08/05/10 Alexandria, Virgina — Earlier this week, we wrote about China’s latest effort to internationalize its gold market, and we’ve previously covered its efforts to encourage citizens to hold personal savings in precious metals. It appears to be part of a somewhat discreet pattern of behavior China has adopted in the gold market, perhaps to become a much bigger player, that’s not gone entirely unnoticed.
According to Mineweb:
“Earlier this year [...] the World Gold Council had entered an agreement with China’s, and the world’s, largest bank the Industrial & Commercial Bank of China (ICBC) (state-owned of course) to co-operate to promote gold investments in China. Yesterday we learnt that China is further loosening its controls on the import and export of gold on the one hand, and on the other that it is also going to support Chinese company investment in overseas gold mining projects.
“Does anyone notice a pattern emerging here?
“…A senior Chinese official has stated publicly that the country will buy gold on the dips so as not to disrupt the market and undermine the US dollar – and there is perhaps more than anecdotal evidence that the Chinese government is buying gold, effectively surreptitiously, for its reserves, but not disclosing this until it reckons it is opportune so to do. Last time it announced an increase in gold reserves it had in fact been accumulating the yellow metal for 6 years before it actually made the fact public.”
Because China is the world’s largest gold producer, it has the means to buy gold from its domestic producers “surreptitiously” as stated above. Further, as suggested above, if China were to suddenly announce a huge increase in its gold reserves it wouldn’t be the first nation to do so. Saudi Arabia already set the precedent in late June when its restated gold reserves and revealed it holds about twice as much gold as previously thought. We’ll be sure to keep an eye on further gold-related actions by China.
You can read more specifics from Mineweb in its coverage of the dragon’s golden teeth.
Best,
Rocky Vega,
The Daily Reckoning
Rocky Vega
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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Rocky, don’t forget there is equal – if not definitely more – inhouse advertising by these banks to invest in long-term RMB cash deposits, RMB-denominated government bonds, and to trade in various stocks etc.
It is not a one-sided story.
There is a lot of misinformation on this particular topic out there, and the context is often twisted.
There is definite reason to be bullish on gold, but if people stand back and look at the overall picture and chronology of the liberalization of China’s gold market (plus the fact the so-called marketing of gold by these banks is not as pervasive as some make out) then there is actually reason to be even more bullish.