If you want to know how to play the currency wars from this southern pacific outpost, look no further than our own global expert on the matter, Jim Rickards. Jim literally wrote the book on this topic and is the editor of Strategic Intelligence.
In his latest issue, he gives his subscribers an interesting way to play the currency war. I won’t give the actual investment recommendation away, but you will get the gist of it.
In the issue, Jim tells about a meeting he had with one of the largest refiners of gold in Switzerland. To preserve his identity, he calls him ‘Goldfinger’.
According to ‘Goldfinger’, the supply of physical gold remains scarce. While he says there is increasing amount of scrap gold coming from Southeast Asia (due to the economic slowdown there),
‘On the other hand, good delivery bars were becoming scarcer. Vaults in London — such as the vault holding gold for the GLD exchange traded fund — were being stripped bare. Goldfinger knew this because each LBMA good delivery bar is stamped with the name of the refinery that produced it, and the date it was produced.
‘Bars are generally stored in a vault on a ‘last-in-first-out’ basis. Newer bars are removed first. The older bars — some with dates from the 1980s — are not moved out until the vault is almost empty. Goldfinger was now seeing more of those older bars come in for refining.
‘He told me he had recently returned from the Middle Kingdom where he had visited Chinese refineries and gold mines. His tour was somewhat restricted by Chinese Communist officials but, as a prominent gold executive himself, he was able to see far more than most outsiders.
‘He said Chinese gold demand was insatiable. The Chinese were buying over 450 tonnes of gold produced from their own mines each year, while importing approximately 1,400 tonnes of gold on top of this. Meanwhile, Chinese gold exports were zero.’
Jim’s message? Buy gold before the buying panic sets in.
For The Daily Reckoning