Chinas exploding gold imports power Perth Mint to record profitsPosted on — Leave a comment
One of the worlds major sovereign producers of gold and silver coins and bullion, the Perth Mint, is reporting record profits for the past two quarters.
The driver? China. In terms of gold bars, cast bars that we are selling, a lot of that is going into Asia, primarily into China, CEO Richard Hayes asserted.
The Chinese remain very, very big buyers of bullion, mainly because they are pretty long U.S. dollars and one of the ways to diversify out of that is to swap those U.S. dollars into gold.
Paper holdings still dwarf gold stash: Thats true on the sovereign level, with Chinas officially reported reserves now at 1,762 tons, the sixth-largest bullion holdings in the world, although some experts think Beijing is vastly underreporting the true size of its gold stash. Moreover, China still has to play a major catchup game in order to boost its gold reserves to a level appropriate enough to back up its roughly $3.2 trillion in foreign-currency reserves.
Gold for heavyweight status: Chinese officials apparently have adopted the philosophy that if youre going to be a heavyweight, you need some heavy metal, noted University of Georgia historian Stephen Mihm in a March 17 Bloomberg op-ed titled Why Canada is dumping gold and China isnt.
A traditional gold-import center for China remains Hong Kong, but as analyst Lawrie Williams has observed, the mainland is increasingly importing gold directly from locales such as Switzerland, completely bypassing Hong Kong in favor of its growing gold hub of Shanghai. (Maybe some of Venezuelas recent gold exports to Switzerland will be finding their way to Asia.)
Cash fleeing China into gold: And its not only Chinas leaders who are trying to get out of U.S. dollars its citizens are trying to elude Chinas own capital controls.
Commenting on a recent Wall Street Journal article titled China, fighting money exodus, squeezes business, CNBC star Jim Cramer commented: The big takeaway from this piece is buy gold, buy gold, buy gold. Why? Because I think a lot of the money thats fleeing China is going into gold. If youre a Chinese investor worried about a slowing economy coupled with a currency that keeps getting devalued, you want to hide your cash in a hard asset thats good at retaining its value in times of economic chaos.
Imports up 1,000% since 2010: Although Chinas major gold-buying holiday, the Lunar New Year, ended in February, its overall demand trend line remains upward, hence the Perth Mints record profits. Chinese imports of gold since 2010 are up more than 1,000%, Bloomberg precious-metals analyst Ken Hoffman noted on March 22.
Thats a whole lot of gold, and that could mean a whole lot more profit reporting at the Perth Mint in years to come.
Asked about Chinas end game regarding gold, author Willem Middelkoop told The Epoch Times: They have a longer-term plan in which gold plays a more prominent role.
They are planning for the next phase of the financial system where gold plays are a more dominant part of the system. I think the Chinese think gold prices will go much higher.