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« TASEKO MINES LTD: Disappoints | Main | The HUI: Coiled up and ready to rocket »

An opinion from a Chinese reader

The following is an extract from a reader who lives in China. His perspective from the inside of China is very interesting and well worth reading.


From approved gold business in the year of 2001, China is just beginning for world marketing. But as being fond of gold and the trend of world economy development, China will be very important station in future market.

Recently our viewpoint for gold-price is following, price will break technology resistance of USD636 and keep it, so it will promote highly. From trend of short time, it’s possible that price rise to USD640-650 but we still need keep cautious attitude for this situation still meet much resistance from upper. The reason is,
Zhou xiaochuan, the president of bank of china, said that rate of development in economy will become a little slow that means Chinese inflation is still low accordingly. China will have the structural adjustment for foreign exchange reserve, which is more than one trillion, that means, reduce USD storage and increase another foreign currency to invest new market.

It wave instable for market of foreign exchange and for this time USD dollar still keep weakness, it’s possible to raise gold-price further. Marketing expert Mr. Dennis Gartman pointed in RBC Capital Market meeting that the gold-price still rise from the planning of central bank of many countries such as china, UAE and Saudi Arabia. Although this plan is promoted slowly, it continually is going on. Gartman estimated that china would increase a little foreign storage continually and slowly, so in the future of 15 years, the percent of Chinese storage will increase from 1% to 5%-6%. Gartman said that for USD dollar is still main storage currency in world and still has important condition in Chinese foreign storage, so Chinese government is impossible to reduce USD storage largely. But maybe china will gradually reduce USD capital and pay more attention to another currencies.

Currently global golden output per year is about two thousand five hundred tons and it totals about 506.4 trillion USD DOLLARS as USD 630 per ounce now, which is 5 percent of Chinese foreign storage. Now Chinese golden storage is about 600 tons by the government official, so if Chinese government buy more than 400-500 trillion USD dollar, it become 5-6 percent of world storage which will have 3000 tons demand in world market .For output per year in world is about 2500 tons, Chinese government will push price to top point.

Currently gold-price still located in high-risk perch relatively. As the investment to confront inflatable, its value to avoid risk is becoming weakness during the falling of CPI &PPI and inflation repeatability, which is the incessant admonition news from Unit state storage. From the point of view of technology, Market is still fluctuating.

To compare with same term in last year, before 9 months of this year, Chinese production gold is 169.281 tons, which augmented 12.615 tons and add 8.05%. From Jan to Sep, 2006, Chinese Smelt Corporation produce total production 81.744 tons, which add 19.31 percent than production during the corresponding period, last years.
The rate of Output per year in September in South Africa has dropped 5.1% to arrive 67.6 points.

The price of World base oil will become steady gradually under control of OPEC and it’s possible to rise a little continually .For the army of American will withdraw from Iraq gradually, so instability in condition of middle east will strengthen more.

Yours truly,

Danqing li

16 November 2006

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