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Tuesday, July 31, 2018

China May Secretly be Adding Gold to its Reserves

Officially, Chinese bullion reserves sit at 1,843 tons of gold. However, their hoard could be much larger than the numbers released.

If history is any indicator, we could be nearing an announcement that the People's Bank of China (PBOC) expanded its gold holdings substantially, reports Newsmax. Officially, Chinese bullion reserves sit at 59.24 million ounces, or 1,843 tons of gold. The figure has remained unchanged since October 2016, shortly before Donald Trump was elected President.

However, according to the article there are signs that suggest China has quietly been adding to its reserves over the past two years. This means, they could be boasting a gold hoard much larger than the numbers given to the public. Before mid-2015, irregular updates by the PBOC weren't considered unusual as the country had only updated its official figures once between 2009 and 2015. Then suddenly, the PBOC revealed a 57% increase in bullion holdings over a period of six years.

The shift towards monthly updates since July 2015 coincided with stricter International Monetary Fund regulations, as China wanted to have the yuan included in the Special Drawing Rights basket. The updates ceased almost immediately after the yuan became part of the SDR in October 2016.

Analysts have little doubt that China's gold holdings have indeed grown since the last update states the article. In fact, Philip Klapwijk, managing director of Precious Metals Insights Ltd., views bullion acquisition by the PBOC as a strategic imperative.

Klapwijk referred to heightened trade tensions between the U.S. and China as the biggest reason why the latter would want to have as much bullion as possible. According to the article, the threat of escalation puts into question the future of China's massive export figures, and bolstering the central bank's bullion reserves would give the government more freedom amid economic constraints.

Klapwijk also pointed out that China's government has plenty of room to amass bullion even in the absence of international purchases. The people of China consistently rank among the top buyers of gold jewelry in the world, in large part because the average citizen is inclined to treat gold ornaments as an investment. If needed, the article writes that the PBOC could access the people's jewelry holdings to obtain a significant amount of bullion. Furthermore, as the world's largest gold miner, China retains the option to simply purchase its own ore rather than export it.

Mark O'Byrne, research director of precious metals broker GoldCore Ltd., is certain that China has already increased its gold holdings by a wide margin over the past two years. To O'Byrne, it's only a question of how large the figure will be when the update is finally revealed.

Expectations that China may have quietly added to its gold hoard over the past two years fit into a general view held by many market participants that China's bullion reserves are actually far greater than reported. Given the nation's propensity towards gold, both on a state- and consumer-level, some have speculated that China's true bullion holdings could be twice as large as the officially reported 1,843 tons.

Tuesday, July 10, 2018

Incrementum AG Fund Manager Says Now is the Time to Buy Gold

Gold market has reached its lows for the year, with prices to gain traction as investors lose optimism.

According to one notable strategist, the gold market will soon see a strong shift in momentum and an accompanying spike in prices. A recent article on Kitco features Ronald-Peter Stoeferle, fund manager at Incrementum AG, and why he believes gold is headed towards an uptrend in the near term.

In the article, Stoeferle says that the gold market has already reached its lows for the year, and that prices will begin to gain traction as investors lose some of their optimism. Stoeferle added that gold's current levels make right now a good time to load up on bullion.

The money manager listed several favorable developments that will keep gold ahead in the coming months. According to the article, signs show that the recovery in the dollar is already losing steam and that investors are being less confident regarding the greenback's future. Stoeferle said that the dollar is bound to go down as the Federal Reserve rounds up its tightening cycle.

As investors come to realize that the Fed doesn't have a lot of hiking room left, the article states the dollar's rally will begin to fade. Stoeferle said that the downturn in the dollar has been a long time coming, noting that many investors were shorting the currency at the start of the year.

The fall in the dollar will coincide with another round of trade tensions and the ensuing market stress reports the article. He sees the potential threat of a trade war as a big statement in gold's favor, as the fallout could act as a major booster for the gold market. Stoeferle said that the growing global uncertainty could force the Fed to return to a looser monetary policy, which would further support the metal.

Stoeferle feels that his forecast for the dollar goes in line with key U.S. officials who have stated that a weaker dollar would be positive for trade. Even President Trump has, on several occasions, likewise called for a lower dollar in order to strengthen U.S. trade.

Although the booming stock market has been gold's greatest nemesis, the article writes that equities will end up bolstering the metal's price. Like numerous analysts, Stoeferle thinks that the record-setting equities are finally winding down. He views the trouble in emerging markets as an omen and a sign that the rest of the stock market will soon follow. The weak technical picture in the stock market is another point that gold will draw strength from.

To Stoeferle, the metal's tenacity in difficult times is the surest indicator of its ceaseless value. Even when other assets posted historic runs, gold remained competitive and avoided selloffs while waiting to make its move up.