Listening to the financial media, you might be convinced that the precious metals – gold in particular – are simply not considered reliable investments anymore. This is a viewpoint peculiar to the West, as Peter Schiff has repeatedly emphasized. However, every now and then, the mainstream media shares some news reminding us that while Americans and Europeans might be disenchanted with the yellow metal, other countries are still very concerned with protecting their savings with the hard asset that has served as a safe-haven for thousands of years. Often that news comes from countries that have a much longer history of troubled economies, and therefore a greater understanding of what assets carry real value in this world.
Today, for instance, Bloomberg published two stories about central bank and Chinese gold demand. In the first, “China May Boost Gold Reserves Amid Imbalances in Holdings“, Bloomberg reports on research from the London-based Official Monetary and Financial Institutions Forum. David Marsh, managing director of the Forum, reminds us that while China hasn’t officially announced an increase in its gold reserves since 2009, there is a good chance that it will very soon. Marsh vaguely suggests that China has been adding to its reserves since 2009 “in different ways.”
Additionally, Bloomberg notes that according to the official figures, Russia has surpassed China to become the fifth-largest gold-holding country in the world. In general, central banks of the world have been net buyers of gold for 14 straight quarters, or 3-1/2 years. So while Wall Street speculators might have been shying away from the yellow metal since it has come down from its 2011 peak, the powers that actually control the world’s money supply have been gobbling up gold. As Marsh puts it:
“Gold will become more traded amongst central banks in the next 30 years because there are colossal imbalances in world gold holdings as a percentage of overall asset reserves.”
Bloomberg’s second article on Chinese gold demand notes that the Chinese Gold & Silver Exchange Society of Hong Kong has become the first non-mainland entity to be allowed warehouse access by China. Construction of the new vault storage facility will begin in Shenzhen next year. It will have a capacity of 1,500 tons. This is just another signal that China is preparing to position itself as the hub of the international gold trade in the years to come.
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