Folks are blaming the drop in gold to reports that China did not buy...
cohodk
Posts: 19,129 ✭✭✭✭✭
...as much as anticipated. Why would this cause a drop in gold price?
Excuses are tools of the ignorant
Knowledge is the enemy of fear
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<< <i>...as much as anticipated. Why would this cause a drop in gold price? >>
The vast majority (if not ALL) analysts had been suggesting their next report would show anywhere from 2200-5500 tonnes. A report of 1658 tonnes didn't cut it.....an under-performance of analysts expectations. Russia ended up buying more gold from 2009-2015 than China did....at least based on public declarations. I suspect China bought much more. But, it's not in their best interest to claim that until they have all they want at the best possible prices. When they reported in 2009 they added over 400 tonnes to reserves it helped to goose the gold market.....ultimately costing them money if they wanted to buy more. Trading appreciated USTreasuries/USDollars for depreciated gold makes sense for the Chinese. Holding $60 BILL in gold reserves against $3.8 TRILL in overall reserves is a pittance (1.6%)....placing them in the bottom 10% of all nations. Iceland, Bangladesh, and Peru have a higher % of gold to overall currency reserves.
Before this release, I can't recall one analyst who anticipated a number lower than what was reported. During the 2009-2015 period the Chinese imported/mined 6,000-7,000 tonnes of gold. It seems illogical that the PBOC only purchased 604 tonnes. It's probably more important how much gold went into China than just into bank reserves.
From derryb's thread earlier today:
My question- since when did anyone start believing official reports from the Chinese government?
Seriously. The Chinese have a vested interest in understating their gold holdings.
They know that doing so will push the price of gold LOWER, which is exactly what they want.
China is sitting on trillions of dollars in reserves right now, a portion of which they’re rapidly trying to rotate OUT of US dollars.
So it’s clearly beneficial to the Chinese government if they can sell dollars while they’re strong and buy gold while it’s cheap.
And if they can push gold to become cheaper, even better for them.
No one but China is sure of what gold China has been buying. We only know what China wants us to know. The very recent delay in admitting the yuan into the IMF SDR basket is likely to result in repercussions. I would not be surprised to see China make sudden effort to drive up the gold price in retaliation. A weak gold price has been an asset to the US's economic policy and economic direction.
Most forget that there is an unkown reason why China took possession of the US's largest vault which is coincidentally located across the street from the NY FED.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Makes collusion that much easier and more convenient, when the time comes.
I knew it would happen.
<< <i>Gold is caught up in the deflationary hurricane's affect on commodities.
No one but China is sure of what gold China has been buying. We only know what China wants us to know. The very recent delay in admitting the yuan into the IMF SDR basket is likely to result in repercussions. I would not be surprised to see China make sudden effort to drive up the gold price in retaliation. A weak gold price has been an asset to the US's economic policy and economic direction.
Most forget that there is an unkown reason why China took possession of the US's largest vault which is coincidentally located across the street from the NY FED. >>
???? We know what they are buying, real estate, you just posted that...
<< <i>
<< <i>Gold is caught up in the deflationary hurricane's affect on commodities.
No one but China is sure of what gold China has been buying. We only know what China wants us to know. The very recent delay in admitting the yuan into the IMF SDR basket is likely to result in repercussions. I would not be surprised to see China make sudden effort to drive up the gold price in retaliation. A weak gold price has been an asset to the US's economic policy and economic direction.
Most forget that there is an unkown reason why China took possession of the US's largest vault which is coincidentally located across the street from the NY FED. >>
???? We know what they are buying, real estate, you just posted that... >>
The fact remains that we do not know how much gold China has been buying.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Gold is caught up in the deflationary hurricane's affect on commodities.
No one but China is sure of what gold China has been buying. We only know what China wants us to know. The very recent delay in admitting the yuan into the IMF SDR basket is likely to result in repercussions. I would not be surprised to see China make sudden effort to drive up the gold price in retaliation. A weak gold price has been an asset to the US's economic policy and economic direction.
Most forget that there is an unknown reason why China took possession of the US's largest vault which is coincidentally located across the street from the NY FED. >>
Considering the British Pound and the Japanese Yen are in the SDR basket, it would make sense that China should be. China's economy is >90% of the combined 19 nations in the Eurozone.
In fact, and I'm sure no one would be surprised by this
If China didn't buy as much, then that should have meant that that gold will still need to be bought, thus at the very least supporting prices. So has the drop really had nothing to do with Chinese demand? Or, perhaps as roadrunner alludes, is China manipulating the price lower through thir gold exchange? Or is it something else?
Knowledge is the enemy of fear
If in fact China has reduced their soverign gold purchases (Only China knows) then it was more likely because they realized that having it as a larger percentage of their central bank reserves did not influence the decision to include the juan in the IMF SDR basket as they assumed it would.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>When history is looked back upon, it will show china sold a crapload of gold... >>
Bingo.
Per day.
Think about it. If this hiccup really is their 1929 then in about five months they will have spent their 2015 GDP to support their market. Takes a lot of disposal of their liquid assets to do that.
You can bet that what they sell into the market is not an easy decision. Sell gold? Or sell UST?
If they sell UST you can be sure of reprocussions from DC.
I think China has made some terrific miscalculations. The music has stopped. Chairs are scarce.
<< <i>When history is looked back upon, it will show china sold a crapload of gold... >>
Not likely. Russia is in even worse economic condition than China as has sanctions applied. And those guys are reporting gold purchases nearly every month. +73 tonnes last month as I recall. If Russia isn't selling, I don't see China selling in secret. Again, why would they? $60 BILL in gold is barely one ante in a poker game where they have $3.8 TRILL in currency reserves, much of it in US dollar denominated assets. There would be zero reason to sell with such a tiny amount....only a reason to buy more. If they sold all $60 BILL is that really going to support their economy in any meaningful way? It would buy about 2-1/2 days of their annual GDP. That would similar to J6P "canceling" his home and car insurance policies for 2 days to "save money."
The much more likely scenario is that in the next 6 years, we're going to find out China's gold reserves are in the 2500-5500 tonne range....or greater. The nation mines over 430 tonnes of gold per year and none of it leaves their boundaries. Russia mines over 260 tonnes/year.
With articles like this - it surely was a disappointment to report 1,658 tonnes.
Russia adds 173 tonnes in 2014. Buys another 25 tonnes last month.
<< <i>When history is looked back upon, it will show china sold a crapload of gold... >>
Your views on gold and its role in economic matters indicate that you should be more concerned with the present.
History will not contradict recent years of China stockpiling gold. History is much more likely to show they stockpiled a lot more than they were willing to tell the rest of the world about.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Market take is that a potential big buyer is on the sidelines.
I've written here for the last several years that China will need to spend it's reserves to keep its people happy and working.
Knowledge is the enemy of fear
China's reserves
There's two types of demand coming from China - government and private. We saw reports of Chinese consumers in a rush to buy gold a year or two ago, but not so much lately. I wonder if the private demand is still there. On the government side, who the heck knows what the China.gov is doing?
We know they're doing side deals with just about everyone else in the world in bilateral agreements to get around SWIFT and American control. We know that. We also know that their economy is submarining at the moment. Hence the devaluation. What does that do for gold?
Hmmmm.....+$10.00 this morning. Like I said, who the heck knows?
I knew it would happen.
China gold holdings - public and govt
Knowledge is the enemy of fear
Liberty: Parent of Science & Industry
<< <i>If all the gold that China mines stays in China then how is it possible to Americans to buy gold pandas? >>
How many gold pandas do they buy? 1% of production? Heck, it's tough enough to get Americans to buy their own AGE's, never mind Panda's, Maples, Coronas, Philharmonics, etc.
How many Americans buy gold beyond wedding rings and a few pieces of overpriced jewelry? 1 MILLION? How many Chinese buy gold? 100 MILL? 500 MILL?
And for every Panda that escapes to J6P...there's probably more AGE's and US 90% classic coin gold that probably make it to China.
<< <i>Imagine if future people perceived a reduced desire to have shiny disks in lock boxes... and instead preferred increased ownership of useful property. >>
Yes. Like digitized cloud-based "shares" of Facebook, Amazon, Apple, etc. Shares that are in street name....not yours.
Those shiny disks have been desired for 3,000-5,000 yrs+. I believe the owners have always considered it useful property. They've fought wars over those disks....and still do.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Liberty: Parent of Science & Industry
More 1%ers have been created thru the acquisition of equities and land than gold.
Great question Baley.
Knowledge is the enemy of fear
We went into Iraq, Libya, Greece (surgically), etc. to get the gold....not take any land. What happened to the gold of Kuwait, Saudi Arabia, UAE, Oman, etc.? The gold comes first in today's world....oil rights second. And Greece will eventually cough some gold up. Who's up next? I hear there's a lot of gold in Spain, Italy, and France. If you're gonna fight over land, make sure you can do something it. Fighting over rugged mountainous terrain, deserts, etc. is not all that intelligent (Afghanistan). But, when they have some gold to take, well alrighty then.
<< <i>Oh, I didn't know this PM forum was only about benefiting the top 1%ers. If the top 1%ers benefit....it must be good for the other 99% too.............well, then carry on.
We went into Iraq, Libya, Greece (surgically), etc. to get the gold....not take any land. The gold comes first in today's world....oil rights second. And Greece will eventually cough some gold up. Who's up next? I hear there's a lot of gold in Spain, Italy, and France. If you're gonna fight over land, make sure you can do something it. Fighting over rugged mountainous terrain, deserts, etc. is not all that intelligent (Afghanistan). But, when they have some gold to take, well alrighty then. >>
you're raving. suggest having one of the half dozen drinks for the year.
Liberty: Parent of Science & Industry
Or slowly building a rational position in each, rather than clinging to a single one and living on a hope and a prayer that it "wins in the end"
Liberty: Parent of Science & Industry
Taxed in perpetuity.
I knew it would happen.
<< <i>Oh, I didn't know this PM forum was only about benefiting the top 1%ers. If the top 1%ers benefit....it must be good for the other 99% too.............well, then carry on.
We went into Iraq, Libya, Greece (surgically), etc. to get the gold....not take any land. The gold comes first in today's world....oil rights second. And Greece will eventually cough some gold up. Who's up next? I hear there's a lot of gold in Spain, Italy, and France. If you're gonna fight over land, make sure you can do something it. Fighting over rugged mountainous terrain, deserts, etc. is not all that intelligent (Afghanistan). But, when they have some gold to take, well alrighty then. >>
I think you should get that air conditioning. Your brain being fried. Lol
You, especially you, roadrunner have the ability to never worry about money, or taxes, or social blight. Go for it.
Knowledge is the enemy of fear
<< <i>I was referring to real estate
Taxed in perpetuity. >>
At potentially unlimited tax rates. You own property at the "pleasure of your govt" or municipality. If they suspect you have drugs or other contraband on your property....then it becomes their property, not yours. You have to fight in court at your own expense to try and get it back. "Suspicion of doing something" is now the rule of the land. Real estate (in general) had its nice 52 year run. It still has to complete the 26 year run to the bottom....and it's only 8 years into the consolidation. Maybe it moves sideways during most of that time. But don't expect a repeat of 1955-2007 until a LOT of time has passed. Some locations will fare much better than others.
I always try harder. But sometimes the fiat bugs just make it too damn easy. And back to Panda's again. China's exports are in such decline, it might be hard to find someone who actually bought a gold Panda outside China....lol. I will admit a forum member just claimed to have a bought a monster box of silver panda's. So there's one. And I forget to mention that Afghanistan does have one valuable natural resource worth fighting over...heroin. Argentina really "enjoying" this Yuan rout as they have 1/4 of their currency reserves in Yuan. They'd have been better off with that 1/4 of their reserves in gold. Even the Chinese people knew that.