Silver As An Investment For The Chinese
No longer favoring the US dollar, the Chinese government has been promoting gold and silver as an investment. Increased its holdings of gold from 600 tonnes in 2003 to 1,054 tonnes in 2009. This month, rumors began circulating that the Chinese government may indeed purchase from the IMF 191.3 tonnes of gold. While the government has denied this rumor, China Investment Corp. has purchased positions in gold miners such as Canadia’s Kinross Gold, Gold Fields of South Africa, and AngloGold Ashanti.
To further fuel gold investment, the government began pushing its citizens to buy gold in September of 2009. In addition, China just introduced its own silver bars as an investment, and China Central Television is running campaigns to push the citizenry into gold and silver investments. This could mean a new swell of demand and higher prices.
New Steps in Precious Metal Ownership
Besides the new ad campaign, China is taking larger and larger steps to solidify its wealth with a huge stake in precious metals, going so far to encourage private ownership. The Ministry of Land and Resources has also rewritten mining laws to encourage existing mining operations to look for gold and silver both in the mainland and overseas. This move, coupled with a ban on silver exports, makes it clear that China wants its hand in the oncoming precious metals rush.
A New Exchange
China has even gone so far to create the Shanghai Gold Exchange, which allows anyone to trade gold in the open market with very little government intervention; this is a dramatic shift from the historic communist leanings of the Chinese government. This new market could open ownership of gold to a growing middle class that saves as much 40% of its personal income, creating a force to be reckoned with in the international and domestic gold markets.
China's Impact on Metals
Though we have known for the last few years that China's government is seeking to minimize its exposure to foreign currencies, especially the US dollar, it is now clear that the country wants to mobilize its citizenry to do the same. This couldn't be more bullish for both gold and silver as an investment, as a new generation of Chinese savers is sure to enter the market place, driving up the price of metals and spreading gold and silver as an investment well beyond government controlled coffers.
Don't Discount the Chinese
Historically, the Chinese have exerted very little impact on speculative investments; however, times are certainly changing. As China's trade surplus grows due to its enormous manufacturing base, the amount of money both in the hands of government and in the hands of the citizenry is sure to follow suit. Just recently, a new class of Chinese citizens clad with personal computers, cell phones and personal transportation is taking a foothold in China, and they are not afraid to invest their immerse wealth where they see fit.
The Time is Now
While the current ranks of investors choosing to protect themselves with gold and silver remains a very small portion of the total investing class, the ranks are growing – all while the amount of precious metals stagnates. Anyone with a calculator and a basic understanding of economics understands that today's prices, though multiples higher than a decade ago, are sure to explode, mostly due to the number of investors who want to own gold and silver.
There is no better time to begin establishing a position. Do so before 300 million middle class Chinese citizens begin to stake their claim in what is sure to be a multi-decade bull run in commodity prices.
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