October 30, 2024
China's Red Flag on Gold!
Dear Subscriber,
 |
| By Sean Brodrick |
Gold just hit a new high for about its 40th time this year. You know my view: The yellow metal is on its way to $3,100 in the short term and over $6,900 in the long term.
Today, I will show you a couple of charts on one of the longer-term drivers of the gold price that few talk about — China.
I’m specifically talking about China’s central bank and the policymakers in Beijing.
This is quite separate from what’s happening in China’s consumer market for gold.
We just got the Q3 numbers for consumer purchases of the yellow metal, and they’re terrible due to a combination of a flailing economy and high gold prices.
Total demand fell 22% to 218 metric tonnes in the September quarter, led by jewelry consumption falling 29%. That decline is short term.
China’s central bank just rolled out its most aggressive stimulus since the pandemic. That money takes time to percolate through the economy.
We’ll probably start to see China’s economy show real improvement in Q1 of next year. As economic activity improves, China’s consumer will come back.
But what I’m talking about today is the Central Bank’s longer-term plans to move OUT of U.S. Treasuries and into gold.
I have two charts for you on that. First, here is a chart of China’s official gold reserves. The trend is your friend.
And that trend has been to increase as the People’s Bank of China (PBoC) stacked gold by more than 22% since 2018.
That buying alone would be bullish for gold. But it’s also interesting to see what China is selling. And that’s U.S. Treasuries …
Wow! China has reduced its holdings of U.S. Treasuries by about 40% in the past 10 years. If this trend continues, China could be out of Treasuries completely in a decade.
Buying from Britain, Europe and elsewhere has made the difference … for now.
But have you noticed how the U.S. Federal Reserve cut its benchmark interest rate, only to see bond yields go up? That’s due to a lack of buyers. And that’s at least partly due to China.
China is waving a big red flag that it doesn’t trust American paper, at least not like it used to. What China trusts … is gold!
It’s not alone. Global central banks increased purchases for their reserves by 6% to 183 metric tonnes in the second quarter.
And that’s on top of enormous buying last year and more buying in the first quarter.
2023 saw China’s central bank raise its gold purchases by 30%!
We probably won’t see that level of buying this year. However, the long-term trend continues — China is selling U.S. treasuries and buying gold.
The PBoC’s sizeable gold acquisitions could be seen in the context of its efforts to replace its U.S. dollar holdings.
This is all part of an escalating trade war between China, Russia and their Legion of Doom on the one side and the U.S. and its allies on the other.
I’ve told you about the War Cycle before and how that cycle is shifting into higher gear. Who would have thought that gold would be a weapon in the next Cold War?
The primary motivation of China and Russia in stacking gold is to be less dependent on the U.S. dollar and less vulnerable to U.S. sanctions.
Now, China and its allies in the BRICS (an economic league formed by Brazil, Russia, India, China and South Africa, including other countries) are openly discussing a BRICS currency backed partly by gold.
That’s not an empty threat. The Central Banks of the BRICS nations hold 17% of the world’s gold.
And maybe that’s why the central banks of other nations — Poland, Turkey, Singapore, Mexico and more — are hoarding gold, too.
The flag-waving is getting furious. Maybe Uncle Sam should pay attention. Indeed, individual investors should pay attention.
Buy gold while it’s still relatively cheap. Your friendly neighborhood gold shop can help.
Or if you prefer electronic gold, the SPDR Gold Shares (GLD) is an easy way to buy the yellow metal, with an expense ratio of just 0.40%.
So far this year, any pullback to the 20-day moving average (the blue line) has been a buying opportunity in gold. We may see a pullback right after the election.
If so, consider jumping on board the gold trade train. It’s heading for higher destinations very soon.
All the best,
Sean
P.S. Speaking of gold, my colleagues just held a presentation on a very different kind of “Golden Window.”
This one only opens once every four years. And when it does, you should pay attention. It’s created gains of 19x … 23x … even 93x!
I urge you to check out what they have to say here.
Tidak ada komentar:
Posting Komentar