- Published on Thursday, 27 September 2012 12:27
- Written by Karim Rahemtulla, Guest Editor, Inside Investing Daily
- Hits: 803
Our global competitors in China are buying gold at an eye-opening pace. It may be bad news for Uncle Sam, but it is great news for gold bugs.
An interesting and telling statistic crossed my desk the other day...
For the first two months of last year, Chinese gold imports from Hong Kong hit around 11,000 kilograms. This year, that number was more than 72,000 kilograms during the same time period.
China, by all accounts, is accumulating gold at a record pace. And with the amounts we're talking, it's not a stretch to assume that the bulk of the purchases were made by the Chinese government.
Even more surprising, though, is that the country also continues to export gold and has taken the spot as the world's top gold producer.
In fact, while researching world gold production, I noticed that the figures, which parallel China's meteoric rise as an economic power, are absolutely astounding.
Let's take a look...
Back in 1970, China didn't even register as one of the top gold producers. The top five producers at the time were South Africa (67%), the former Soviet Union (13.7%), Canada (5.75%), the United States (3.7%) and Australia (1.3%).
Then, in 1995 -- coincidentally, right around the first time I visited China to cover its emergence into the "capitalist world"-- China made its debut on the Top 10 list at No. 6, with 6.2%. South Africa was still No. 1, but produced only 16.6% of the world's gold -- a sharp decline from 1970. The United States jumped to 13.7%, followed by Australia and Canada.
Fast-forward to 2011, and the numbers are quite eye-opening...
China's now the No. 1 producer on the planet, at 13.1%, followed by Australia, at 10%, the United States, at 8.8%, Russia, at 7.4%, and South Africa, at only 7%. (If you add the former USSR nations together, they still top the list.)
In the end, China's buying and hoarding of gold only bodes well for the price of the metal, going forward.
And since China has shown consistently that it's a patient investor that buys with an eye for the future, we're looking at decades of support for gold prices.
Bottom line: At some point, gold stocks will benefit from all of this buying. Right now, they trade at levels that are similar to when gold was under $1,000 per ounce. The ratio of the XAU gold index to the price of the metal is also signaling that it's time to buy gold stocks.
The real question is not if gold shares will go higher, but when.
Special Note: I hope you enjoyed my coverage of the "Roadmap of the New America" conference. We had a great time out in Vegas, and the attendees all enjoyed the valuable presentations and recommendations from our speakers. It was so successful that our executive director, Sandy Franks, spoke with a few of the gurus and convinced them each to write a special bulletin for our readers. So over the coming weeks, you'll receive these bulletins in place of your usual alert. Today's alert comes from Karim Rahemtulla. I think you're going to like it. And don't forget... if you weren't able to join us for the conference, you don't have to miss out. Follow this link to check out everything you missed...
Your No-Longer-Roving Reporter,