China: a Much More Important Factor in Determining Gold Prices than Fed QE Tapering

Demand For Gold in China

Demand For Gold in China

US investment on gold declined during the year of 2013, since the specter of Fed QE tapering did promise higher interest rates for investors. This made gold investments much less attractive for Americans during the last year. But this move encouraged the Chinese to corner the gold market just like the Hunt Brothers did with the silver market in the 1980’s.

The Chinese gold demand has become a much more important factor in determining the prices of gold than the “Quantitative Easing” tapering by the Fed. Reserves. Just look how China has performed in the other markets. China was able to overtake France as the world’s largest consumer of red wine last year. Just think what that would mean for the wine prices worldwide.

Follow The Money –

If you follow the Chinese money with your investments, you will never go wrong: especially on commodities. That being said, Fed tapering of QE did have something to do with the Chinese enthusiasm for buying gold. The Federal actions heralded in higher global interest rates and that is quite toxic for China’s bubbling economy. Turkey and India raised their interest rates yesterday, and who’s next?

What else can they invest in, which possesses an internationally stable price level that could resist the worst of the asset price slumps. It is none other than the king of the precious metals: Gold. Gold prices will never slump to low levels since the mining of gold is getting harder and harder with each passing day. The miners have to dig deeper than normal to uncover the precious metal as it becomes scarce in the world. This would ensure that the prices of gold would keep on rising during the next few years too.

Gold: $7,000 – 9,000 –

Once that hurdle is passed gold prices will definitely take an upward leap again. From the sell-off during the year of 2013, which mirrored a collapse similar to the years of 1975-76, we can now expect a seven-fold increase in prices which took gold to a peak in the 1980’s.

That would definitely place gold in the $7,000 – 9,000 range as Jim Richards: Author of “Currency Wars” has stated. Just as they did with red wine, the Chinese have turned tables on what was an affordable commodity into an expensive luxury.