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Posted by on Oct 24, 2013 in AdvisorShares, Market Insight

From Today’s “The Gartman Letter”: China and Gold

From Today’s “The Gartman Letter”: China and Gold

Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, “The Gartman Letter,” since 1987.  A frequent guest on business news networks CNBC and Bloomberg, Dennis is a preeminent expert on commodities and issues relating to the capital markets.  Below is Dennis’ insight from today’s “The Gartman Letter,” which AlphaBaskets is now pleased to be sharing with our audience on a weekly basis.

Our friend, Mr. Grant Williams… he of the always fascinating “Things That Make You Go Hmmm…” weekly newsletter, has brought to our attention the rather substantive sums of gold exports from the UK to Switzerland this year. Last year the UK exported 85 tonnes of gold to the Swiss; this year through August (with obviously four more months to go) the British bullion banks have exported 1016 tonnes of gold to Switzerland. At the same through the end of July, the Swiss have exported 500 tonnes of gold to Hong Kong and Hong Kong has exported 1200 tonnes of gold to the mainland.

So, we have gold moving from the UK to Switzerland; from Switzerland to Hong Kong and from Hong Kong to mainland China. If we were not naïve, we’d think this was a scheme by the government in Beijing to hide the sums of gold it is buying. Further, we note that from January through August, Chinese gold miners mined 270 tonnes of gold, all of which has had to be sold to the People’s Bank of China. So by inference it appears that the PBOC is indeed aggressively adding gold to its monetary reserves, and buying as the price has fallen rather consistently.

If it is the PBOC that is the buyer of gold over these past several months, they’ve a huge loss on the position; the question then is, ‘Does the PBOC care?” Our bet is that it does not. It cares, apparently, about bringing China’s gold reserves to the levels closer to those of the US, of the EU, of the UK et al; to the levels of first world nations rather than to the levels it has held reminiscent of second tier nations instead.

We care that gold is holding firm; that gold in Yen denominated terms has found support and has stabilized in and around ¥130,000/oz., and gold in EUR, and Aussie and Sterling terms is higher and is rising. For example, earlier this month gold in EUR terms traded down to €925/oz.; and it is presently trading €970, while Gold/Aussie traded down to A$1310 on the 14th of this month and is trading, as we write, A$1367. This we find impressive.

The above communication is a publication of The Gartman Letter and is not intended to provide personalized recommendations to buy, hold or sell investments.  The Gartman Letter’s information, statements, views, and opinions are based on internal and external sources considered by The Gartman Letter to be reliable, but The Gartman Letter makes no express or implied representation or warranty to those sources’ accuracy, completeness, or correctness.  Such information, statements, views and opinions are expressed as of the date of publication, are subject to change without further notice, and do not constitute a solicitation for the purchase or sale of any investment referenced in the publication.  Investors should verify all claims and conduct their own research before investing based on the above communication provided by The Gartman Letter.