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Can China Affect Gold Prices?

20 September 2009 322 views No CommentEmail This Post Email This Post

Buy Chinese Silver CoinsThe Chinese government has been advising its citizens to buy gold and silver. Typically, there is a large abyss between what the government wants and what the people actually do. However, in this case at least, it seems that the Chinese people are happy to be buying both these commodities. Until very, very recently possession of gold was an offense in China, punishable with confiscation and jail time. But this year, the government made it legal which has resulted in a surge in local Chinese demand.

The last thing the Chinese government wants is for the price of gold to collapse. Especially after having recommended that the people start buying it. So the question arises whether they can manipulate the price of gold if the need ever arose? Could the Chinese government increase the price of gold just by buying it?

The answer comes to us from David Galland, a financial newsletter editor. According to his calculations, with gold prices at $1,000 an ounce, all the gold ever mined is worth $5 trillion. With the Chinese government’s foreign reserves of US dollars exceeding $2 Trillion, they have all the necessary ammunition to keep the prices of both and silver propped up for quite a while. Although, they may not necessarily allocate all the reserves to buying gold and silver, high ranking Chinese official, Cheng Siwei has publicly stated that they will be buyers of gold on dips, which should automatically serve as a floor to the price of gold.  However, with the capability of buying 40% of the world’s supply of gold, there should be a strong correlation between China’s gold buying and the price of gold.

We all ready know the Chinese government is buying both gold and silver on dips. Are you? Everyone should be buying 1 gm gold bars and 10 ounce silver bars on dips.

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