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The Gold Rush of 2016 - China Started It Already?

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posted on Apr, 1 2010 @ 02:29 AM
I just seen another thread on gold that didn't get much attention, you can find it here. This thread and its links go into some detail about how the gold market is going to skyrocket soon when the global currencies plummet. Silver and know the story by now and you see the cash4gold commercials etc...It is no surprise what is going on here, and what is lurking.

If you are not very sure about what is going on with the gold and metals scandals and manipulation you can check here.

I would like to also point out from a source I use, an interesting new analysis of the current gold market done 2 days ago. This pretty much explains how China has an absurd need and use for gold recently, and for the future as well and how they are single handily going to skyrocket the market to $5000/oz numbers.

Now think about how the U.S. dollar is plummeting, think about all the other currencies in a domino effect because of this. Now think about that combined with the gold purchasing and use over in China and you see problems real fast. Okay lets take a look.

"China Buys Gold!"

Not now, but soon.

"CHINA BUYS GOLD" is the story that all commodity journalists want to break, and the headline that gold bugs the world over most want to read."

"Because if (or when) the People's Bank of China shifts from quietly adding domestic mine output to its reserves...and starts buying gold bullion in the international market instead...the rapture of $5000 gold will be upon us."

"It's unlikely to play out like that, however - not until 2016 at least. First because Beijing's policy wonks aren't so stupid. And second, because "China buys gold" is already old news."

How much gold?

"Rising 85% by weight since 2004, China's private gold demand has more than quadrupled in Dollars. It pretty much doubled by value in terms of both Dollars and the Renminbi in the last two years alone, rising to $13.6 billion in 2009."

"Overall, China accounted for more than 14% of global gold investment and jewelry demand last year on the World Gold Council/GFMS data - a close second to the 16% of private world hoarding swallowed by India."

Growth Rate of Consumption?

"Now the World Gold Council forecasts that China's annual gold consumption has the potential to double in the next 10 years. Its new report notes the link between China's gold demand, runaway GDP growth, and phenomenal household savings rate. But it doesn't put a figure on that relationship - itself a blunt rebuke of the idea that modernization and consumer capitalism would see gold cast off as a barbaric relic..."

"Yi Gang, deputy governor of the People's Bank of China and administrator of the State Administration of Foreign Exchange (SAFE), recently estimated that private households own some 3000 tonnes of gold. Two-thirds of that has been accumulated in the last 5 years alone. Those 1890 tonnes outweigh by four times the gold bought by SAFE and then transferred to the People's Bank between 2002 and 2009."

Okay quick recap. China almost puts ALL their household savings into GOLD. That's right folks, that means they spend all their money and are HOARDING it. Look at the chart it is quite alarming if you consider the economy here in the U.S. right now. Most people sold their gold a while ago...and the Chinese bought it up.

Now understand we are talking 3 000 000 kilograms of gold just in Chinese households...

China Knows Gold

"Perhaps that's been just as Beijing intended. Gold Mining output is a strategic target in the regime's current 5-year plan. Sending money offshore to plug the widening gap between local supply and demand, private citizens help reduce China's side of the global trade imbalance. They've also, all told, drained some $44bn from the banking system by swapping cash and bank-deposits for metal since the start of 2004. They'd clearly like to buy more, too."

"The size of the gold market is limited," Yi went on. "So China's [official] purchases of gold in the global market would push up global prices...China's domestic Gold Prices are related to global prices, so Chinese consumers will face higher prices and they won't like it."

"The People's Bank, in other words, is sticking with its policy of buying domestic mine production for its own reserves - rather than open market supplies - because it's worried about upsetting China's voracious gold-buying public. Which is awfully sweet of the Communist dictators."

So China wants to manipulate the Gold market, yet they are doing so with their own people in mind...How very nice of them.

So Here's The Problem

Trouble is, based on below-ground reserve estimates and the surge in China's mine output, China's gold mines could be all gone within six year says data from the US Geological Survey. So if the People's Bank finds good cause to keep buying gold in 2016, it will have to turn either to the global market...or pick up non-mine supplies closer-to-home...where it will just happen to find an extra 6,000 tonnes, according to the World Gold Council's projections, added to today's privately-held jewelry, coins and bars.

China doesn't have the domestic gold mines to cover them more than another 6 years. This is all estimated with today's rates of consumption mind you. We are probably looking more realistically at 4 years given the growth rate. So when they are dry where do they go for their gold needs? They go global...

Now lets take a peek at what happened when the U.S. Government Nationalized private gold, and banned private gold bar and coin ownership in 1933.

"Nationalizing private gold was what the US government did, under F.D. Roosevelt, when it banned private gold-bar and coin ownership in 1933. Which was a pity. Because that post-inflationary slump known as the Great Depression - which merely paused, and didn't halt, the United States' progress as world No.1 economy - would have proved a great time to preserve wealth with gold."

"The Treasury confiscated gold - on pain of a $10,000 fine or imprisonment - at the price of $20.67 an ounce. Then raising the value of its hoard to $35 an ounce, Washington banned private dealing in non-adornment metal, leaving anyone who neglected to turn in their US-held gold a fugitive the moment they tried to sell it. Clinging onto gold outside the domestic US, on the other, and remaining free to realize its value, meant enjoying a 90% drop in the price of listed US equities, plus a halving in the cost of living."

"That's something China's private gold-buyers might want to bear in mind today...if only they can get money offshore to buy gold and keep it there."

Authors Note***Information or data included here may have already been overtaken by events. However mind you this was just written on 3/29/2010

Take into consideration when reading this that Adrian Ash, the author, is the Head of BullionVault Research, and the Editor of Gold News.

If you want more up to date info regarding gold and our economy check here.

Full Editorial

[edit on 1-4-2010 by Smell The Roses]

posted on Apr, 1 2010 @ 02:56 AM
I have been afraid that the price of gold is about to crash.

What China may think is a safe investment today, could turn out to be a huge loss tomorrow.

How can something be a safe investment when it is at it's highest price?

So what, the rules of economics do not apply to gold? Call me skeptical.

Seems like quite the risk...

[edit on 1-4-2010 by muzzleflash]

posted on Apr, 1 2010 @ 08:08 AM
reply to post by muzzleflash

It is a lot cheaper now than it will be once China runs out of gold in their own mines. 5000 an ounce is pretty absurd and you would rather sell at that price than buy I am sure...I'd say gold is a hell of a lot better investment that the current U.S. dollar, that's probably why the Chinese have all their savings wrapped up in gold not paper money...


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