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China really loves gold – and it understands gold better than any Western nation.
It's no secret that the People's Bank of China has been buying the yellow metal for years, shoring up its reserves. And the country's central bank may have been buying for decades before it became at least a little more transparent.
Recently, however, the Chinese central bank has been among the world's most aggressive buyers of gold.
In fact, there are some clues that point to the fact that their actual gold holdings are a multiple of what's actually being reported in the financial press, which in turn points to a shocking long-term strategy: a move to link or back the yuan with gold.
The implications of this would send shockwaves through the world economy, so it makes sense to start getting ready to profit right now…
China and Russia Are Leading the Charge to Buy Gold
For nearly 20 straight years until 2009 and 2010, central banks were net sellers of gold. Between 2003 and 2008, central bankers sold 2,846 metric tons of gold.
And then, as the world was exiting the worst of the financial crisis, something strange happened: The trend reversed in a sea change for the gold markets. Between 2009 and 2014, the banks bought 2,301 metric tons, making for a 5,147 metric ton swing to the upside.
According to the World Gold Council, they bought 477 metric tons in 2014 alone, the second-highest level in 50 years and a 17% jump over 2013.
Now, both China and Russia have accumulated large proportions of their central bank reserves in U.S. Treasuries, and they're growing increasingly anxious to diversify away from that "asset." Gold makes for a great alternative, especially after such a sizeable decline in price over the past four years.
Russia alone gobbled up a whopping 173 tons last year, adding 10 to 25 tons monthly in the past five years.
And, after six years with no updates, China finally broke its silence to announce a 60% increase in reserves to 1,658 metric tons. In the third quarter of 2014, they added another 50 metric tons.
Those are the official numbers, and they're robust enough. But what's happening off the books is truly incredible…
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About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.
Well articulated point, presented convincingly.
Well done Peter. You do a good job.
One quibble … I'd be VERY careful about holding renminbi (yuan) short term. The Chicoms are clearly interested in devaluing the currency at the moment to wrest back some competitiveness and teach the criminal, arrogant Fed a lesson or two.
Last thing: Thanks for always posting comments, even if they're mildly challenging. That's a refreshing change from what happens to comments submitted to other MM newsletters that either get censored or live in limbo land … "awaiting moderation" till kingdom come.
Looks like an interesting Newsletter. The areas covered are of interest to me.
Ed
OK- I never cared about money. I made it, spent it and gave it to those in need. I'm pushing sixty now and it is pushing back.
I have annuities, gold, silver, insurance, low risk stocks…
I have a 401k and IRA. I have a financial guy to deal with the "money" because I have never cared about it.
As a newbie to the MM site that I stumbled upon today, how do I proceed?
Seems that everyone has a different idea of what is the right move.
Do I doubt the man that has been handling my money for years.
I think at this point in my life, learning the ropes of MM isn't going to be easy. That said, I do appreciate the free newsletter and the option of hearing other views on metals and their value…Past, present and future.
Metals is the one area that my financial guy keeps me from.
I like gold and silver and have it in solid form and "on-hand"
Thanks for the chance to watch some pros from the side lines.
If I'm not careful, I might just learn something.
Do I doubt the man that has been handling my money for years?"
Speaking as a former broker and pension consultant who knows how the financial planning / money managing game works …
YES.
Metals is the one area that my financial guy keeps me from…
Is that because he doesn't earn a commission from them? (Buy or Sell?)
W.
Great investment read. Can't wait to check out the suggested buys.