CHINA SYNDROME UPDATE
Oilprice.com/Dave Forest/ 7-13-2016
“Bloomberg broke the story late last week that China’s $40 billion Silk Road Fund is looking at buying its first gold mine. With the big buyer reportedly in talks over the Vasilkovskoye operation in Kazakhstan. Vasilkovskoye currently belongs to Glencore — a firm that is aggressively selling assets in order to pay down debt. And it appears the sale of Vasilkovskoye may go a long way toward that goal, with the Silk Road Fund apparently considering a price tag around $2 billion.”
MK note: This acquisition, should it become reality, is important for what it signifies. In recent months, China has revealed its determination to acquire producing gold mines wherever and whenever they become available. We see it driven by something elemental in the gold business and something every gold owner should take to heart. China understands the limitations to above-ground physical metal availability and has a long term strategy to deal with it. The market for gold could potentially become very tight over the longer term particularly if the global negative interest rate environment persists. The recent surge in gold demand from Japanese savers/ investors influenced by negative rates is a prime example of the trend. The best, and really the only, viable strategy available to the average private investor is to make his or her own acquisitions before the shortages manifest themselves.
Most, if not all, of the gold mined by Chinese companies is likely to flow back to China and into its reserves, the coffers of its banks, or the personal possession of its people. The Silk Road Fund is financed by China’s sovereign wealth fund, Export-Import Bank of China and the China Development Bank Corporation. In other words, the commitment to gold in China includes its biggest players and comes from the top.
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