Does all the gold in China matter to the rest of us?

05-02-18
Does gold demand in China affect amateur investors? Does China affect whether I should buy gold? Should amateur gold investors worry about China? What is China's gold strategy all about? Could the Yuan replace the Dollar? Do analysts believe China is stockpiling gold? Is China driving the price of gold? Demand for gold by China continues to rise How much gold is actually being held by China? Is China increasing gold demand?

China is having an increasing influence on the global demand for gold and is now one of the largest bullion holders in the world.

Demand for gold in China has risen consistently over the last few years and many experts now believe that China accounts for a quarter of global gold and coin purchases.

How much gold is actually being held by China is a matter of increasing interest and conjecture amongst both followers of gold trading and international organisations such as the International Monetary Fund (IMF). It has been reported that China’s official holding (as reported to the IMF) is around 1100 tonnes. However other sources push that figure higher to around 1,800 tonnes.

There are gold analysts who believe China may have been stockpiling much larger quantities of gold (more than 20,000 tonnes) over many years as an insurance policy against severe volatility in world trade.

One such analyst is Alasdair Macleod who wrote an article titled “China’s gold strategy”. Similarly, other analysts – such as Lawrence Williams in one of his recent articles asks the question, “could China have as much as 30,000 tonnes of gold?”.

Much of this speculation is based on the premise that, in the event of a global trade melt down it is possible that the major western economies could take such a big hit as to potentially render the $US invalid as the world’s reserve currency. In such extreme circumstances, could the Chinese Yuan replace it?

In order for that to be a viable option, the Yuan would have to be seen to be backed by significant determinable assets (in order to establish its value legitimacy), and 30,000 tonnes of gold would go a long way to securing that position.

So is it just an insurance policy, and if so how does it affect the amateur or first time gold investor?

Well the answer to that is pretty straightforward (for now). Increasing the scarcity of gold on the open market undoubtedly has the effect of maintaining an upward pressure on the price of gold.

If China is really adding to this equation, then it is underpinning the investment potential of gold for millions of private buyers around the world.

So go ahead and buy now but keep watching the gold markets and how they react to changes in global trade and paper (bond) debt.

At the end of the day, gold has always been a secure financial investment and a hedge against market volatility in other instruments.

If it’s good enough for the world’s second largest economy, it’s probably good enough for the rest of us as well.

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About the author

Phil Blackett

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I am an entrepreneurial retailer and wholesaler with a strong track record of achievement and success in E-Commerce within a B2C environment.

For over 30 years I have successfully founded, created and operated businesses within Men’s High St retail and online optical. I’ve built successful, high-performing teams – both technical and non-technical and always enjoyed developing profitable, long-term relationships with clients. 

It hasn’t all been plain sailing. I’ve learnt some hard lessons along the way that have shaped my ‘people first’ approach. I have a laser focus when it comes to margin, I believe profit tops turnover, cash is king and putting the customer first builds the right reputation. I’ve worked extensively with clients and suppliers all across the globe – giving me a truly international perspective in understanding cultural nuance and sensitivity.

By the very nature of my career to date, I have a very broad business experience and perspective. From developing international supply chains, merchandising and store design to raising VC funding, negotiating with banks and property agents and building high performance E-commerce sites – I believe I can bring value and insight to solve a broad range of business challenges.

Throughout my business career hindsight would have been a wonderful thing. I feel that I’m now able to share my knowledge and experience with others and help them avoid pitfalls and overcome the challenges that I’ve faced over a thirty-year career. In addition I believe my e-commerce knowledge and experience is very much at the cutting edge – enabling me to not only support ‘traditional’ small business – but also add value to those looking to establish themselves in the digital economy.

Additional Skills

E-commerce business seeding and transformation

I am also a Director of London Gold Bullion.

https://www.londongoldbullion.co.uk

 

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