Today Stephen Leeb told King World News, “... there is a controlled desperation in China when it comes to acquiring gold.” Leeb, who is Chairman of Leeb Capital Management, also said, “They are acquiring as much as they possibly can without tilting the markets dramatically to the upside.”
The acclaimed money manager also stated, “China mined a total of 355 tons, which was by far the largest amount of gold mined for any country. And yet they are still buying every single available ounce they can get in the open market.” Leeb was also quick to point out the strength gold is displaying, “Today we have global stock markets under significant pressure, the US dollar breaking out on the upside, and yet gold is holding firm.”
Here is what Leeb had to say about what is happening with Europe, the Chinese and gold: “Europe is a mess and sooner or later the Europeans are going to have to come to grips with the dire situation they face. Yesterday, Moody’s put the three AAA countries on credit watch, Germany, Luxembourg, and the Netherlands.”
“Unless the European bank is willing to print money in order to start buying the debt of the failing countries, you are going to have a catastrophe. The patchwork schemes they have been using are not going to get the job done. Right now, Eric, as we look at the European crisis, it’s worse now than it has ever been.
5-Year Spanish bond yields are now trading at 7.6%. That’s an extraordinary number, and it really says Spain cannot finance anything....
“For practical purposes, Spain has come to a halt unless they get help. This means lots of money printing going forward and tremendous inflation down the road. All of this favors the price of gold going dramatically higher.
In the past, when you have seen these kinds of situations, people sell things to get liquid. The item that is most liquid is gold. But you are not seeing intense selling of gold today. I just don’t think gold will go down very much. If gold does eventually test the lows or break lower, I don’t believe it will go much lower than the previous low.
In the past, people felt gold could go much lower in a full-fledged crisis, but that is not the case this time. The Chinese will continue to step in and buy and this is the primary reason gold has remained so strong during this European upheaval. You have to remember that the stock market is down in China and it is likely to remain down until you see a shift in leadership.
So gold has become increasingly important and China has encouraged its citizenry to buy gold. With the stock market already frustrating people in China, the Chinese, interestingly, will not want gold to be added to that list of frustrations for their investing public.
In the past, if the Chinese could step out of the way and let gold tumble in price so they could purchase it cheaper they would. Right now I think they just don’t want to add to their citizen’s frustrations with key markets, gold being one of them. If I’m right, then the Chinese will continue to support the price of this metal.
I would also note that China mined an unbelievable 20% of their proven reserves of gold last year. That’s an almost impossible achievement. That number was reported by the USGS, which is a very credible source for this type of information.
China mined a total of 355 tons, which was by far the largest amount of gold mined for any country. And yet they are still buying every single available ounce they can get in the open market. Australia was second with 270 tons. Keep in mind that Australia has 4 times the reserves that China has. I have never seen any country mine that percentage of any commodity. What China has done in truly a Herculean feat.
So there is a controlled desperation in China when it comes to acquiring gold. They are acquiring as much as they possibly can without tilting the markets dramatically to the upside.
Today we have global stock markets under significant pressure and the US dollar breaking out on the upside, and yet gold is holding firm. The bottom line is the weak hands are out of gold and China is creating a floor in the market. So if your downside is around $1,520 and your upside is many thousands of dollars, I would buy.”
