Chinese newspapers and financial media are reporting that buyers are primarily wealthier investors. Prior to the gold and silver rush, buyers were primarily lower income and purchased only one ounce silver rounds or one gram gold pieces. However, today's buyers are reaching out for heavier bars and coins of both gold and silver.
Newer buyers are moving towards silver as a value play. While the traditional silver to gold ratio is anywhere from 15-25:1, today's prices show a discrepancy, as silver trades at a more than 60 times less an equal weight in gold.
Chinese Currency History
Perhaps more than any other nation on the world, China appreciates the value of physical gold and silver as not only an investment, but also as a currency. As recently as the 1920s, Chinese currency was backed by physical metals, and for the thousands of years prior, both gold and silver played a part in both domestic and “international” trade.
If history is any indicator of the present and foreseeable future, silver will play an important role in the move to hard assets. As recently as the fall of 2009, the Chinese government issued a notice in which it suggested precious metals to individual investors. The government backed up its announcement with a cross country media campaign touting the various investment options and sizes that would be preferably to individual investors.
However, outside of Asia, the news on precious metals has been scarce. It was only last week that the Gold Anti-Trust Action Committee or GATA was formally cited by a significant news outlet, the Financial Times, for its work in uncovering illegal price suppression in the commodity markets. That coverage, however, was late. The interview that was cited was several months old, stemming from a discussion that occurred around the same time new events were popping up daily surrounding a whistle blower. Of course, even that news – the news that someone had real evidence supporting suppression claims – was also suppressed in the media.
No More Dry Powder
The mainstream press does not have much more to throw at those who push the idea that gold and silver prices are not only manipulated, but artificially suppressed. The move to physical metals is well documented, and it is only a matter of months before years of global events come full circle. For those who have known about the intricacies of the commodities markets for quite some time, the next few months to years will be undoubtedly profitable. For those just entering the metals market, well, you too still have a very long ride ahead of you. Price suppression is breaking into the mainstream, and when it finally reaches the threshold, we should only expect an influx of mainstream investment dollars and higher gold and silver prices across the board and all over the world.