Gold’s New Big Dog
According to the IMF, China currently holds just 1.4% of its total foreign exchange reserves in gold. This is the lowest amongst major central banks. The average is 5% and many central banks have a lot more than that.
Now consider: If China were to boost its gold holdings just to 5%, it would need to buy the rest of this year’s total mining output!
Of course, that wouldn’t happen—not overnight, anyway.
But it is very likely to happen over time, and here’s why:
Beijing’s Big Dogs have already declared that, as the yuan rises and the value of China’s dollar-horde is forced down, China will aggressively diversify into gold.
This makes cold economic sense. Islamic nations have been doing the same since 2004, and this has been a significant force behind the resurgence of gold from $391 to $591 an ounce. Again—inflation had nothing to do with it.
So: Beijing is one big new gold buyer. Who is the other?
$831—here we come!
The second big new buyer of gold is the Chuppy: the newly-affluent Chinese yuppy.
The Chuppy has not been a gold-buyer until very recently, but a new China Strategy survey of spending habits among China’s new middle class indicated that there is a remarkable change afoot.
Our historic survey found intense conservatism among the new middle class in China. This burgeoning group will buy real estate, they will buy status symbols, but above all, they will hedge against an uncertain future.
gold to do it.
Who could blame them? This is a generation that saw their parents eat grass to survive, and experienced individual aspirations being publicly crushed into the collective mud.
Here in the U.S., we saw how the Great Depression made Gold Bugs of an entire generation. Imagine, then, the effect on today’s Chuppies of Mao’s ghastly Great Leap Forward!
Small wonder, too, that Chuppies in our survey felt extreme caution about socking their savings away in Beijing’s banks. Banks are seen by many in China as corrupt and liable to be plundered by the government.
So gold is the logical answer.
Today’s Chuppies are buying gold, but not in the form of the heavy, 24-carat jewelry favored in India. Hip new looks and lighter alloys are coveted—but the effect on gold prices is the same.
It’s a classic demand-driven boom—just as we’ve seen in so many commodities over the past 5 years.
In China's Hottest Commodities, a brand-new report I am making available to all new subscribers to China Strategy with today’s offer, I show you how to cash in on gold’s next big leg up. The report is FREE, today only, at this special link.
The Second 91% Gain
Commodity prices are 91% higher today than four years ago. Did you know? And, more to the point: Did you profit?
It’s not just gold and silver that are hitting 25-year highs, either. From aluminum to wheat, it’s a roaring, red-hot commodities bull market!
Pension funds as well as retail investors are now using commodities as a crucial way to diversify away from stocks.
So in many ways, this bull market is still young—and, indeed, prices of many mining companies are still among the best deals on The Street.
China’s juggernaut economy is the key driver behind many of these all-time highs. China bought just 5% of the world’s output of base metals in the 1980s.
Today, it buys about 25%.
That’s a huge, historic shift. You just can’t ignore it.
