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Thursday, September 17, 2009

China is eating the world, Part II: China to world -- No more shiny metals for you

China to world: No more shiny metals for you

Wowzers. Here’s one for the gold bugs — rumours on Thursday that China may ban the export of silver and gold.

The excerpt below is from a Commodity Online piece written by Erik Bethel of SinoLatin Capital — a Shanghai-based merchant bank exclusively focused, as the name might suggest, on transactions between Latin America and China. In practice that means stuff like helping Chinese companies acquire LatAm goldmines, so the company clearly has an interest in promoting China’s apparent gold lust worldwide. Nevertheless, here’s the thrust of the piece:China may ban export of gold, silver
Last week Alan Greenspan noted that “Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies.” In other words, people are buying gold as a hedge against inflation.

…How could China affect the price of gold? We live in China and spend a lot of time with local industry leaders and policy makers. We hear repeatedly that the time has come to think seriously about how to survive the perceived dollar devaluation. In some cases we note serious concern, and in other cases absolute dread over a perceived dollar crash.

Over the past six months Beijing has made a series of moves to protect itself against a dollar devaluation. In a recent “BRIC Summit” in Russia several months ago, Chinese leaders came out strongly in favor of a new reserve currency to replace the dollar (including the IMF’s “SDR” currency). China is also quietly purchasing mining assets and gold bullion. But the government has recently gone further.

According to Financial Sense:

As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions. In fact, as Mineweb and other sources report now it is actively pushing folks to buy some personal metal, with China’s Central Television, the main state-owned television company, running news programs cum infomercials, letting the public know just how easy it is to purchase gold and silver as an investment.

It truly is as simple as can be, because every bank sells gold and silver bullion bars in four different sizes to individuals. (Try to find the same the next time you make the trek down to Wells Fargo.) Mining companies are reportedly encouraging employees to convert some of their wages to gold on payday. Gold is traded in some form 24 hours a day. And paper proxies for the metal are also soaring in popularity. There are persistent rumors that the export of silver has already been banned. Gold could be next.

China, we should note, is already reportedly looking at banning the exports of rare earth metals — the elements used in things like hybrid cars and superconductors.


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