china economic quake drives gold tsunami

Source: Terry McCrann From: The Sunday Telegraph February 13, 2011

Strong demand: Extraordinary growth in China is driving soaring commodity prices, which includes gold.

THE truly massive profits BHP Billiton and Rio Tinto are making - nearly $40 billion between them this financial year alone, compared with a likely $6 billion or so for the Commonwealth Bank - are the most obvious face of our new resources boom.

China is gobbling up more and more of our iron ore and coal - both the coal that fires power stations and the coal that goes into steel-making with that iron ore.

The prices just seem to go up and up and up; the money pours into BHPB and Rio, and then into the Federal Government's tax coffers. And that's before the new resources tax comes in.

But there's another, less obvious, boom under way. It's in the price of foodstuffs and so-called soft commodities such as cotton. Indeed, the cotton price leapt 150 per cent last year.

Coffee is up nearly 100 per cent, wheat more than 75 per cent, oats something similar.

...Gold is a commodity, just like coal and cotton. It's also the ultimate money, and what we've been seeing is a slowly developing gold tsunami, as one observer puts it.

This is a tsunami driven, so to speak, by the Chinese economic earthquake. The extraordinary growth in China is what's driving those soaring commodity prices.

Now China is buying gold instead of global paper money to try to protect itself from the rising global inflation that its insatiable growth is unleashing.

According to the World Gold Council, says the Canada-based Sprott Assett Management which coined the term "gold tsunami", Chinese retail demand for gold increased 70 per cent from late 2009 to late 2010.

Indian demand is actually higher, but most of that gold is turned into jewellery.