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« Gold: Set To Make History | Main | Gold-prices.biz portfolio Update 17 September 2009 »
Thursday
Sep172009

Could China Push Gold to the Moon?

In this mornings mail bag we have this 'take' on gold by David Galland, Managing Director, Casey Research.

Inside sources have recently confirmed the Chinese government is actively promoting gold and silver investment to the masses.

Some analysts now contend that China can no longer afford to let the gold or silver price slump. The rationale behind that contention is that with the Chinese government now telling the general populace to buy precious metals, it would be highly problematic should gold and silver subsequently take a nose dive.

In many cases, what a government wants and what ultimately occurs can be wildly different, due to unintended consequences rarely foreseen by officialdom, and because once the masses get it into their heads to break one way or another, government’s desires are largely ignored.

“You shall not smoke marijuana,” says the government. “Roll me another,” says John Q. Public.

But in the case of gold, interestingly enough, the Chinese government has the means at its disposal to actually do something about prices. Namely, at $1,000 an ounce, the total value of all the gold ever mined comes to about $5 trillion.

Of that amount, less than $1 trillion is held in official reserves, the rest under mattresses, in jewelry and family heirlooms, and in various ETFs – GLD being the biggest, by far, holding about $34 billion worth of gold.

Against these totals, China has foreign reserves in excess of $2 trillion. In other words, more than enough to push the tiny gold market around in any way it wishes. Given that much of its reserves are now denominated in fragile U.S. dollars that it would sorely love to replace with something more tangible, and that China is the world’s largest gold producer, the country’s involvement with gold is something more than just a passing fancy.

Simply, there is a new gorilla in the room in global gold markets. The extent to which the broader market hasn’t yet figured this out is the extent to which you as an early mover can ultimately profit. Especially in the more leveraged gold stocks, which continue to be strong even as the broader markets show weakness.

That all of this comes before the dollar hits the wall it must hit, or before the inflation that is now baked in the cake arises, lends a lot of credibility to the idea that when the gold bubble begins to expand, it could reach all the way to the moon.

No need to chase gold at these levels, as opposed to buying on dips. But buy.

As mentioned above, gold stocks – especially those of the junior exploration variety – can provide an even greater upside than gold itself. As the subscribers of Casey’s International Speculator can confirm, double- and triple-digit gains within 12-24 months are nothing out of the ordinary. Click here to read more.

Have a sparkling day.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.







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Reader Comments (3)

I'm just wondering -- I can see why gold will go up soon, but does that necessarily mean that oil price will also rise for the same reason?  I'm not sure which market is more suppressed LOL!!  Thanks for your help.

September 20, 2009 | Unregistered CommenterG

I much prefer your comments rather than non-stop Casey editorials. You are under estimating yourself.
Del

September 22, 2009 | Unregistered CommenterDel Funk

Del,

We thought that we were in danger of becoming a little repetitive and that it would be a good idea to include other articles from other writers to broaden it out a tad.

Thanks for your encouraging words though they are appreciated here.

September 22, 2009 | Unregistered CommenterGold Prices

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