Quote from article Talks about chinas possible real estate collapse and it's effect on gold. One unheralded but critical development during the past two years has been the sharp rise in physical gold buying from China. The gold buying by China's central bank has been well reported, but an equally essential story has been private accumulation of physical gold. Various estimates have been given since much of the buying has been unreported or inaccurately tabulated, with most reliable analysts believing that total Chinese demand as measured by weight increased at least 20% in 2010 as compared with 2009, and by a similar percentage in 2009 as compared with 2008. Some have suggested that China's total gold buying may have even surpassed India, traditionally the world's largest consumer of gold. I have no doubt that a significant percentage of gold's price increase in 2009-2010 was caused by the incremental demand from Chinese buying. The real question, then, is what will happen with this demand going forward, and which factors will be the most important in gauging future trends. .................. In all regions where real-estate prices slumped, people thereafter spent far less money on nonessential items. This was not primarily because they had less money to spend, but because they psychologically felt poorer as a result of having their most valuable assets lose a significant percentage of their value. Economists often refer to this phenomenon as the negative wealth effect. In China, one important demonstration of the negative wealth effect would be sharply curtailed demand for gold. ...................... In the short run, precious metals and their shares have become unpopular, which usually leads to some form of sharp rebound. In the longer run, however, the most serious threat to goldas it also is to most other risk assetsis the inevitability of the collapse of real-estate bubbles throughout the world. Currently, roughly 4.5 billion people live in neighborhoods where the ratios of housing prices to incomes, or housing prices to rents, have never been higher. As these bubbles inevitably collapse, which may already be occurring in places like China where such information is not likely to be accurately reported by the media for political reasons, it is likely that people will feel poorer and will therefore spend much less of their money on nonessential items like gold. The notable underperformance since November 8, 2010 by assets like FXI, an exchange-traded fund of Chinese equities, and a subsequent downtrend since December 7, 2010 by GDX, an exchange-traded fund of gold mining shares, may be signaling that a reversal of fortune is imminent. While short-term bounces are likely to occur whenever sentiment has become unusually depressed, as has been the case recently, it will likely take one or two years for the sting of the real-estate collapse in many regions of the world to complete its negative wealth effect on the prices of gold, gold mining shares, and related assets. http://www.kitco.com/ind/Kaplan/jan312011.html
From the article: Today, there are numerous cities in China where real estate is averaging between 20 and 40 times average household income. This has to qualify as the most dramatically overvalued real-estate bubble in world history.
My friend was telling me that rich people in China find property too expensive now. Property prices are starting to fall, they find no where to park their money and are moving into Gold. If China is holding 1 trillion dollars in treasuries, how much physical gold can that buy today at $1350. 1000,000,000,000 / 1350 / 32.15 / 1000 = 23040 tonnes of gold. How much physical gold is available above ground today? I see what you are saying, even if property prices fall and other asset prices fall. We just have to make sure people still have fiat currencies and that the amount of fiat currency is still far greater then the amount of physical gold available. If there is 1quadrillion dollars out there in wealth / assets world wide and it contracts by 500 trillion, theres still going to be 500 trillion chasing a finite physical gold market. Gold will fall, but so will everything else and you will maintain purchasing power. Slam
If true, it appears to make a mockery of the recent ranking of property affordability. http://forums.silverstackers.com/to...ility-in-australia-a-world-class-outrage.html
Mmm Cocaine. So the rapid expansion of cocaine use in the USA assisted by CIA attempts to keep 'US friendly' despots in South America may have had a side benefit then to the Agency? Well I never. I thought the heroin trade in Vietnam finished when the war ended. Oh Afghanistan too? Oh deary me.
The china real estate crash and gold,is written from an American prospective. Translated into Australian,if China falls she won't want our exports and the AUD will fall back to 70c USD. I.e Price of gold USD might fall,but gold in AUD will suffer a lot less.
At goldprice.org checking figures, I noticed the wild ride between price of gold and price of gold in AUD In the giant changes periods (AUD at 55,60,65,70 etc) did dealers here continue to trade at the AUS dollar prices, or hiold, or price in US dollars? ie. was the AUD premium sought by any here and how did you go? p.s http://www.goldprice.org/spot-gold.html and click on the options on the chart to see what I mean
