China have been introducing silver bars for investment. The state-run China Central Television (CCTV) is running a campaign encouraging the population to invest in gold & silver. Physical gold and silver investing has begun in China.
China's largest bank, the Industrial and Commercial Bank of China, created a new department to serve investors seeking gold and silver. The bank told Reuters the Chinese have a custom of holding gold as a form of personal wealth and its gold market could soar as people get wealthier. The Chinese government by encouraging its citizens to buy gold and silver is now held responsible for the gold price & silver price.
First it banned exports of silver, and then it endorsed gold and silver as investments for its people.
If the gold price falls the politicians will lose face and that would be political suicide in China, as Susan Shirk relates in her book China: Fragile Superpower...
Dogged by the specters of Mao Zedong and Deng Xiaoping, and the revered leaders who preceded them, China's current leaders feel like midgets, struggling desperately to stay on top of a society roiled by economic change. These leaders can't afford to look foolish, so they'll back up their words with deeds.
Consider what they've done already...
China has become the largest gold producer in the world (they passed South Africa last year).
In April, China's Foreign-Exchange Agency announced the purchase of an additional 16 million ounces of gold for state coffers. They want to diversify their reserves, replacing some of their U.S. dollars that are being devalued by the U.S. government, with something tangible - like gold.
In short, the Chinese government wants more gold.
They realize gold is one of the only buy-and-hold investments in the world right now. And they've got a lot of money to invest, nearly $2 Trillion according to a recent report in The New York Times.
Recently The Chinese Ministry of Land and Resources has completely rewritten the country's mining laws (known as the Minerals and Resources Law) to encourage local and foreign companies to explore for and produce more gold.
Once the Chinese Government gets behind a foreign company the stock price can become a sight to behold!
The government recently created the Shanghai Gold Exchange, to allow anyone to trade gold, on the open market, without government interference. China has a lot of money to invest... nearly $2 trillion. So the followers of Mao are telling their folks to buy gold with a wink and a nod.
While the government buys a bit of bullion on the sly, gold goes up, and they look great. Gold being a global commodity, an increase of Chinese buyers will increase the price of gold in the U.S. too.
It might not be a bad idea to buy what the Chinese are buying. With 300 million people in the Chinese middle class this is especially significant ... when you consider the average savings rate in China is 30 to 40%..... That's a lot of buying power.
You may want to own gold bullion for protection from our own government's policies.
Inflation is coming and there isn't any way around it. The policies that pulled us out of the recent economic crash put trillions of new dollars into circulation. That makes all of our existing dollars worth less... but it increases the value of copper, oil, and especially gold and silver.
This is a good reason to own, physical gold and silver as part of one's investment strategy.
By the way, you will want to buy bullion-- pure gold--not paper.
Buying exchange-traded funds (ETFs) or other electronic investments that purport to invest in bullion is NOT the same. When you buy a share of one of those, all you own is a stock certificate...
You don't have the physical wealth in your possession. The government wants to limit speculation on commodities through these vehicles - and you can be sure the gold ETFs will not be spared.
Tuesday, March 2, 2010
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