Monday, January 13, 2014

5 Hottest Stories on Gold -- Is China's Central Bank Buying Bigtime?

Story #1: China may have vaulted ahead of Italy and France last year to become the third-largest holder of gold, according to Bloomberg. China’s central bank probably added 622 metric tonnes last year after reserves increased 380 tons in 2012.

There’s one word for that. Whoa!

Also, this line from the Bloomberg story: “Based on conversations with officials in China and Mongolia, it’s evident that China feels they want as much gold as much as the U.S.”

I’ll do the math for you. That would mean China wants to add another 5,963.5 metric tonnes on top of last year’s buying binge. If it keeps buying at last year’s rate, that would be another 10 years of massive buying by China.
But it could buy less, it could buy more. I’d say it would buy more if it thinks it is buying gold at a discount.

"Should Chinese demand continue to be around 100 tonnes per month [as in 2013]," said Eugen Weinberg to Bloomberg on Monday, "then we're likely to see a strong recovery in gold prices."

Now forecasting a possible 12% rise in world prices in 2014, and noting that Hong Kong "[is] the trading hub" for China's flows, "This is likely to be make or break for this year," he concludes.

Story #3: Arab shoppers are buying a LOT of gold.

“The impression is that these shoppers are buying into gold as a sort of defensive asset against social or economic uncertainties in their home countries.

This article is from ZeroHedge, so take it with a large grain of salt. But they’re quoting a source from the Perth Mint.

Mines are valued dirt-cheap, and the miners know it. The big fish are eager to snap up the little fish. Osisko is up 19.7% on the news as I write this, while Goldcorp is down 3%. If gold prices do head higher from here, this is very accretive to Goldcorp’s value. 

Will we see more takeovers? At these prices? Bet on it!

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