Anecdotal at best, but found this to be an interesting post worth sharing:
I've been working for the past 9 months in Saudi Arabia (government position) and have witnessed the infusion of Chinese "buyers" descending into Riyadh's gold souks (markets) and buying up the gold contracts the government (Saudi's central bank) dispenses to these PM dealers. As of April 10th, 2010, according to the Ministry of the Interior, Chinese buyers have purchased 16.2% of the gold contracts to the tune of 210,000 ounces with a 6.99% adjusted mark-up over spot. In Saudi Arabia, that's a much higher premium paid than the normal 2.99% mark-up. With a raised eyebrow, I inquired into the gold markets in Jeddah, Danman, and Mecca and discovered contracts were being purchased there as well by Chinese buyers (though I don't have the figures from those cities yet).
There has been an unprecedented surge in Saudi gold purchases in the past two weeks by the government with over $8.5 billion being spent on the yellow metal, reported by the Gulf News citing local industry sources.
According to the newspaper, the Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven. But, IMO, that's just a cover.
Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. But it's not the Saudi investors piling into gold.
News about the Saudi gold rush (if it gets out) is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices well above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.
It is my belief that China's purchasing of physical gold in vast amounts through the backdoor of KSA keeps the transactions mute and off the wire services, in the same way China couldn't possibly purchase the IMF's 300 tons without juicing up the price of gold on the open market.
This seems to smell of a coordinated effort between the two countries. 210,000 ounces in the span of 5 days (Riyadh only) would seem insignificant when were talking about trying to make up 3,000 tons to add to China's 1,500 tons currently. If China somehow manages to extract enough gold from the Middle East, and other regions in the world through backdoor purchases, combined with their own mining operations, and reaches the magical 4,000 tons (half of the u.s's holdings), then it's a new ballgame.
