Editor's note: My friend David Galland is one of the most plugged-in guys in the world when it comes to gold and natural resource investment. So when he comments on something related to the industry, I always pay close attention. In today's issue, we share David's take on a huge trend in the gold market right now. Read on to learn...
Could China Push Gold to the Moon?
By David Galland, Managing Director, Casey Research
Saturday September 19, 2009
Inside sources have recently confirmed the Chinese government is actively promoting gold and silver investment to the masses.
Some analysts now contend that China can no longer afford to let the gold or silver price slump.
The rationale behind that contention is that with the Chinese government now telling the general populace to buy precious metals, it would be highly problematic should gold and silver subsequently take a nose dive.
In many cases, what a government wants and what ultimately occurs can be wildly different, due to unintended consequences rarely foreseen by officialdom, and because once the masses get it into their heads to break one way or another, government's desires are largely ignored.
"You shall not smoke marijuana," says the government. "Roll me another," says John Q. Public.
But in the case of gold, interestingly enough, the Chinese government has the means at its disposal to actually do something about prices. Namely, at $1,000 an ounce, the total value of all the gold ever mined comes to about $5 trillion.
Of that amount, less than $1 trillion is held in official reserves, the rest under mattresses, in jewelry and family heirlooms, and in various ETFs – GLD being the biggest, by far, holding about $34 billion worth of gold.
Against these totals, China has foreign reserves in excess of $2 trillion.
In other words, more than enough to push the tiny gold market around in any way it wishes. Given that much of its reserves are now denominated in fragile U.S. dollars that it would sorely love to replace with something more tangible, and that China is the world's largest gold producer, the country's involvement with gold is something more than just a passing fancy.
Simply, there is a new gorilla in the room in global gold markets. The extent to which the broader market hasn't yet figured this out is the extent to which you as an early mover can ultimately profit. Especially in the more leveraged gold stocks, which continue to be strong even as the broader markets show weakness.
That all of this comes before the dollar hits the wall it must hit, or before the inflation that is now baked in the cake arises, lends a lot of credibility to the idea that when the gold bubble begins to expand, it could reach all the way to the moon.
No need to chase gold at these levels, as opposed to buying on dips. But buy.
Sincerely,
David Galland
P.S. As I mentioned above, gold stocks – especially those of the junior exploration variety – will explode to the upside as the bull market in gold progresses. As the subscribers of our junior resource advisory service International Speculator can confirm, double- and triple-digit gains within 12-24 months are commonplace... along with occasional 1,000%+ gains.
If you'd like to join us in finding the best opportunities in this market, click here to learn more. |
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52%
Year-to-date gain in the price of silver. Silver is considered both a monetary metal (like gold) and an industrial metal. |
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