The next translation I present is from a speech by Zhang Bingnan, financial expert for CCTV and vice president of the China Gold Association, an institution that acts as a bridge between the Chinese government and gold producers in protecting business interests and providing information, consultancy, co-ordination and intermediary services for them. Zhang has 20 years of research and management experience in economic sectors in China’s gold industry. One of his studies was “A Study on Optimal Scale of China Gold Reserves“ in which he proposes the Chinese official gold reserves to be 5787 – 6750 tons by 2020.

Because his study was done in 2012 the estimates are too low in my opinion, as Chinese demand for physical gold exploded in 2013 and may continue this strong pace in the future.

The gold withdrawn from the SGE vaults is equal to Chinese gold demand (which I have exposed here), excluding PBOC purchases.

Zhang has done many studies, inter alia a five part analysis on gold’s role in the modern economy, and came to the conclusion that gold is an essential part of the current monetary system. At the same time he states China needs to further study gold’s role in a future monetary system.

Zhang held his speech just before the one held by Tan Ya Ling, that I published last week, hence the reference Tan made to Zhang’s theory on gold for the future economy.

Translated by Peiying Peng:

Zhang Bingnan: Gold Is Safeguarding National Economic And Financial Security

May 7, 2013, Beijing – sponsored by the Capital University of Economics and Business, co-hosted by the Chinese Gold Market Research Center, Jing Yi Gold Co and CPM Group the Chinese gold market trends seminar 2013 was held.

Hexun network’s exclusive Gold Report broadcasts, Secretary-General of the China Gold Association, Zhang Bingnan delivered a speech at the conference. He stated that the scientific development of the gold market needs a supporting theory, the sustainable development of the gold industry needs a supporting theory, and the ordinary Chinese citizens, who are incorporating gold into their portfolio to avoid risks, need a supporting theory.

He also said that recently gold has gained worldwide attention; the media have also reported on the Chinese gold rush by the Chinese aunties. In fact, the rush to grab gold is not just limited to the Chinese aunties, this gold buying binge is spread throughout the whole world, from Shanghai, Beijing to Hong Kong, Mumbai and New York.  It should be said that this craze for gold buying is global. Therefore, it is not just China that is buying gold in bulk, but also the rest of the world.

So why this global rush to buy gold in large quantities during the gold price fall this time? In 2008, after the Gold price pushed through $1,030, it also fell twice for 10%, and then further fell 30% in the following 6 months. Why did we not see any gold buying rush then? In fact, once we see the Chinese aunties rushing to buy gold, we need to really thinking deeply about the underlying reason from this phenomenon. Why the falling price in 2008 did not lead to a global demand for buying gold?  And why is it happening this time around? I think it’s because after this round of global financial crisis, more and more people around the world have a clearer understanding that gold is safeguarding national economic security and financial security. Its importance of protecting ordinary people’s portfolio is increasing. 

In 2008, people might still be in the craze of seeing the stock market rising from 6,000 points to 10,000 points, people might still indulge in buying a house and see its value double in a few years. During that time, Freddie Mac, Fannie Mae stocks were still at more than 160 US dollars per share. Nobody had a clear view as what we have today regarding asset protection and scientific configuration of their portfolio.  It is this round of global financial crisis that has made us increasingly recognizing the irreplaceable importance of gold in safeguarding national economic security, and safeguarding ordinary people’s assets.

Why did the governments around world have changed their policies, after 20 consecutive years of net selling of gold, to net buying since 2010? Last year the governments around the world had net purchases of 534 tons of gold, accounting for 18.8% of total gold production worldwide that year. Why are governments around the world in recent years started to buy gold in different options? Why after this fluctuation of the gold price, people around the world are buying gold in different options? Compare to 2008, I think we have a clearer understanding of the global gold rush. The reason behind all this is that gold has become increasingly important and popular after this round of financial crisis. This reason has little direct correlation with short-term price fluctuations.

He also told Hexun network’s exclusive Gold Report, the future of gold depends on the role of gold in the financial system. The further we understand this, the further gold can go. Therefore we still have not fully understood the nature of the gold, the true pattern of the gold market. This is the case for our own theorists, our gold market, and our financial sector. So symposiums such as this one will further discuss and research on this topic.

Through this round of global financial crisis, we are increasingly aware of the importance of gold. It may be more and more important to include gold into the top-tier design, including top-tier design of the national financial security, and also ordinary citizens’ asset protection.  From this perspective, we still have a long way to go.

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