China Strikes at the Heart of Gold
June 24, 2010
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Coeur d'Alene Mines' landmark deal to export 1/2 of the life-of-mine gold production at Kensington to China's primary (and state-owned) gold producer marks a significant signal of China's growth in gold demand continuing to outpace its ability to source adequate supply doestically (DESPITE REMAINING THE WORLD'S LARGEST PRODUCER SINCE 2007!!!!!!!!!).
China Strikes at the Heart of Gold
http://www.fool.com/investing/small-cap/2010/06/24/china-strikes-at-the-heart-of-gold.aspx
China recently surpassed India as the world's largest market for gold jewelry, and The World Gold Council now expects consolidated Chinese gold demand to DOUBLE from recent levels over the next ten years!
This is a sweet boon for Coeur d'Alene, which is well positioned geographically to offload Kensington's concentrate to China. More importantly, much like the morphing structure of the coal markets that I have documented over the last several months that portends a sustained, generational bull market in the works, this contract is indicative of (or at least continues to telegraph) a similar structural / geographical shift in the global market for gold. Couple this with Shanghai's rise as a key spot-market hub, and Hong Kong's repatriation of bullion formerly stored in London, and you have all the evidence in place to declare Asia as a new global hub for precious metals to easily rival New York and London. Once those latter cities' exchanges are caught with their pants down mired in worthless leveraged paper gold and uncoverable naked shorts, Asia will then become the de facto center of the gold and silver world.
Economic wars are waged in part through currencies, and with Europe and the U.S. betting the farm on the world playing along cooperatively with reflationary printing to combat limitless mounds of toxic debt, China and its pan-Asian kin may face an irresistable opportunity to employ gold and silver as salvos in their bid to reinforce the ongoing decline of Western economic hegemony. The global balance of power continues to march in a state of flux due to the financial crisis, but I caution Fools against underestimating the extent to which China and surrounding nations will seek to position themselves by whatever means at their disposal to fill the resulting vacuum.
The structural supply deficit in China's rapidly expanding gold market clears the way for at least $1,500 gold on that one driver alone, and ultimately the resulting strain on global supply may well be what triggers the mother of all margin calls on the leveraged LBMA or the naked-shorted COMEX. If either of those exchanges are forced into default, then my long-held $2,000 price target will be rendered woefully understated.
Long and Strong Silver and Gold,
Sinch
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