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Gold
continues to do well.
As
time passes that 400 ceiling is making every effort to become a floor. While
this year seems to drag on this inevitable slow consolidation period is
necessary before gold continues its longer term trend climbing higher. And
further evidence of gold’s unending battle to conquer 400 as a floor
for the gold price…
“If
gold is able to conquer 403 I expect a quick move to 405.00 with potential to
climb to 411.00…” Scotia Mocatta, 8-17-2004
How
about that! Gold continues to show more strength with each passing day! And
look at the headline below.
“Nevertheless,
barring sudden strength by the U.S. dollar, bullion prices are likely to
remain solidly underpinned by support at US$400/oz, US$398 and US$395,
traders and analysts said.” Nicholas Sinclair, Dow Jones Newswires,
8-19-2004
The
world is definitely turning to gold. What is that old saying? Every dog has
his day? Well, as time passes gold will have many, many more very favorable
days. Too many growing financial problems & there must be one stable
currency for the world to trust. The world is a dangerous place & is
becoming more so every day. And if the world has you frightened & worried
the following story may even frighten you more.
“Jenna caught it. Jenna caught the
fish!”
“Bush
shouted to journalists from his father’s boat.” Scott Lindlaw,
Associated Press, 8-7-2004
Our
world is becoming a more treacherous place. But in the middle of all these
crises I feel comforted & at peace to know that “…Jenna caught the fish…”
And
more?
“Rods
& reels in hand, the family set out together in the morning on the
Fidelity III, the new powerboat. Three 275-horsepower engines rumbled beneath
the boat, which can reach speeds of up to 75 mph.” Scott Lindlaw,
Associated Press, 8-7-2004
Yes,
good to know that while our sons & daughters are dying in Iraq that Bush
is making every effort to make certain that there will be a continued need
for all that Iraqi oil as he powers up that new speedboat with not 1, not 2,
but 3 - 275 horsepower engines.
And I
know the fishing & boating industry is happy as they watch Jenna catch
her fish & observe Daddy riding off into the sunset in his gas guzzling
power boat.
“Earlier
Saturday, several family members climbed onto the family speed boat for a
fishing expedition. One of President Bush’s twin daughters reeled in a
38-inch striped bass, the president announced.” Scott Lindlaw,
Associated Press, 8-7-2004
And
don’t you dare give me any grief for bashing Bush since you let me get
away with bashing Kerry last week. I think all of us should take every
opportunity to whack our leaders & leader wannabees. It keeps them
(hopefully) humble.
But let’s talk about China & gold.
I know
the subject of China & Asia is probably beginning to bore you. Very
repetitive message it seems. The same ole’ story over & over again
& retold by every writer under the sun. But do you think the sailor
should ever tire of looking at the light house?
Focusing
often on China & Asia may bore you to tears but what is unfolding in that
part of the world will probably grow to have a very considerable impact on
both your life & your children’s lives for the next several
generations.
And
when we discover something influencing profoundly our children’s future
welfare & prosperity then its best to listen again & again &
again…& then again if necessary.
“Tensions Rise as Economic Power Tilts” James
Cox, USA Today, 8-11-2004
And?
“China
spends its dollars on U.S. Treasury securities, and, by doing so, helps keep
interest rates down for American borrowers.” “That’s good,
right? Not necessarily, says Jeffrey Garten, dean of the Yale School of
Management. “It’s a sword
of Damocles over the United States. We never want to be in a position
where any foreign government has so much influence over our interest
rates,” he says.” James Cox, USA Today, 8-11-2004
Now
here is an interesting point. Most folks in this country are apathetic to
China’s growing potential strangle hold on the U.S. & do you ever
wonder why?
“The
USA is the world’s largest economy, with annual output of $11 trillion.
China, No. 2 at $6.5.trillion, is the fastest-growing economy, barreling
ahead at average annual growth rates of 9% a year. In 2002, China surpassed the USA as the worlds leading destination
for foreign investment.” James Cox, USA Today, 8-11-2004
The
U.S. doesn’t seem too concerned about Chinas growing economic might.
Maybe the U.S. of A feels that if the competition just gets too tough
we’ll just go over there with a few troops & guns & bring the
country under submission.
“Yet
China isn’t emerging so much as re-emerging. The Chinese economy
outperformed Western Europe’s for more that 1,000 years, until the 16th
century.” James Cox, USA Today, 8-11-2004
Yes,
while our ancestors in Europe were living in squalor during the Dark Ages
China was a technological marvel whose people were living with an extremely
high standard of living. And when Marco Polo returned to Europe to tell of
the fantastic sights & innovations he had seen there every European
thought he was a liar & nuts.
China
today is re-emerging as
a super power.
“By
2020, China will have a middle class of 200 million, vs. 186 million for the
USA, says Ming-Jer Chen, a business strategy expert at the University of
Virginias Darden Graduate School of Business Administration. At that point,
he predicts, Americas service-based economy will find it is competing on new fronts with the Chinese
– battling for dominance in banking, insurance, telecommunications
& other service industries.” James Cox, USA Today, 8-11-2004
And
more?
“American
manufacturing workers earned an average $16.14 an hour in 2001. Their Chinese
counterpoints earned 61 cents a hour…” “If anything,
Yale’s Garten says, Chinas impact
on the U.S. economy is only going to grow. The two countries
will struggle to make room for one another, he says.” James Cox, USA
Today, 8-11-2004
Let’s
read that last text again.
“The two countries will struggle to make room
for one another…”
This
kind of reminds me of the story of ancient Carthage & Rome. One super
power lived in the West & the other super power maintained its empire in
the East. And for a long while the two great powers traded with one another
& made money off of one another. But as time passed the two growing &
expanding powers began to compete for the same limited resources &
profits.
And
that is the situation we are going to find between China & the U.S. Our
resources (including oil) are quickly being used up & the time is not long
before the competition intensifies greatly & it becomes more difficult to
share.
“We’ve
never been exposed to an onslaught of this magnitude,” he says.
“And what were seeing now are just the initial convulsions.”
James Cox, USA Today, 8-11-2004
And
what does this have to do with gold?
Well,
for one the Chinese understand & appreciate the value of gold even more
than we do here in the west. In just the past several years the Chinese have
been making every effort to build up their gold mining industry & they
have been seeking western technology & western dollars to accomplish this
goal.
The
text below illustrates China’s official policy to do everything in
their power to build & strengthen their gold & silver mining
industry.
“China
welcomes foreign investment in its gold production, according to an official
with the State Economic and
Trade Commission (SETC).”
þ
- click here
And
listen to the following very important fact below.
“China's industrial and public demand for
gold far exceeds the country's own production.” þ
- click here
And
further evidence of China’s commitment to expand the minerals &
natural resources industry.
“According
to the Ministry of Finance, the Chinese government intends to take pro-active
measures to guide non-governmental capital into the commercial exploration of
mineral resources…” “China will strengthen international
cooperation and attract more foreign capital to devote to sustainable
development, especially with regard to projects relating to the surveying and
exploration of mineral resources that are abundant in the country.” þ
- click here
Oh!
Getting
back to readers comments the following email is good.
David,
“Yes,
UNBELIEVABLE that Delta could be on the skids.”
“Now, picture the U.S. economy as a Delta.”
“The
real story about a Delta is that it's just a harbinger of what awaits our
economy without real change, timely change. And
the hard money issue is just an EFFECT from these causalities, which
if the "mainstream" were listening, would dissect & learn from
quickly, instead of seeing precious metals as an
"enemy"…!”
“Wow,
what kind of world will it be without a "Delta."
Best,
G.
And
the following I ran across a couple of days ago & I just could not pass
it up.
“In
the new GQ, the Democratic presidential nominee offers relationship advice
for men:”
”On what to seek in a woman:”
"Look
for what gets your heart. Someone who excites you turns you on. ... It's a
woman who loves being a woman. Who wears her womanhood. Who knows how to
flirt and have fun. Smart. Confident. ... And obviously sexy and saucy and
challenging." Drudge Report, 8-16-2004
And
John, don’t forget to add that it also helps if that woman is worth a
cool billion dollars. But getting back to the title of this article, “Why
China Will Drive Gold Higher.”
I
guess the main point to understand is that China is opening up the gold market
to its people - all 1.5 billion. And to the Asian mentality gold is not a
“worthless relic.” Gold is, instead, a very integral & major
component to their economic well being & financial stability.
China will drive gold higher because the Chinese
want to own gold & the Chinese demand for gold will not be met from
Chinese yearly gold production.
And
talking about the Chinese makes me think of rice & other starches.
Had
some great fresh out of the garden lima beans yesterday at my favorite diner
in downtown Greenville. Good fresh cooked beans are kind of like a good
steak. If they are fresh enough (just out of the garden) & cooked just
right all you need to add is a little butter & salt & pepper.
It’s nice to occasionally go to a fancy restaurant, but the best eating
day to day are beans, fresh hot out of the oven cornbread dripping with
melting butter on top & home made fresh tea with a lemon slice.
Appropriate
& nutritional eating habits are something else we could learn from the
Chinese. They eat sensibly & you don’t see many fat Asians. Smart
folks really.
Probably
the strongest piece of writing that has come out recently supporting a strong
powerful gold demand by the Chinese is an article in Mineweb.com. Now at
first glance this article appears to question the Chinese demand for gold.
But under further analysis the article really supports a very positive &
strong Chinese demand for gold.
And
remember, Mineweb editors do not wish to be considered journalists, but they
are analysts. And when an analyst writes for public dissemination their goal
is to make their readers think & to use their brains.
Witness the
following quote.
“…if
the PBC (Chinese) wanted to increase its gold reserves to a significant
level, the gold market is not physically large enough to allow that without a
major reaction.” Peter Gonnella, Mineweb.com, 7-10-2004
Now everybody
& their brother & every idiot in town knows that the Chinese are
rapidly becoming over populated with American greenbacks. Everyone also knows
that China will eventually have to begin selling some of these vast US
dollars they hold in their reserve & replace these dollars with gold. And
again, what does the article text above say will happen when the Chinese
begin selling dollars to be replaced with gold?
“…a major reaction…”
Yes, & a “…major reaction…” with
the gold price shooting for the stars!
But let’s
get back momentarily to lunch. Went back to the diner next day – fresh
picked big butter beans on the menu! Good eatin’! If everybody in this
country would just eat a big bowl of butter beans every day we wouldn’t
need all that Arab oil.
Sat down at the
counter next to an old & distinguished black gentleman.
Albert Davis was
his name. He kind of reminded me of Morgan Freeman. And Albert has been
coming to Gene’s Diner for over 45 years. Remembers back in the early
60s when Gene’s was the only diner in town that served black folks
– at the back door only. Thank God times do change & sometimes very
much for the better.
And let’s delve
further into the real facts about Chinese gold demand.
“…trading
in gold is expected to become a crucial investment arena for Chinese
individuals.” Xinhua, ChinaDaily.com, 12-5-2003
Now pay attention
to the fact here that these news quotes are coming from Chinese news sources.
And who would know better than the Chinese themselves about their desire for
gold?
“A recent
questionnaire by the Beijing Gold Economic Development Research center in 10
major cities in China showed 70% of respondents said that they would invest
in the gold trade if they had money & over 20% of securities investors
would transfer part of their capital to gold trade.” Xinhua,
ChinaDaily.com, 12-5-2003
And listen to the
following Chinese estimations for gold consumption.
“Experts
predicted that nearly 7.5 million (Chinese) investors will try the gold trade
while continuing the securities trade in the future. Calculating that each
one will invest 10,000 yuan (about US $1,200) of capital, the trade will
attract 75 billion yuan (some US $9 billion) of funds in total.”
Xinhua, ChinaDaily.com, 12-5-2003
Now can you answer the question & understand
why China will eventually drive the gold price drastically higher?
You
can bet your bottom fanny gold is heading to the moon eventually & contributing
to gold’s climb will be the gold lovin’ Chinese!
Let’s
listen to Bill Bonner talk about China. And as always Bill is very much worth
listening to.
“Let's
see...the Chinese get new factories, jobs, wages, profits, technology,
assets, savings, capital, know-how. We Americans LOSE jobs, assets, savings,
capital, factories, profits and so forth.”
“The foreigners (including the chinese) own
more and more of what used to be American wealth-producing assets.”
Bill Bonner, Daily Reckoning, 8-18-2004
Now to
really put in perspective how China is growing in wealth & how wealth in
the U.S. is declining absorb the following.
“When
Ronald Reagan arrived at the White House, foreign-owned U.S. assets were less
than 15% of GDP. Now, they're over 78%.
And they're growing rapidly. Net purchases of U.S. assets by foreigners rose
to $71.8 billion in June, up from $65.2 billion in May. Most of that was in
U.S. Treasury bonds. And most of those were purchased by Japan and
China.” Bill Bonner, Daily Reckoning, 8-18-2004
Wow!
If these facts do
not help you to understand & to interpret growing “trends”
then I do not know what will!
“This puts
the U.S. economy - and even its elections - largely in foreign hands. If the Chinese or Japanese should decide to
sell Treasurys, for example, it would certainly boost interest rates, pop
the housing bubble and likely cost George W. Bush the White House.”
Bill Bonner, Daily Reckoning, 8-18-2004
And
just how historically important are these trends?
“…
Asian growth is being driven by industrialization and related development in
China and India as dramatic as the transformation of the United States in the
19th century from a small colonial economy of 4 million people to the world's
largest economic power." Bill Bonner, Daily Reckoning, 8-18-2004
Hopefully,
after exploring these facts all of us can see a future correlation to gold
& China. And if we have any common sense we will have to ask ourselves
why we may not yet be invested in this gold market.
David Vaughn
Editor,
Gold Letter, Inc.
www.goldletterdv.com
All
articles by David Vaughn
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