Precious Metals Market Analysis, By Michael Pennington (Copyright 2010 Pennco Coins)
In the past, whenever I discuss the DEMAND for Gold I always remind the reader that very few people actually own physical gold or silver. In the United States, for example, only 1% of the citizenry own Gold or Silver. I always like to add, imagine what the price of gold would be, if 2% or even 5% of the U.S. population purchased and owned Gold or Silver? The price would increase to astronomical levels.
Now let’s translate that into China’s population. Last week, China’s Central Television, the main state-owned television company, carried a news program letting the public know how easy it is to buy precious metals as an investment. As for silver investments the announcer is quoted as saying ” China has introduced its first ever investment opportunity for silver bullion. The bars are available in 500g, 1kg, 2kg and 5kg with a purity of 99.9%. Figures show that gold was fifty times more expensive than silver in 2007, but now that figure has reached over seventy times. Analysts say that silver has been undervalued in recent years. They add that the metal is the right investment for individual investors and could be a good way to cash in.” Apparently China is pushing the idea of buying gold and silver for investment purposes to the general population in the way that Western television sells soap powder. If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market!
What appears to have happened in China is a total relaxation of any restrictions on holding precious metals by the individual with the government pushing gold and silver as an investment option, seemingly at every opportunity. This is a far cry from the situation only a few years ago where the distribution of gold and silver was strictly controlled. Now, the Thunder Road Report notes that every bank will sell gold and silver bullion bars in four different sizes to individuals and gold related investments are said to be soaring in popularity.
The Chinese are being converted from being the lowest per capita gold consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of gold is likely to exceed that of India, which has been for years the world’s biggest gold market. And one suspects that the potential for gold purchasing by individuals is only in its earliest stages. As more and more Chinese move into the cities and individual wealth grows, this trend is only likely to accelerate.
A report in “Miningweb.com” concluded: “Simply put, the Chinese government is trying to trigger a national gold craze…and it’s working. The Chinese public now has gold trading platforms on steroids…. …Also, for the first time in history, Chinese investors can even trade gold abroad (in London) with the swipe of a ‘Lucky Gold’ card. I can’t even get Bank of America to open a foreign currency account for me!
If the Chinese are indeed beginning to buy gold and silver as the Chinese media suggests then this has to be a strong signal that prices are going to rise, and perhaps rise dramatically, in the relatively near future. We await comment from other China watchers for confirmation of the gold and silver buying spree, but with global gold production currently in decline, even a small increase in Chinese buying could have a substantial impact on gold and silver prices.
Penncocoins - Precious Metals Market Analysis 