Rosenberg: Gold Going to $2600 Thanks to China
Posted Dec 01, 2009 12:39pm EST
by Vince Veneziani in Investing, Commodities, Recession, Banking
From The Business Insider, Dec. 1, 2009:
finance.yahoo.com,^HUI,ABX,NEM,GOLD,FCX&sec=topStories&pos=8&asset=&ccode=
Gold has finally surpassed the $1200/oz mark.
But it may be going much higher.
China is going to increase its holdings signficantly, according to Breakfast With Dave,
Gluskin Sheff's analyst newsletter with David Rosenberg.
So significantly, in fact, that gold could hit $2623/oz in the near future.
From Breakfast With Dave:
Gold just capped off its best month in a year — up 14% in November and 34% so far in 2009. Not even the S&P 500 can compete with that.
Helping drive the latest gains was the news out of the China Gold Association that the country’s gold demand is on pace this year to exceed 450 metric tonnes, a 14% increase over the 395.6 tonnes in 2008. (In contrast to India, jewelry sales are up double-digits in China so far this year.)
By way of comparison, China, which recently surpassed South Africa as the world’s largest producer, is on its way to 310 tons of newly mined output this year, or more than 30% below its level of demand.
It’s not just the middle-class in China that is starting to buy gold, but the central bank, which has very deep pockets, is going to do likewise.
We just came across a Bloomberg News article quoting an official from the state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) as saying
“we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.”
China’s reserves, after a 76% buildup since 2003, currently stand at 1,054 tons, so we are talking here about the prospect of some pretty heaving buying in coming years.
If China were to lift their gold reserves to 5,000 tonnes, which is equivalent to about two years of global production, that shift in demand would boost the gold price by $800/oz to around $2,000 ($1,978) based on our models.
If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park.
Originally posted by Veteran98 here:
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