We have previously discussed the way Chinese gold demand will impact the gold price via imported gold.  Even we have underestimated that demand.  Right now, the demand for physical gold in China is surging.   The premiums for gold bars for spot delivery jumped to their highest levels in two years there.   Both nations are experiencing food inflation in particular, as well as the rising levels of general inflation.  If this is a consequence of urbanization taking productivity away from the countryside, we expect the government will rectify that quickly without using monetary means.   But overall gold demand is not a response to inflationary pressures there, but the rising capacity as well as rising numbers of middle class investors turning to one of the two prime investment mediums, bank deposits or gold.  We expect this to rise rapidly in this country of 1.4 billion people who are rapidly being enriched.
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