An interesting and telling statistic crossed my desk the other day…
For the first two months of last year, Chinese gold imports from Hong Kong hit around 11,000 kilograms. This year, that number is more than 72,000 kilograms during the same time period.
China, by all accounts, is accumulating gold at a record pace. And with the amounts we’re talking, it’s not a stretch to assume that the bulk of the purchases were made by the Chinese government.[ad#Google Adsense 336×280-IA]Even more surprising, though, is that the country also continues to export gold and has taken the spot as the world’s top gold producer.
In fact, while researching world gold production, I noticed that the figures, which parallel China’s meteoric rise as an economic power, are absolutely astounding.
Take a look…
The Rise of Gold in China
Back in 1970, China didn’t even register as one of the top gold producers. The top five producers at the time were South Africa (67%), the former Soviet Union (13.7%), Canada (5.75%), the United States (3.7%) and Australia (1.3%).
Then in 1995 – coincidentally, right around the first time I visited China to cover its emergence into the “capitalist world” – China made its debut on the top-ten list at number six with 6.2%. South Africa was still number one, but only produced 16.6% of the world’s gold – a sharp decline from 1970. The United States jumped to 13.7%, followed by Australia and Canada.
Fast forward to 2011, and the numbers are quite eye opening…
China’s now the number one producer on the planet at 13.1%, followed by Australia at 10%, the United States at 8.8%, Russia at 7.4% and South Africa at only 7%. (If you add the former USSR nations together, they still top the list.)
In the end, China’s buying and hoarding of gold only bodes well for the price of the metal going forward.
And since China has shown consistently that it’s a patient investor that buys with an eye for the future, we’re looking at decades of support for gold prices.
Bottom line: Gold stocks will at some point benefit from all of this buying. Right now, they trade at levels that are similar to when gold was under $1,000 per ounce. The ratio of the XAU gold index to the price of the metal is also signaling that it’s time to buy gold stocks.
The real question is not if gold shares will go higher, but when.
Ahead of the tape,
Note from Daily Trade Alert: If you’re a regular reader, you should be familiar with our favorite way to profit from the pricing disconnect between gold and gold stocks. It’s by trading the Market Vectors Gold Miners ETF (AMEX: GDX). In short, thanks to its structure as an exchange-traded fund, you get instant, diversified exposure to a basket of the largest gold miners.[ad#jack p.s.]
Source: Wall Street Daily