This “Secret Passage” to China Could Boost Gold

One of the biggest questions looming over the commodities markets today is: which way will gold prices go?

The action of late in bullion has been subdued. With prices largely trading sideways in the $1,300/oz range.

But even as the market has been unremarkable, a number of potentially transformative events have been moving forward in this space.

I discussed happenings in major purchasing nation India earlier this week. And we also just got news about critical changes underway in the world’s largest gold-buying country: China.

Reuters reports this week that Chinese officials are looking at opening up a new channel for gold imports. By officially allowing bullion to flow through the capital of Beijing.

This would become China’s fourth entry point for foreign gold. Joining Shenzhen, Shanghai and Hong Kong.

Up until now, Hong Kong has been by far the most important of these import channels. With $53 billion worth of gold flowing through here to the mainland last year.

But Chinese regulators are reportedly uncomfortable with reporting in Hong Kong. Where the government tracks exact numbers on incoming gold shipments, making the data available to market observers globally.

China allegedly wants to keep its gold purchases more opaque. With the opening of Beijing representing a “secret passage” into the country–where bullion can flow in, uncounted and unreported to the wider market.

All of this is of course, according to unnamed “sources familiar with the matter”. But the move does jive with recent speculation from groups like the World Gold Council that China may be upping its central bank purchases of bullion in a major way.

The theory goes that the Chinese government is building a massive gold stockpile. One that will be announced only after it has been completed–in order to keep prices low and orderly while the position is being assembled.

The sudden announcement that China is now perhaps the world’s largest official holder of bullion would jolt gold prices. And this week’s news is one more piece of evidence we may be moving in that direction. We’ll see how this plays out.

Here’s to the Beijing buy up,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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