Gold has lost $170 since hitting a peak of $2,050 per ounce in early May.

But let´s be fair to gold; it is up over 13% in the last year, 54% in the past five years, and 407% over the past 20 years.

It’s natural for investors to view the value of gold through the lens of its price in fiat money, especially the Federal Reserve note. Perhaps a more useful way is to examine how commodities are priced in gold. Oil has not risen for over 50 years when priced in gold.

GOP Rep. Matt Gaetz recently joked about the gold bar bribery allegations against Democratic Sen. Bob Menendez to make a serious point about inflation. Speaking on the House floor, Gaetz quipped,

"We are devaluing American money so rapidly that in America today, you can´t even bribe Democrat senators with cash alone. You need to bring gold bars to get the job done just so the bribes hold value."

American investors are missing the Gold story

Of course, gold has risen in U.S. dollar terms over the past decade, but gold’s performance is more profound globally:

  1. Up 68% vs. the Chinese yuan
  2. Up 73% vs. the pound in the UK
  3. Up 80% against Canada´s Loonie
  4. Up 100% in Japanese Yen
  5. Up 133% in Swedish krona,
  6. Up 200% in Brazilian real

China´s recent gold buying frenzy has extended to 11 consecutive months.

Data from the People´s Bank of China shows it bought gold again in September. Gold reserves rose by 26 tonnes, boosting reported net buying to 181 tonnes so far this year. China´s "self reported" gold reserves now total 2,192 tonnes. but analysts believe the actual number is exponentially higher. The communist nation is unlikely to disclose its full gold holdings until it has secured a #1 position in the ongoing East vs. West financial war, if ever.

Gold has been proclaiming its message to the world in many languages. Investors need to listen.

Central bankers have tuned in recently, that’s for sure. They have been buying gold in increasing amounts for years now even as investors sell their holdings in gold exchange traded funds (ETFs). Look at this chart:

A global faceoff for the control over gold pricing is starting to intensify. Asian nations have been amassing physical gold for numerous years, while the majority of Western nations continue only to add to their debt pile.

In recent weeks, we’ve seen a surge in gold prices in China, leading to a record premium over international prices, at times exceeding $100 an ounce. This contrasts significantly with the past decade´s average premium of less than $7.

The East has been driving up the gold price, threatening to break the West´s long-standing pricing power.

The world´s largest gold/silver distribution center is located in Shenzhen Shuibei, China, and is closely connected to Hong Kong.

Much of the gold comes from Hong Kong... there are more than 7,000 stores with a daily turnover of nearly 300M RMB (nearly $40M USD).

This region contributes to 50% of China´s sales.

Folks in areas like Hong Kong, China, and India observe gold and silver as culturally significant symbols of wealth.

Here is a far-fetched scenario, but it helps illustrate a point…

Suppose every one of Hong Kong´s seven million population bought one ounce of gold in Hong Kong and then made a quick trip over China’s border to sell it. They could each make a risk-free $100 profit and theoretically trigger the draining of something like 200 tons of gold from Western vaults.

China’s insatiable appetite for Gold

China produced 372 tonnes of gold in 2022. Russia´s gold production is No.2 globally, with most of it getting supplied to China traded in RMB.

These two countries have adopted a local currency swap agreement for their gold trade. Therefore, the proportion of gold purchased in U.S. dollars is low.

Last year, China imported 1,343 tonnes of gold. This year, the imports are continuing to increase significantly during the same period.

The direct reason for China´s spike in gold imports is consumer demand.

It is difficult for the West to understand the Chinese cultural value of gold as a wealth preserver, but this quote from Vince Lanci sums it up well:

"Not only is China ravenously buying up all the physical gold it can get its hands on…. more importantly, it is letting the world know it is buying up all the physical gold it can get its hands on [this time]."

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD stays under bearish pressure and trades at its lowest level since early May below 1.0700. Unabated US Dollar demand amid risk aversion and looming EU political uncertainty exert downside pressure on the pair heading into the weekend.

EUR/USD News

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD extends its decline on Friday and trades at its lowest level in nearly a month below 1.2700. In the absence of high-tier data releases, the US Dollar continues to benefit from souring market mood, forcing the pair to stretch lower in the second half of the day.

GBP/USD News

Gold clings to recovery gains at around $2,330

Gold clings to recovery gains at around $2,330

Following Thursday's pullback, Gold holds its ground on Friday and trades in positive territory near $2,330. The benchmark 10-year US Treasury bond yield edges lower toward 4.2%, helping XAU/USD push higher ahead of the weekend.

Gold News

Monero price poised for a downward correction

Monero price poised for a downward correction

Monero price has encountered resistance at a critical level. The technical outlook suggests a potential short-term correction as momentum indicators signal a bearish divergence.

Read more

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

It will be another central-bank-heavy week with the RBA, SNB and BoE. Retail sales will be the highlight in the United States. Plenty of other data also on the way, including flash PMIs and UK CPI.

Read more

Majors

Cryptocurrencies

Signatures