Four Pillars of Gold-Price Strength Remain Intact - Just Ask China

NEW YORK, Dec. 17 /PRNewswire/ -- Jeffrey Nichols, Senior Economic Advisor to Rosland Capital, fresh from a recent trip to China, today made the following comments on the recent volatility of gold:

"While gold traders and investors are currently focusing on U.S. economic data, they're missing the just-as-important statistics from China.

"Recent indicators point to a "V" shaped recovery in the Chinese economy. Chinese industrial production accelerated in November to its fastest rate this year – up over 19 percent from a year earlier. I can tell you first hand from my recent visit to Shanghai that China's largest city is booming with new construction – roads, bridges, office towers, and apartment blocks – rising everywhere, streets crowded with shoppers, and auto sales so strong that many buyers wait months for delivery.

"We've written and spoken about the importance of China to the world's gold market and price outlook. It is now the world's largest gold-consuming market, surpassing India this year. It is also the world's biggest miner of gold. Moreover, the People's Bank of China, the central bank, has been a significant buyer of gold from domestic mine production for the past three or four years.

"Notwithstanding the recent correction – and the possibility that gold may yet fall further before bargain hunters and other buyers (including central banks) reappear – the four pillars of gold-price strength remain intact.

"These are:

1. Inflation-fueling U.S. monetary and fiscal policies;
2. Central bank reserve diversification with the official sector being a taker rather than a supplier of gold in 2009 and the next few years;
3. Expanding retail and institutional investor participation in the United States, China, and around the world;
4. Declining world gold-mine production.

"Looking ahead to 2010, don't be surprised to see gold at $1,500 or higher by the end of next year!"