Gold in late December was under $1540. Today, it is $200 higher. What happened?
A Forbes colmnist offers suggestions.
First, gold is not like other commodities. It is an alternative currency. The European crisis is accelerating.
Second, hedge funds had to sell to redeem shares.
Third, low interest rates help to keep ownership cheap. Alternative uses for money are limited.
Fourth speculators had sold 42% of their holdings between August and December.
Fifth, Chinese started buying.
The truth is that the drop to $1525 in December triggered the renewed buying by the Chinese, who are the new incremental buyers in the world. The Chinese prefer to buy on weakness and not compete with the central banks of Russia, Korea, Thailand,Singapore and are buying to hold.
Zhang Jianhua, the research bureau director of the People’s Bank of China, was quoted in the POBC internal newspaper as insisting that “The Chinese government needs to further optimize China’s foreign exchange asset portfolioi and seek relatively low entry points to buy gold assets.”
Gold is the rich Chinese citizen’s safe haven.