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Chinese “Lose Faith In Collapsing Stock Markets And Currency”, Import Most Gold Since 2013

from Zero Hedge:

China’s demand for gold is back: as China’s equities slumped and its yuan currency finished 2015 with a record yearly loss, “people looked at other investment  alternatives that’s why there was huge demand for gold,” said Brian Lan, managing director at gold dealer GoldSilver Central in  Singapore.

Five months ago, when we previewed the asset classes that we thought would benefit the most ahead of (and during) China’s ongoing currency devaluation, and its accelerating capital controls, we laid out two things we are focused on: bitcoin and gold.

This is what we said:

China’s propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China… However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation – it tends to show up quite distinctly on X-rays.

 

Which is why we would not be surprised to see another push higher in the value of bitcoin … if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.

Back then bitcoin was $225, and after doubling in the susbequent five months, was last seen trading just around $400.

But what about gold: would China focus exclusively on bitcoin as a capital controls evasion mechanism to the detriment of the yellow metal? Earlier today we got the answer and it was a resounding now, because according to the Hong Kong Census and Statistics Department, in December Chinese gold imports via the main conduit Hong Kong surged to the highest in more than two years, as – in Reuters words – “investors lost faith in collapsing stock markets and a weakening currency and snapped up bullion.”

While there was some discrepancy in the actual data, we will use Bloomberg’s according to which net purchases rose to 111.3 metric tons from 66.8 tons a month earlier and 58.8 tons a year ago. Net buying increased to 774.1 tons in 2015 from 750.8 tons a year earlier and compared with a record 1,108.8 tons in 2013, the data show. Mainland China doesn’t publish the data.

That was the highest monthly number since October 2013 when imports stood at 130 tonnes.

According to Bloomberg, “Investors took advantage of the lowest global prices in almost six years to stock up on bullion amid share market gyrations and concerns the central bank would let the currency depreciate to boost slowing growth in the world’s second-biggest economy.Consumers were also buying in the run-up to Chinese New Year in February, the peak demand season.”

As China’s equities slumped and its yuan currency finished 2015 with a record yearly loss, “people looked at other investment  alternatives that’s why there was huge demand for gold,” said Brian Lan, managing director at gold dealer GoldSilver Central in  Singapore.

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1 comment to Chinese “Lose Faith In Collapsing Stock Markets And Currency”, Import Most Gold Since 2013

  • rich

    Investors Piling into Illiquid Assets to Avoid Discipline of Market Prices
    Posted on January 26, 2016 by Yves Smith

    Calling Elizabeth Warren….

    The latest “you can’t make this stuff up” ruse on behalf of investors to hide from plunging asset prices is to run for the supposed cover of illiquid assets, where lax valuations allow fund managers to fudge valuations, meaning pretend things are less bad than they are.

    Not only is choosing to prefer flattering and misleading accounting over economic reality not a wise idea, but virtually all of the illiquid asset classes, like real estate, infrastructure investing, and private equity, rely on the liberal use of borrowed money. That means they are riskier, in investment terms, than those embarrassing, loss-exposing asset types like stocks and bonds. In other words, if the objective were to be retreating from risk, rather than trying to camouflage it, this would be the last place you’d want to go. But Wolf Richter tells us investors are herding to the false cover of so-called “alts” (alternative investments):

    Illiquid assets — because they aren’t regularly traded, there is no pricing data — have an advantage over stocks and bonds for institutional investors in these trying times: their losses don’t have to be booked every time a statement goes out. Losses aren’t known, and certainly aren’t disclosed, until years down the road.

    And it’s not as if these investors aren’t aware of the fact that they are just playing accounting games. Consider this section from CalPERS’ private equity workshop last November:

    In some ways, I hate singling out this workshop panelist, Bob Maynard, since he’s candid about the issue of the smoothing being questionable. But his remarks illustrate the point: that the investors know full well that this supposed advantage amounts to gaming of reporting systems and the larger political processes that are tied to them, and they embrace this gimmickry.

    http://www.nakedcapitalism.com/2016/01/investors-piling-into-illiquid-assets-to-avoid-discipline-of-market-prices.html

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