This is obviously a very attractive deal for Coeur, speeding up its cash flow, although it covers a relatively small amount of gold for the Chinese - but the very fact that this has been put into place suggests that other similar deals are likely to be negotiated with other new producers going forwards. It also means that China's appetite for gold just cannot be satisfied by its still growing domestic gold mine output - as we noted above already the world's largest.
If indeed it is China's plan to increase its gold holdings, but while maintaining an orderly market in the yellow metal, it is a smart move. The main reason, almost certainly, that China did not buy the IMF gold on offer - or even a large hunk of it - would be that to do so would have sent a very overt signal to the market and that the gold price would have skyrocketed as a result. Such a movement in the price might have been seen on global markets as a vote of no confidence in the dollar - and with China's huge dollar-related foreign exchange holdings this would not suit its long term economic policy either.
To buy newly-mined gold production at source is thus a clever ploy. It is not interfering with the gold market directly by being seen to buy, but picking up gold which is actually never reaching the market. It can then move the gold into some interim holding capacity which does not have it showing up in its official reserves until, and unless, it wishes to make this statement to the markets. The fact that, as a result, less gold is actually reaching the market has a substantially smaller impact on it than the overt purchasing of bullion itself.
The move has to be seen as long term bullish for the gold price and is yet another way of limiting downside risk for gold investors. GATA has for a long time been railing against what it sees as gold price suppression by the gold banks and governments, but probably none of this has the potential impact for control of the gold market which can be, and probably is being, exerted by the Chinese - but because this is broadly positive for gold it may not be in that organisation's interests to comment yet it is an equally manipulative policy if indeed it is in effect!
