China's Demand For Gold Has Trapped The West's Central Banks

Submitted by Adam Taggart,

Every once in a while, an Off the Cuff interview is so important that we decide to make it available to the entire public. This is one of those occasions.

In this week's Off the Cuff podcast, Chris and Alasdair Macleod build on the insights laid out in Chris' recent mega-report last week on gold: The Screaming Fundamentals for Owning Gold. And specifically, they delve deeply into the poorly-understood topic of why Chinese demand has become such a game changer in recent years.

In my opinion, this podcast offers the best clarity I've heard to-date in explaining:

• what the true measurement of annual Chinese bullion demand actually is (hint: it's even bigger than you imagine)
• what the implications of China's gold voraciousness will be
• why Western central banks had to smash the price of gold last April
• why Chinese demand exploded at these lower prices, putting the Fed and other Western central banks into a trap (kill the banks or kill their currencies)
• why the Fed is desperate to keep the price low for as long as possible (and why this suppression will fail)
• why the Eastern attitude towards gold will trump the West's

In regard to the last point, Alasdair pithily summarized a critical dynamic that, in my opinion, is as hugely important as it is under-appreciated:

In the rest of the world and particularly Asia, people do not think like we do. As far as they're concerned, gold is the only long term asset worth holding. It is the family pension fund. I like quoting the typical situation in India. I first went to India in 1965 and the price of gold at that stage in rupees was around about 170 rupees an ounce. Today it's about 100,000 rupees an ounce. And when you think that the young man getting married at that time -- he'll be a grandfather now -- he would have got a dowry from his wife's family which would have been in gold. His presents would have been gold. Every time they had children there would have been gold. Every time there's a festival there would be gold. Gold is the family pension fund. What other investment has gone from 170 rupees to 100,000 rupees over that period of time? Absolutely nothing! There isn't even an alternative like sensible equities or anything like that for them to play. Gold is the only way they can escape the devaluation of the rupee. And so no wonder it's so popular. That's the story all over Asia, by the way.

I think the financial press in the West, the mainstream media, basically they rely for their information on analysts in the bullion banks. And the bullion banks are always short. And so they always get a negative story. Universities teach people economics, the Keynesian variety and the monetarist variety. And there is an assumption that gold is no longer money. It is just a commodity with peculiar characteristics.

Now whether the West is right or wrong is not the point. The point is there are 4 billion people in Asia who have got a very old-fashioned view of gold, and they have become wealthy over the last twenty years. And their view is likely to prevail against the <1 billion of us in North America and Western Europe. I mean it really is as simple as that. It's not a question of Austrian economics, or Keynesian, or whatever. We're outnumbered.

To help drive this point home, consider this...

Click the link below to listen to Chris' interview with Alasdair Macleod (54m:32s):

https://www.youtube.com/watch?v=B92SncG4UrM