Thursday, November 26, 2009

Gold Rush?

"The world's central banks are likely to be net buyers of gold in 2009 after two decades of selling, sparking a race among analysts to figure out which country will step in with the next big purchase. ... Wei Benhua, a former Chinese official, was cited by Chinese-language magazine Caijing on Monday as saying China, Brazil or Russia may follow India in buying IMF gold. ... The most logical buyers are countries that are running current-account surpluses and that don't have their own domestic gold production, Mr. [Jeff] Christian said. ... While China has become an obvious buyer, some analysts say the country is likely to buy production from Chinese mines rather than buy from the IMF. China, the world's largest gold producer, has $2.3 trillion in foreign reserve, with the majority in US Treasury securities. ... For example, to increase its gold holdings to the world average of 10%, China would need to buy $180 billion of gold, or about 5,400 metric tons--the equivalent of more than two years of the world's mine production. Gold prices would probably spike above $6,500 an ounce, Mr. [Andy] Smith estimates, making the scenario highly unlikely", Carolyn Cui at the WSJ, 11 November 2009, link:

Unlikely Smith? We disagree. At $1,174 gold is cheap. Dollars are dear. Buy the former, sell the latter. See how simple that is? Let Zimbabwe Ben make you rich. Smith is a Bache Commodities analyst. A "respectable" source said $6,500 gold is possible.


Anonymous said...

Happy thanksgiving.

The interesting pair to me is gold and oil...

Spread betting said...

Now could be the time begin trading gold. Gold prices are continuing to soar to new highs as the Chinese government attempt to stock pile the precious metal.

Spread Bet