors. A cynic (or
a raging gold bull) would suggest that this will precede a move to switch a
good proportion of the country's reserves into gold which would have a huge
effect on the global gold price and could prove disastrous for the dollar.
Maybe it's not in China's interests to drive the dollar down too much until
it has managed to divest itself of the huge dollar overhang (see the article
on Chinese Sovereign Wealth Funds we published yesterday - Chinese sovereign
wealth fund dumping dollars for strategic investments like gold ). The
country may well already be, of course, surreptitiously building its gold
reserves without reporting the build-up.
If the Chinese are indeed beginning to buy gold and silver as the quoted
report suggests then this has to be a strong signal that prices are going to
rise, and perhaps rise dramatically, in the relatively near future. We await
comment from other China watchers for confirmation of the gold and silver
buying spree, but with global gold production at best flat and probably in
decline, even a small increase in Chinese buying could have a substantial
impact on gold and silver prices.
Author: Lawrence Williams Posted: Thursday , 03 Sep 2009
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editing and expanding on our stories. Email him at alechogg@gmail.com
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