Daily Commentary

Investment Demand For Gold In China Surges 176%

by Joe Battaglia
Posted: October 22, 2009

Gold and silver are correcting again with gold testing the $1,050 level one more time.  However, that level is holding very nicely.  Gold is down $10, silver down $.39, oil down $.89 and the dollar on a big rally, which is prompting the commodities to correct.  The dollar is up 34 basis points at 75.31.  The equities are also lower, with the Dow down 7 and the Nasdaq down 13.  Clearly, the metals and other commodities continue to track the dollar closely.  When the dollar falls the commodities including metals go up, and when the dollar rises the opposite occurs.

The Conference Board reported that the September leading indicators index rose 1% last month.  That was slightly above expectations.  Moreover, while the economy is recovering according to Fed officials, it is doing so at a tepid pace.  Fed Governor Rosengren and others are saying that the Fed will have to be cautious about raising rates and do so at a slow pace.  However, the Treasury says the government is beginning to wind down the TARP program even though the financial system is still fragile and several markets are still impaired. 

Yesterday, the White House indicated that they are going to restrict bonuses to employees of seven of the banks and companies that got the largest amount of TARP funds.  Noticeably absent from that group was Goldman Sachs.  Of course, Goldman and some other banks have actually repaid the TARP funds, so probably the government has no jurisdiction over them.  However, it is interesting to observe how some of these huge banks get all the benefits and none of the risks. 

The Dow Jones Wire Service reported: "A stronger global economy, and unchanged policy stance by major central banks and a weakening dollar increased investment demand for gold in the third quarter, the World Gold Council said Thursday."  They added: "Moreover, we saw an improvement in risk appetite during the quarter, which also put more downward pressure on the dollar as investors sold U.S. treasuries in favor of higher yielding assets overseas, further increasing demand for gold as a dollar hedge."

Demand for gold in China is so strong, that the country imported a net 112 tons last year.  This is in spite of the fact that China is the biggest gold producer in the world.  Dow Jones Wire Service reported that the demand for gold in China was driven by a 176% growth in investment demand and a 21% growth in jewelry demand.  The article further said: "For the next five years, China will still be a net importer."  China has been apparently buying gold on the dips and the demand there is stupendous.  Some analysts say the demand for gold in China will exceed that of India, which imports the most gold of any country. 

Looking at that data, it would appear that the fundamentals for gold are constructive as global mine supplies seems to be continuing to decrease while demand is growing aggressively.  

In economic news, employers took 2,561 massive layoff actions since September that resulted in the loss of 248,000 jobs.  New claims for unemployment were ahead of expectations as the economy lost 531,000 jobs in the week of October 17th.  As Eric Hommelberg recently said: "There is a lot of talk about recovery but the simple truth is you can't have a recovery without people getting back to work."  In a report yesterday, Hommelberg forecasted that gold will be above $1,250 an ounce within the next six months.  He joins a growing chorus of analysts who believe the gold market will continue to forge higher over the next several years. 

Investors may wish to take advantage of this period of correction and consolidation to either add to holdings or to begin new holdings.  As I said yesterday, consider utilizing Goldline's Price Guarantee Program to protect you from further corrective moves in the markets.  Ask about the details by calling Goldline at 1-877-341-2646.  In addition you should be sure to ask for the free information package, which will provide you with excellent information from major banks, brokers, strategists and economists.  The information will include forecasts for the precious metals and an excellent explanation of the problems facing the U.S. dollar.  Call Goldline now for the free information at 1-877-341-2646.

Investors should ask Goldline to explain the features, benefits and cost structure of the various gold and silver investments that are available to you.  Select those that best meet your own personal and individual investing needs and objectives.  Investors looking for low transaction costs may wish to consider bullion assets such as American Eagles, Swiss 20 Francs, Krugerrands, Canadian Maple Leafs, Silver Bags or Silver Bars.  However, the Price Guarantee Program is not available with these assets.

If you would like to take advantage of the Price Guarantee Program, which provides you with a two-week window of opportunity in which to re-price your order in the event of a correction, you must select assets with some collectible value such as 20 Francs, Double Eagles and Silver Dollars.  Call Goldline at 1-877-341-2646 for further information on the Price Guarantee Program.

To receive the free information package on gold investing call Goldline at 1-877-341-2646. You will also receive the Client Account Agreement, a company brochure and a Coin Facts Risk Disclosure Booklet, read these carefully before you make an investment.  Call Goldline at 1-877-341-2646 now to receive your free gold investment package.

 

^{You should carefully read Goldline's Account and Storage Agreement and our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider. These provide important information that you should consider before investing in precious metals. Goldline's spread, which is the difference between the price we sell our products and the price we buy them back, generally ranges between 5% to 20% on our most common bullion products and 30% to 35% on all other products including our popular semi-numismatic coins such as the European francs, proof coins and graded coins. The market must go up enough to overcome this spread before an actual profit is achieved. All markets go up and down. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average portfolio though others may recommend a different percentage. Please see Goldline's risk disclosure materials for additional information.}

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