how is gold performing?
Gold is becoming stronger every
day & still hardly anyone notices – or cares. I am sure you
have observed lately that oil has hit 61 dollars a barrel. People
do notice oil, but with almost the same amount of indifference.
strange gold could have come so far, yet the interest still be so
subdued.” Bill Murphy, LeMetropole, 6-29-2005
We have mentioned before that
as the days move forward we will observe resource wars evolve as
the mighty nations of the earth begin to seriously compete with
one another to acquire rapidly depleting resources. Japan, in the late 1930s attempted to secure a
supply of oil for her Pacific Empire & we know the eventual
outcome of that event.
“World War II was fought with oil and for oil, as both Germany and Japan tried desperately to extend their hegemony
to distant oil-producing regions to ensure the continuation of their
rapidly developed industrial economies. Both lost the war, in large
part, because they failed to secure the oil.” By James Howard Kunstler,
The Long Emergency, 2005
And make no mistake that the
wars we are experiencing today are a battle over oil. China’s economic power & world influence will
continue to grow & weigh heavily against the economic fortunes
of the U.S.
every age, capital flows from nations with mature economies &
excess wealth to nations that require it for development. As China
transformed itself from a political & economic backwater into
a world power in the late 20th & early 21st centuries, the major
river of capital flowed from New York to Shanghai."
is considered by many to be the most breathtaking city on earth
and is twice the size of New York. Here more skyscrapers abound representing
the sparkling zenith of the commercial transformation of China these last 10 years. China accounts for
less than 5% of the global economy, but is credited with 15 – 20%
of the world’s economic growth & yes, over 85% of US Treasuries
are purchased by Asian central banks.
today is industrializing their country at the expense of the de-industrialization
of the U.S.
This is just revenge considering that for over a hundred years China suffered humiliation
at the hands of both the United States & Europe.
"Global investors should
carefully consider this point. Economic growth could shift from
the Western industrial nations to the emerging economies of Asia
and the former Soviet Union, and relegate some recent centers of
prosperity such as Silicon Valley and Hong Kong to the status of
a Buffalo or New
Orleans." Tomorrow's Gold, Mark Faber, 2003
Do you think China
will hold onto all those US dollars forever or even if they really
care if they eventually lose a third or even half of their savings
in U.S. Treasuries?
“China spends its dollars on U.S.
Treasury securities, and, by doing so, helps keep interest rates
down for American borrowers.” “That’s good, right? Not necessarily,
says Jeffrey Garten, dean of the Yale
School of Management. “IT’S A SWORD OF
DAMOCLES OVER THE UNITED STATES. We never want to be in a position
where any foreign government has so much influence over our interest
rates,” he says.” James Cox, USA
Sweet revenge planned by the
“Asian central banks have purchased
so many U.S.
Treasury bonds the past two years that they may decide to diversify
reserves by buying gold." Joseph Foster, portfolio manager
of Van Eck International Investors Gold, By Warren
Berry, Chicago Tribune, 10-24-2004
And how significant is this
Chinese gold market?
"China is set to triple gold demand
over in coming years, up from 200 tonnes, the World Gold Council
said Monday." Business Report, 2004
So the Chinese love gold. What
does this mean? A proper understanding of how significant this
Asian gold market is growing can build a confidence for those in
the west who still doubt gold’s value.
“A recent questionnaire by the
Beijing Gold Economic Development Research center in 10 major cities
in China showed 70% of respondents said that they would invest in
the gold trade if they had money & over 20% of securities investors
would transfer part of their capital to gold trade.” Xinhua, ChinaDaily.com,
Let’s stop here & examine
further the gold trade in China.
“…trading in gold is expected
to become a crucial investment arena for Chinese individuals.” Xinhua,
But let’s not leave here until
we take a gander at the Chinese estimated gold consumption &
demand for the next few years.
Let’s go over yearly GROWING
Chinese gold consumption:
- 166 Tons
2000 - 175 Tons
2001 - 182 Tons
2006 - 362 Tons (Per World Gold Council Estimate)
2011 - 546 Tons (Per World Gold Council Estimate)
Yes, there is a LARGE demand
for gold in China, with some
estimates of future annual imports running at 600 – 800 tonnes a
year which is quite strong against a 4,000 tonne world market.
So our point here in discussing
gold demand & gold development in China?
“Experts predicted that nearly
7.5 million (Chinese) investors will try the gold trade while continuing
the securities trade in the future. Calculating that each one will
invest 10,000 yuan (about US $1,200) of capital, the trade will
attract 75 billion yuan (some US $9 billion) of funds in total.”
Xinhua, ChinaDaily.com, 12-5-2003
And now – back to the subject
no mistake in understanding what is going on," writes our Pittsburgh correspondent, Byron King. "The Unocal
takeover effort is a test by the Chinese government of U.S. national will.
The Chinese have an energy-based national strategy, and upon it
they are acting. You can disregard this at your peril.” Bill
Bonner, Daily Reckoning, 6-29-2005
Historians a 100 years from
today will write in their texts those catalysts that occurred at
the beginning of the 21st century that set the mighty
wheels of conflict in motion as nation battled nation to fight for
“I believe that we face a dire & unprecedented period of
difficulty in the twenty first century…” “I predict that we are
entering an era of titanic international military strife over resources…”
By James Howard Kunstler, The Long Emergency, 2005
Can we observe today a catalyst
in the making?
is aggressively seeking to corner a strategic asset, oil, and create
its own captive supply.” “For a world still absorbing the emerging
force of a newly capitalist China, CNOOC's bid is the clearest sign
yet of how China's appetite for resources is reshaping
global commerce.” “CNOOC's move
underscores the urgency of China's
drive to secure new stocks of energy…” By Jonathan Weisman & Peter S. Goodman, The
Washington Post, 6-25-2005
”The takeover bid by China's state-controlled CNOOC Ltd. may have been
the clearest sign
yet of an emerging economic power's global ambitions…” By
Jonathan Weisman & Peter S. Goodman, The Washington Post,
I am sure you have caught this
story in the news this past week. China
is attempting to purchase a U.S.
bid for one of America's oldest and most iconic oil companies is
not only novel, it is a signal event...it tells us that
things have changed.” Bill Bonner, Daily Reckoning, 6-29-2005
needs to continue to increase its oil purchases to be able to survive
& feed its growing energy needs. In Canada this past month or so China successfully purchased a stake in Canada’s
oil reserves, but will the U.S.
allow China to
do the same in the United
in Congress see the bid as an attempt by the Chinese government
to seize American oil…” "It will become increasingly difficult
for U.S.-based companies to compete for scarce energy resources
on the world market against China's
state- owned and/or controlled energy companies…" By David
R. Baker, Chronicle Staff Writer, San Francisco Chronicle, 6-25-2005
Do you see the potential for
a serious & evolving catalyst in the making?
needs to secure energy & oil to feed its growing empire &
how is it going to acquire these resources if they are already held
by others who have no desire to share their own oil assets. I believe
we are witnessing the beginning & the foundation of a new battle
that will grow to take on world shaking proportions.
“Political fears of China's economic might intensified Thursday
following China's unsolicited bid to take over a U.S. oil company,
with lawmakers from both political parties warning that Congress will take retaliatory action
against Chinese trade practices if the Bush administration fails
Weisman & Peter S. Goodman, The Washington Post, 6-25-2005
And in my personal opinion I
believe as the U.S. intensifies its effort to with hold energy
resources from China
that the Asian people will view this as the catalyst requiring them
to make a stronger stand against the United
States. As China sees its energy needs challenged they will
look into their own arsenal to see what bargaining chips they can
themselves deploy in retaliation.
oil and gas firms have already made 60 acquisitions worth $2.1 billion
so far this year (2005)…” “This compares with 146 deals worth $8.3
billion in the whole of 2004, and 83 deals worth $4.9 billion the
previous year (2003), according to data firm Dealogic.” irandaily.com,
I believe what we are witnessing
is China’s effort to cash in some of those US dollar chips it has
been accumulating & trading them in for something tangible.
And if China is blocked by the US from doing this China has to ask
itself if there is any real value in all those US chips it has been
piling up to the ceiling.
And what ever happened to “free
trade” & the concept of “globalism” for every nation? That
concept will quickly evaporate as the oil continues to be depleted.
"I believe strongly in a free global
marketplace. However…” warned Rep. Richard W. Pombo (R-Calif.)
And do you wonder what the Chinese
may at this moment be thinking?
those who still might not get it, I think that the Chinese may as
well be taking out a full page ad in the Washington Post, stating,
'We are going to buy up all of your oil and gas. And
to accomplish this task, we're going to use all of those dollars
you have been sending us for the past ten years. And just what are
you going to do about it?”
Bill Bonner, Daily Reckoning, 6-29-2005
The resource wars have indeed
“While the short-term is hard to figure, the gains to be made
from here on in will be even more sensational than those made from
1999 through 2003. You can take that to the bank.” Bill Murphy,
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