Moves In The Gold Market

With the stock market tumbling, gold surging, and the U.S. dollar falling, today Canadian legend John Ing discusses major moves by the Chinese in the gold market as well as their position on Ukraine.  Ing, who has been in the business for 43 years, also discussed the intensifying currency wars between various countries around the world.

Eric King:  “John, what’s going on with China?”

Ing:  “Regarding the Ukraine, China has been noticeably quiet.  They get a lot of oil and other forms of energy from the Russians.  Ukraine is not seen as China’s battle, but the slippage of the renminbi is very telling because they have cooperated with the U.S. since 2008 in moving the renminbi higher.

The problem was that everybody else, their trading partners such as the Japanese and the Koreans, their currencies have been going down relative to the renminbi.

While these other countries have a race to the bottom in terms of their currencies, China is losing a trade advantage.  This is the reality of a world that has erupted in currency wars.  Nobody wants to be left behind, so they move their currencies down.  This is highly inflationary.

We know that with the slowdown in China and a pickup in inflation, this has created a move toward hedging.  As we know, the Chinese have been buying gold as a perfect hedge.  They are also awash in dollars, so that is yet another reason for them to be buying gold.

The dilemma for the Chinese longer-term is that while they are the largest consumer of gold in the world, they are also the largest gold producer as well.  But their consumption is about 1,100 tons of gold, and their production is about 440 tons.  So the Chinese have to import a staggering amount of physical gold.

The Chinese continue to be huge buyers of gold, but the interesting thing is that the Chinese have become much more sophisticated in the gold market.  We just had the biggest gold convention in the world (PDAC) here in Toronto, but this time the Chinese skipped having their own reception.  Instead, I saw the Chinese were aggressively visiting with management teams and adding companies to their shopping list.”