But not due to runaway demand…
At an International Monetary Fund (IMF) forum last month, China’s central bank governor, Zhou Xiaochuan, made it clear he believes the
What was the IMF’s reaction? “We welcome and share this objective,” said IMF Managing Director Christine Lagarde. “We are now working closely with the Chinese authorities in this regard,” added Director of Communications Gerry Rice.
They didn’t say they would accept it, but then again, they surely wouldn’t advertise it in advance.
What’s the connection to gold? If Chinese officials seek “reserve” status
Why? Two reasons:
- Currency strength. Demonstrating they hold ample gold reserves—certainly more than the official number of 1,054 tonnes—puts the currency on more solid footing. The IMF holds the world’s third-largest gold reserve, so this issue matters.
- Transparency. A gold reserve announcement would help quell worries about the country’s lack of data transparency, something that’s been an ongoing concern.
The review process for admitting a new currency is held only every five years. I seriously doubt Chinese officials want to wait until 2020. Meetings will be held soon, with the results announced in October.
What’s Behind (Chinese) Door Number Three?A recent Bloomberg estimate
I think the actual number is higher than either estimate. My guess is at least 4,000 tonnes (Jim Rickards thinks it’s 4,500 tonnes). If I’m right, and if Chinese officials do announce a new reserve figure before October, it could light a fire under the gold price.
A large increase is key, because even mainstream investors know that China has been buying a lot of gold. To really jolt the market, the new number must be a surprise—which is exactly what I expect.
Why? Many analysts overlook that Hong Kong imports are no longer a reliable way to measure China gold demand. China agreed over a year ago to import gold through numerous channels, such as banks,
Of course, I could be wrong about a pending announcement. Buying Chinese government bonds still comes with a lot of restrictions, for example, which could keep the
But most of the rest of the world is already on board, as evidenced by the whopping 57 countries that signed on to become founding members of China’s Asian Infrastructure Investment Bank. Furthermore, nearly two-thirds of the world’s central banks
On top of this, China recently agreed to adopt IMF standards for reporting
So, I think it’s likely China will announce an updated figure on its gold reserves, and that it will be higher than the mainstream expects. If it makes headline news, it could ignite the gold price and give instant birth to a new bull market.
If I’m right, we obviously want to be positioned before it happens.
And if I’m wrong? It doesn’t really matter, because all the core reasons for owning gold remain intact and poised to turn into catalysts.
Harry Dent Has Accepted My Bet!This is just one reason I bet Harry Dent about where the gold price is headed. He recently proclaimed that gold will fall to $700 in less than two years—and I say hogwash. I bet him a gold Eagle that it won’t, and he accepted, so our bet is live.
We battle it out in a new special report, a 17-page debate where each of us argues our case. You can read our in-depth report free of charge—just enter your email address here, and we’ll send it to you right away.
Which is more likely, inflation or deflation? Is gold destined to
Read the eight “proof points” each of us offers, along with the details of our wager and the date the winner will be announced. We both think the report will help each individual investor make up his or her own mind.
It’s the battle of the year, with two ounces of gold on the line. I invite you to follow along in our “boxing match” and see who takes home the gold. Enter your email address and see who wins!