After gold, the Chinese are rushing into copper and silver

The price of gold broke another all-time high in all currencies last week.

China remains the main driver of this frenzy around gold. Trading volumes on the Shanghai market have literally exploded over the past few days:

This bout of fever is now largely accompanied by a record number of long positions open on the futures market:

What are the reasons behind this sharp increase in interest in gold in China?

Gold is the asset favored by the Chinese since the stock market is underperforming and the real estate market is falling.

In recent weeks, the fall in real estate in China has accelerated:

The first drop in property prices coincided with the start of the gold rush in China.

The intensification of this craze for gold also coincides with an acceleration in the decline in real estate. Old house prices have now fallen by -6.8% compared to the previous year, an unprecedented figure in thecontemporary Chinese economic history.

LThe importance of real estate and the scale of indebtedness in this sector raise fears of massive intervention by the Chinese monetary authorities. Such action would have a marked effect on the value of the yuan.

Is the gold craze a signal of imminent currency devaluation?

In all cases, this gold rush is now accompanied by a craze for other metals.

The copperhas also soared to greater heights.

This comes at a time when the slowdown in the Chinese real estate market should nevertheless exert downward pressure on the red metal, widely used in this industrial sector.

The level of Chinese copper stocks is also much higher thanit should not be at this time of yearyear :

Analysts who scrutinize these stocks logically take a bearish outlook in the short term.

At this price level, and given inventory levels, it would therefore be logical to expect China to carry out massive copper exports.

However, this angle of analysis, once predominant, today seems to be confronted with a new reality: China is building up reserves of raw materials.

What is the benefit for China of storing so much copper?

By hoarding metal, China is removing physical stocks from the market.

Finding sources of copper supply is becoming particularly complex, particularly in Western countries.

The significant divergence between prices traded in New York (COMEX) and those on the London Metal Exchange has shaken the global copper market, leading to a frenzy for supplies destined for the United States. This disconnect between paper and physical prices highlights the difficulties in supplying physical metal.

This supply difficulty is the sign of a short squeeze, responsible for the surge in copper prices:

The disconnect between the paper market and the reality of the physical market could force manufacturers to conclude over-the-counter agreements directly with producers. It appears that for copper we have entered a new supply environment.

This pressure on copper also translates into refining costs for concentrates that are now negative, which is a historic first. In other words, refiners are willing to pay their suppliers to continue to obtain their concentrate. There is less and less copper concentrate available in an increasingly competitive refining market. Is copper becoming a… precious metal?

Another metal has made a giant leap in a few weeks: lmoney.

In a bulletin published two weeks ago, we discussed the risk ofa second Silver Short Squeeze.

Silver prices quoted in Shanghai continue to break records, while premiums between the Chinese and London markets also stand at historically high levels:

Trading volume in silver contracts also peaked on China’s Shanghai Futures Exchange (SHFE). LThe influx of long contracts has even forced the Chinese authorities to raise margin levels to calm speculation:

China’s gold rush is turning into a gold rushmoney !

A phenomenon still largely neglected in Western countries.

In nominal terms, the price of silver has returned to levels seen 11 years ago, but in real terms it is still far from the peak reached in 2020, equivalent to $34.45 today.

When we look at the 1980 peak, we see that, in real terms, silver is still nowhere near what it was worth at the time. Indeed, adjusted for inflation, the price of silver has fallen significantly over the last 45 years. The money/inflation ratio is currently trying to break through a negative trend:

This generational resistance which is currently being tested is found in certain mining companies such as Hecla Mining:

Silver’s continued rally would be a generational event, as it would finally mean the metal is emerging from its downtrend in real terms.

This is the signal many investors have been waiting for to get back into mining companies.

In China, the gold rush is now accompanied by a copper and silver rush.

This rush for tangible metals comes as China ramps up its sales of U.S. Treasuries.

China has reduced its holdings of US Treasuries for three consecutive months, liquidating a total of $76 billion. Chinese reserves now stand at $767.4 billion, returning to levels similar to those of 2009.

China is selling its US Treasury bonds and stockpiling metals.

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The information contained in this article is purely informative and does not constitute investment advice, nor a recommendation to buy or sell.



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