This Chart Says Buy Gold

Andy Snyder|April 28, 2021

It’s “game on” in the world of gold.

We’ve got the chart that proves it.

If you’re lucky enough to subscribe to Manward Letter, you know we like our gold. With interest rates where they are, our Modern Asset Portfolio calls for an oversized 10% allocation to the stuff.

Thanks to some simple economics, we’re convinced that stake is about to pay off in a big way.

It has to do with China.

You may have heard the news. Beijing is allowing imports of gold back into the country.

The headline writers tried to put a fake twist on the news. They hinted that China may be trying to back its new digital yuan with gold. We admit it’d be a bold move that would allow the country to call Washington and whisper “checkmate” into the phone… but it won’t happen.

Beijing’s currency is too manipulated and dependent on artificial pricing to allow it to happen.

The truth – as usual – is much simpler… but perhaps even more lucrative.

The “Real Price”

What’s really happening is that Beijing is working to control the price of gold.

Most folks don’t realize it, but there are many prices for the metal. Most buyers never pay the price that scrolls across the bottom of your TV screen.

Prices ebb and flow based on local supply and demand.

When India messed with its cash, for instance, prices soared overnight. They more than doubled. And yet the global spot price barely budged.

In China, local prices have been quite depressed in recent months. A crushing pandemic and trade sanctions slammed the country’s economy.

Late last year, investors could buy gold for as much as $100 below the spot price.

Beijing cut off supply to keep things from cratering even further.

That’s the idea that takes us to that chart we mentioned above. It shows the plan worked.

Local prices in China have not only climbed out of their slump… they’re back to trading at a premium to the global spot price.

Opening the Spigot

Once again, the simplest explanation usually wins – Beijing has opened its borders to balance supply with demand.

It will keep prices in China from surging. But across the world, it will add a huge slug of fresh demand to the market.

In all, roughly 150 tons of gold (worth nearly $9 billion) are expected to start flowing into China between now and the end of May. It’s more than twice the 2019 monthly average… and 15 times larger than the monthly average that trickled into the company last year.

Clearly, it’s enough to disrupt the global supply-and-demand balance.

It means prices could finally get out of their slump and begin to rise.

Again, our Modern Asset Portfolio calls for a 10% allocation to gold.

It’s about to pay off handsomely.

China is back… and so are the bulls.