ETF Daily News reports that the import of gold has increased significantly in Eastern countries such as China and Dubai. This is shown to be true by reports that, in 2012, China’s imports of gold from Hong Kong, reached 800 tonnes. To put this into perspective, the average monthly import of gold from Hong Kong to China is roughly 31.75 tonnes or 381 tonnes per year. Another red-flag warning came from Dubai, who announced that the DMCC (Dubai Multi Commodities Centre) handled over $70 billion in gold trade. Unsurprising since Dubai has been trying to position itself as a gold centre for the last decade. As a result, leaders in gold production, mining, and manufacturing are moving operations to Dubai.
Lets Look at why this is Happening
January 1, 2012 the gold price per ounce was $1564.95. February 28, 2012, the gold price was 1786.55 per troy ounce. May 16, 2012, the gold price was $1540.59 per troy ounce. October 04, 2012 the gold price was $1791.84. December 31, 2012, the gold price was $1675.83
This chart represents historic highs and historic lows of the price of gold on the US exchange from January 1, 2012 through February 19, 2012. What this chart shows us is the tremendous opportunity that gold represents as an investment. Each of those peaks represents an enormous opportunity to profit from gold, and this cycle repeated not once, but twice in 2012.
What does this have to do with gold moving from the West to East? Consider that the price of gold is influenced by the value of the US. Dollar + demand. If the US Dollar is following this value pattern of gold, then it is easy to see that as the US dollar falls in value, other currencies rise. This is true of the Chinese Yuan. January 1, 2001, the exchange rate for Yuans to Dollars was 8.2775. Which simply means that it took 8.2775 Chinese Yuans to equal 1 US Dollar. By January 1, 2011, the exchange rate for Yuans to Dollars was 6.3494. So in that ten year period the Chinese Yuan gained about 23.5 percent in value over the US Dollar.
Remember that gold is not only a currency it is a commodity and as the US Dollar weakens, Eastern countries recognize the fact that their currency values increase. This means that they can buy more gold for less money. A stronger currency buys more product than a weaker currency. Someone wise once said that gold follows money, and if that is true then the cycle of gold from West to East is dependent upon how the Western currencies perform against the currency from the East. As the US Strengthens, gold will again flow West.
Notation: The gold discussed in this article is measured in tonnes (tuhn). A tonne is a metric ton that weighs 2204.6 pounds, and differs from a US ton which weighs 2000 pounds or roughly 10 percent less than a tonne.
