Column: Top five contrarian commodity scenarios for 2025
Overall, the first part of 2025 is likely to be defined by a period of uncertainty.
Hedge fund gurus George Soros and John Paulson and central banks around the world are jumping back into the bullion market.
At MarketWatch, Myra P. Saefong, speaks to Kevin Kerr, president of Kerr Trading International, Brien Lundin, editor of Gold Newsletter and Mark O’Byrne, executive director at GoldCore about “unconfirmed speculation” that China – the world’s number one producer and second-placed consumer (at the moment) – is gearing up to buy up to at least 5,000 to 6,000 tonnes starting before the end of the year.
There is also “the potential for greater demand from unreported purchases by the People’s Bank of China, should they decide to again report an increase in their gold holdings,” [O’Byrne] said.
[Kerr said] “If China buys this much gold, that would exceed annual, global production of gold, he said. “We do not have enough gold for China to buy that much, and it will take China time to purchase this amount of gold.”
“There’s a significant discrepancy between domestic gold demand in China and the level of Chinese gold imports and production, and apparently this gap is being made up by central bank gold purchases,” said Lundin.
“We will know in time, but the bottom line is that China is … consuming an ever-growing portion of global gold production,” he said. “This forms a floor under the gold price, which is why the most pessimistic assumption of downside targets in gold corrections have always been far off the market.”
Global gold mine production has averaged roughly 2,600 tonnes per year over the past five years, according to the World Gold Council.
Central banks went from net sellers to net buyers during 2009 while recycled gold supply has declined over the same period to constitute around a 1,000 tonnes or less than a third of annual supply.
China produced 380 tonnes of gold during 2011 – over a 100 tonnes more than its nearest rival. The country is preparing to launch direct interbank gold trading – a banned activity at present – at the end of August as part of a broader set of banking reforms.
11 Comments
ree
As a Taiwanese, I learned from my grands that : always holding as much gold as you can !!! we had a very hard days during 1940–1960 , we totally understand the value of gold, we know what will happen in a fiat currency crisis, it happened to my grands !!! I heared the story over and over again about how a rich man become poor in just ONE NIGHT!! Hold on to Gold my friends!!
FrParlentAuxFr
Well as a French man, I am very fond of the bimettalic standard, which as you can read from Friedman and others was more flexible that the Gold standard. So I have a kind feeling for Silver, but I should not be alone given that Asia was on a Silver standard up to 1930s.
OnlyObserving
China has $3 trillion in US dollars. 6000 tonnes is only about $300 billion. So that is not a very big deal for China. Besides, they have been selling treasuries and have sold about $300 billion or so over the last year (Japan has taken up that slack and has bought about what China has sold in US treasuries). Perhaps, China will pony up $30 billion and buy up all the available silver bullion in the world (only about a billion ounces is available).
Tukaluk
What makes this issue big news? China has always made big progress while other nations sleep.
Larry
Lucky Larry
What China needs is some make believe money like our great federal reserve notes. Oh I forgot. They have piles of that they are trying to get rid of. Maybe that is why they switched to gold. There are some Americans trying that. Trouble with that is our corrupt government has frozen the gold market. Goddamn you people — first you invite comment then block it!!!!!!!!!
Robert
John Paulson is a ‘hedge fund guru’? He lost nearly half a billion dollars in 24 hours on his Sino-Forest bet. Doesn’t sound like much of a ‘guru’ to me.
Bob
Buy gold with some caution. Since China’s purchases of gold has laid a floor for gold prices, what happens if a poor economy finally forces China to stop buying gold. What if China decides to start selling some of their gold. The gold price could drop just fast as it rose, possibly much faster.
Tommy
China doesn’t sell Gold. It isn’t just another asset, so don’t worry, China knows what it is doing.
rene Coda
Out of a catastrophe, do not expect China to ever sell the gold it owns. It is only getting out of the doomed US dollar. Chinese know full well that you don’t own gold to make more money but as a mean of survival. I am laughing at the stupidity of Westerners when they talk making money from gold. Out of Germany which is piling up gold, all the others are lamentably bankrupt.
Charles of the Casbah
China’s poor economy is backed by trillions in reserves. I reckon they can spread the manure they hold in reserve pretty broadly and deeply in their desire to protect against profligate debasing by Western governments.
therooster
The conditions you’ve outlined will definitely lead to lower currency values