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There’s
some compelling data coming out of China this month about gold and silver. As
you’ll see, it paints a very bullish picture.
- According to the General Administration of
Customs in China, the country’s net imports (imports minus
exports) of silver quadrupled in 2010, to 122.6 million ounces. This
equals 13.7% of global silver production. This is especially noteworthy
when you consider that China was a net exporter of silver for decades,
and only became a net importer in 2007.
- Several analysts are reporting that demand
for physical gold and silver this month has been surging. This is
largely due to the start of Chinese New Year, which begins on February 3
and ends on the 18th. Orders have been described as
“phenomenal” and shipments as “heavy.”
- The operating profits of China National Gold
Group Corp, the country's largest gold producer, hit 3.2 billion yuan (US$483 million) in 2010. This is more than
five times the profit of 2006.
- China Investment Corp., the country's
sovereign wealth fund, is opening an office in Toronto, only its second
outside the mainland. The reason seems clear: they want to diversify
their reserves by investing in Canada's natural resources. The CIC has
$300 billion to spend.
- According to estimates from the Ministry of
Industry and Information Technology, gold production will be 8% higher
in 2010 than the year prior. The numbers aren’t final yet, but the
agency predicts mainland production will hit 11.9 million ounces. China
is already the world's largest gold producer.
- When you add China’s mine production
to imports, the final tally on the country's overall gold consumption in
2010 will likely reach 21 million ounces or more. This is roughly
one-quarter of worldwide mine production.
- Just prior to his meeting with President
Obama, Chinese President Hu Jintao called the U.S. dollar-dominated
currency system a "product of the past" and described moves to
turn the yuan into a global currency.
The conclusions
to draw from the data are nothing new: gold and silver production continues
growing; demand, including from Chinese citizens, continues rising; and
diversifying out of the U.S. dollar is a major priority.
And when you
consider the baked-in-the-cake inflation that has yet to hit, along with the
ultimate direction of the U.S. dollar, these trends are
not going to change anytime soon.
I think this
quote from Cary Pinkowski, CEO of Astur Gold, sums it up pretty well: “It’s
really simple,” he said. “China banned gold ownership for most of
the 20th century, and that’s over. China has a savings rate of more
than 30%, and an official inflation rate of 10%.” No wonder
they’re buying.
One could argue
that you can’t reach any solid conclusions about precious metals
without looking at China. If that’s true, the bull market in gold and
silver is far from over.
To whatever
extent you agree that the trends in China are a valid indication of
gold’s future for at least the next few years, buying any dip in price
seems a pretty safe bet.
[To read
the full edition and the interviews with 17 of the world’s leading
investment pros – including Jim Rogers, John Hathaway, Peter Schiff,
and Rick Rule – try BIG GOLD at just $79 a year, with 3-month
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Jeff Clark
BIG GOLD
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