China Takes Advantage Of September Price Drop; Imports Record Amount Of Gold
by Tyler Durden
Remember how virtually all “experts” speculated that the drop in the price of gold would set off a liquidation cascade in China, where everyone was “loaded to the gills” and at the first hint of deflation would dump all holdings (not to mention that economic Ph.D. proclaimed the gold “bubble” popped two months and $200 lower)? It seems that as so often happens when all experts agree on something, it is precisely the opposite that happens. The FT reports that “Chinese gold imports from Hong Kong, a proxy for the country’s overall overseas buying, leapt to a record high in September, when monthly purchases matched almost half that for the whole of 2010….After hitting a nominal all-time high of $1,920.30 a troy ounce in early September, the yellow metal fell to a three-month low of $1,534 an ounce later in the month. Chinese investors snapped up the metal as prices fell.” Fair enough: this means the natural bid under gold will pretty much always be there, especially since the SHCOMP plunged at the same time, and if there was truly cross asset liquidation, imports would hardly rise. Which begs the question: if not China, then who sold? Was the move purely a function of fears that Paulson was liquidating? Or were rumors that various central banks are liquidating gold, actually true? We will likely find out when the next WGC report is filed. WE will also know that the Chinese number for total gold holdings is grossly underreported.
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