Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China's Growing Impact on the Global Gold Market

Commodities / Gold & Silver 2009 Sep 13, 2009 - 05:07 AM GMT

By: Lawrence_Williams


There is little doubt that China nowadays has the financial muscle to effectively control the global gold price.  The mere sniff of a report that it is taking gold into its official reserves to counteract dollar decline is sufficient to, at the least, stabilise the gold price - and there seems to be little doubt that it is so doing, but at the moment in a manner that is not designed to de-stabilise the dollar or, on the other hand, not to contribute to a quantum leap in the yellow metal's valuation - yet.

But - should China wish to de-stabilise the dollar by announcing big gold purchases into its reserves to replace a good proportion of its trillions of dollars, there is also little doubt that it could do so.  It is an economic weapon which perhaps has more power than a nuclear one if it wished to bring America, and the West, to its collective economic knees through currency war.  But again that is not seen as an option - or at least not until the country's domestic market is big enough to soak up all the manufactured goods China can still sell to the West. 

Thus China is still very dependent on export markets, so revaluation of the renminbi is not seen as helpful and dollar decline has to be worrying.  So the country has to move cautiously to retain some kind of global economic equilibrium.

But noticeably, China is already exerting its financial dominance.  It has said its mostly state-owned financial organisations will have the right to default on some of the more dubious commodity and financial related derivative trades that they may have entered into.  This has only raised a muted response from those financial institutions which could be affected because it is China's financial muscle which is beginning to call the tune in world financial circles - not the mighty U.S.A. any longer.  But it could lead to more grief in western financial circles and the already stressed banking system.

Its state-owned enterprises are on a massive buying spree of western assets, both as an investment and, in the case of the mining sector, to tie down future strategic resource supplies.  In perhaps a conscious effort to allay suspicions of Chinese motives in many countries, much of this is via significant minority stakes in western companies tied to long term supply deals.

But back to gold.  We reported here that a top Chinese official virtually admitted China was buying gold, but in a way which was designed to maintain at least a reasonable degree of stability in the markets and not rock the gold boat.  If this is true, and there is little reason why it should not be so then this will effectively mean there is little or no serious downside risk in buying gold.  But China can also control the upside, as it may not wish to precipitate a big dollar collapse which would be the likely outcome of a big gold price rise.

We reported also, in an article which virtually went viral on the internet and has been picked up by many other commentators (China pushes silver and gold investment to the masses), that Chinese state organisations are selling, like soap powder, the advice to buy gold and silver to the general populace - which already has a gold purchasing psyche.  As a result China is likely to surpass India as the world's biggest precious metals purchaser this year or next.  It also lends support to the country's domestic gold mining industry - China is currently the world's largest gold producer and is a country where output is continuing to rise.  Chinese domestic gold purchases rose 14% year on year in the first half of the year to 446.6 tonnes and industry analysts expect double digit growth to continue in the curent half year, even with gold at over $1,000.

This too provides a massive underpinning of the gold price at, at least, around current levels.  It is apparent that buying has been coming in every time gold dips and the suspicion is that this is by the Chinese, but it is well enough hidden that it is difficult, if not impossible, to clearly define the source.

At the moment gold seems to be holding up well close to the $1,000 level despite the huge degree of profit taking which comes in at psychological levels like this.  The suspicion is that China may wish to see $1,000 gold, or thereabouts, as a new floor, but there is unlikely to be any official recognition of this and we will have to wait and see whether the supposed Chinese underpinning of the market is reality - or yet another gold bug's dream.

By Lawrence Williams


Global Research Articles by Lawrence Williams

© Copyright © Copyright Lawrence Williams, Global Research, 2009

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in