The Golden Tidal Wave is Rising in Asia

Gold investors, forget Europe.

Yeah, yeah, gold prices went down on the idea that France might vote for someone boring. Panic leaked out of the market like an old balloon.

So, gold prices went down. That’s nice. I told you why this is actually good. Meanwhile, there is a tidal wave of demand building in Asia.

I’m going to tell you some big news on China. Big for gold. But first …

First, let’s deal with India.

Earlier this month, I told you how gold imports into India jumped sevenfold in March. India’s gold imports rose to 120.8 metric tons in March from a year earlier.

Demand from jewelers in anticipation of India’s wedding season was off the charts. That’s partly due to the fact that demand was suppressed last year.

Last year, India’s gold consumption fell 37% to hit the lowest level in seven years. That was due to all sorts of chaos caused by a hike in taxes on imported gold, a resulting jeweler’s strike, and general government shenanigans.

This year, India is getting back in its golden groove. And yeah, that’s bullish.

Also in that same story, I reminded you that "India is the world’s No. 2 consumer of gold, after China."

So we’ve all been waiting to see what’s happening with China.

Hoo, doggies! Something’s happening all right.

Here is a chart of gold imports into China through Hong Kong.

Source: Goldcore/goldchartsrus.com

Whee! In fact, Reuters reports that gold bullion arriving into China via Hong Kong — its main vein for gold imports — more than doubled month-on-month in March.

Well, that’s pretty bullish. But part of the frustrating thing about China is they’re so danged secretive about their gold markets, gold holdings, you name it.

However, there is another measure of Chinese demand for imported gold: its flows through Switzerland.

And sure enough, somebody has been buying A LOT of gold from Britain and shipping it into Switzerland.

Source: Goldcore/goldchartsrus.com

What happens to the gold there? Well, big bars of gold, the kind stored in London, are melted down and recast into smaller bars for sale in Asia.

"Gold exports to China from the refining hub of Switzerland almost doubled to 46.4 metric tons in March," according to Bloomberg. That’s up from 23.6 tons in February.

Another 30.29 tons went to China. You get one guess where that gold ended up.

And let’s not forget India. India’s gold imports from Switzerland soared to 72.5 metric tons at the same time.

Singapore is a big buyer, too. Singapore is often a "back-door" channel into China. Singapore also exports gold all across Asia.

So, you get a Swiss gold export chart that looks like this.

Source: Goldcore/goldchartsrus.com

The four big bars I’ve circled are Swiss gold exports in March to China, Hong Kong, India and Singapore.

So yeah, you might say that Asian demand for physical gold is rising. Heck, I’d say we’re seeing a tidal wave forming. It’s all part of the surge in demand by Asia’s the ballooning middle class that I warned you about.

So now we can add renewed Chinese demand to that long list of bullish forces for gold.

You know what I’m talking about: declining gold reserves, a lack of spending on new exploration, a top in the U.S. dollar, declining gold grades, peak gold, rising inflation, the cyclical nature of gold. And more.

So now gold is selling off. This is due to panic leaking out of the market as France chooses the middle road. And the market seems to be hanging a lot of hope on President Trump’s tax cuts.

To be sure, these tax cuts are not paid for. Which means, even if President Trump is successful in getting his tax cuts, the federal deficit and America’s national debt will balloon.

The debt used to matter to the markets. It might matter again. And when it does, you’ll know what you want to know.

So go on. Give me a big pullback in gold. We’ll get the best buying opportunities we’ve had in a long time. And then on the next turn of the wheel, the profit opportunities won’t just be good. They’ll be glorious.

All the best,
Sean Brodrick

Your thoughts on “The Golden Tidal Wave is Rising in Asia”

  1. Richard Nixon, back in 1971, figured out how to make bankers think, the way Mob bosses think.

    If I’m fool enough to run up a gambling debt, the Mob will kindly issue me a loan and allow me to exit the casino. The loan will charge maybe 50% interest.

    Weekly.

    If I don’t at least pay the 50% interest, I’m likely to suffer a severe beating and walk around with some bones broken.

    There are laws against this kind of activity. When Mobsters do it, it’s called Usury and maybe also Extortion.

    What Nixon discovered in ’71, is that he could use the IRS to carry out one of the functions of a Mob loan shark.

    If enough people are terrified witless, to miss a payment they owe to the IRS, and the IRS insists on being paid in United States Dollars, those people will focus intently on the prompt and timely acquisition of sufficient US dollars to pay the vig they owe the loan shark…er…Government. Not once are they going to consider what the exchange rate was, 40 years previous, between dollars and silver, or between dollars and gold.

    Nixon ended the gold squabble that Charles de Gaulle began, by relying on the American necessity to possess dollars for the purpose of paying taxes and staying out of legal trouble for nonpayment, to make gold convertibility seem irrelevant.

    Today there’s a newcomer to the currency markets called Bitcoin. The late Larry Edelson insisted that Bitcoins aren’t money but did a lame job of explaining why.

    Applying the Nixon Principle just explained, there’s nobody who will inflict great bodily harm or deprivation of freedom upon me, if I fail to possess or deliver Bitcoins. There are governmental bodies that can demand Dollars. Therefore, it’s a necessity to possess dollars. There’s no necessity to possessing Bitcoins.

    Much has been written about the Blockchain Algorithm, that’s used to track Bitcoins. A collection of 1-kilogram gold bars, each uniquely identified by a numeric code, could be tracked with Blockchain, precisely as Bitcoins are tracked. Such a Blockchain tracking system for gold, overcomes one of the principal failings of Gold Standard currencies in bygone years: When prosperity brings about a general reduction of the cost of living, so that even the poorest people can afford to buy luxuries like running water, soap, air conditioning, several changes of clothing, and have access to communications so that they can educate themselves, prices tend to decline. Historically, this was a problem, because to divide gold into physical coins that were tiny enough to cover every possible transaction, was difficult. A coin that’s too small to see, is too difficult to count.

    Applying the Blockchain Algorithm of Bitcoin would make it possible to sell nanogram or even picogram quantities of gold, by digital means. Very small financial transactions could be carried out electronically, without the need for fractional reserve banking.

    Will world peace grow, when there’s no longer any bank-issued currency left to manipulate?

    I hope that someone engaged in all this Asian gold buying, is considering that possibility, because it would enable a bloodless transition to a peaceful and honest economy.

    Meanwhile, with the rip-roaring inflation that’s underway in China, anyone who took his life savings in Yuan. on December 16, 2015, and bought dollars with it, is about 12% richer than if he’d hung onto his yuan. If he’d bought gold instead of dollars, he’d be about 23% richer.

    Sigh.

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Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit. Working on…