|Jan 25, 2007 3:53 am
||A Stronger Yuan Means Higher Gold
|| A Stronger Yuan Means Higher Gold
Remember when the Japanese bought Pebble Beach golf course and New York’s Rockefeller Center?
China won’t do that.
Instead it is using its vast hoard of dollars to buy gold, made cheaper by the rising yuan. The buying binge sent gold stocks stratospheric, and I expect that rise to continue.
Two powerful forces are pushing gold to $700 and beyond:
1. Chuppies. China’s newly prosperous middle class is saving 45 cents of every dollar they earn. But they (with justification) distrust Beijing’s banks. Gold is the ultimate store of wealth, and young Chuppies are just beginning to convert their huge cash savings into gold. This factor alone could be responsible for the next $30–$50 upswing in gold prices.
2. Big Dogs. Beijing’s big dogs, as they’re known, have stated publicly that, as the yuan is forced up and China’s store of close to $500 billion in dollar-denominated Treasuries is thereby cheapened, the government will diversify into gold. According to the IMF, China holds just 1.4% of its total foreign exchange reserves in gold. The average is 5% worldwide. If Beijing decided to rebalance its reserves with 5% gold, it would have to buy almost a year’s global gold production! So even a few percentage points shift to gold could instantly create a supply crisis forcing gold up to historic highs, close to $831!
And I expect other precious metals to follow. Nothing can stop the rise of copper, gold and several other industrial metals China so desperately needs. In a special research report you receive as part of your “Welcome Aboard”package from us at China Strategy, I show you exactly what you must do to cash in on this trend. Click here to get started now.
Jackpot in the South China Sea:
How China’s Oil and Gas Discovery Changes Everything
The discovery this summer of a massive oil field in the South China Seas, destroys two myths in a single blow.
If you grasp its significance, you can collect a pot-full of cash. But you’ll have to move fast.
The field is called Liwan 3-1-1, and it lies just 155 miles south of Hong Kong, 5,000 feet below sea level. In oil business jargon, Liwan 3-1-1 is an elephant—absolutely enormous—and it effectively doubles reserves for its owners.
Amazingly, it was the first hole drilled in the area!
Two assumptions have been driving oil prices recently, and both now look wrong. The first assumption was that China’s continued growth could only come at a higher and higher price as its demand for energy drove oil prices beyond $70 to $100 or more. Liwan 3-1-1 suggests that the South China Seas may become to China what the Gulf of Mexico has been to U.S. economic growth for the last century.
Not only would this stabilize energy prices globally, but it would ignite a fresh China boom!
Here at China Strategy, we are well-positioned to capitalize on such a boom. Indeed, when you put China’s global energy initiatives together, you quickly realize: Beijing’s not going to risk a chance of an economic slowdown over energy prices.
China’s Little Napoleon
China’s oil giants are as fossilized as the fuel they sell—and I’ve said so publicly. But I’ve also said that one oil company is unique and worth buying. And this is the oil company that has just found Liwan 3-1-1.
The significance of the discovery, and the fact that this feisty company owns it, add up to a potential double for fast movers.
The company is run on Western principles, with American-trained managers and a keen sense of investor value.
These factors put this China oil company in a class of its own, but here’s the capper: although relatively small, so deep are this company’s pockets, there is almost no deal it could not swing.
It is a key player in the Alberta oil sands. Plus, the company recently bought access to oil and natural gas in the waters of Australia and Indonesia. These deals boosted revenues 30% last year, and plumped up profits 40%.
Sudan, Nigeria, Kenya—wherever a claim is to be staked, these guys are in there, promising roads and royalties. Indeed, for the past decade, acquisitions have grown this company’s oil reserves by 15% per year! The stock is already up over 40% for us in China Strategy, and it should climb another 30% in the next few months.
That may even be an overly conservative prediction.
Remember, China is sucking up energy faster than any country on earth, and it has been unable to reduce the strain it places on world oil markets. It has built enough power plants in the past year to light Italy—and still blackouts blight the industrial and domestic routine in most cities throughout China.
The Blue Sky Strategy
Our feisty China oil company has another card up its sleeve, too: natural gas.
It’s no secret that, environmentally-speaking, China is toxic. High oil prices have pushed China back to coal, with the result that sulphur-dioxide emissions rose 15% in 2005.
In some areas of China, such as Xian, the soil is black, the rivers are dry, slagheaps tower over villages, there are no trees, and even taking a breath is painful. The solution is natural gas and many cities have new laid pipelines to bring this clean fuel to every residence.
Our China oil company has just signed a $13 billion contract to buy Liquefied Natural Gas (LNG) from Australia. A huge new natural gas find, the Gorgon Field, located in the shallow waters of the North West Shelf, has also been snapped up by this company.
The first LNG tanker has already arrived at the company’s vast new terminal at Guangdong—ushering in a new era of cleaner, but perhaps not cheaper, energy.
In the just-posted special report China: Bull in the Energy Shop, I show you how to buy this innovative oil blue chip that’s leading China’s overseas and LNG initiatives. Learn how to download your free copy at this special link now.
I look for crude oil prices to trade between $50 and $80 a barrel in 2007, close to where they were for 2006. Despite OPEC’s projected cutbacks in oil production, I believe improvements in fuel efficiency and new supplies of oil will help keep its price in check. The good news is that we’re starting the year with no oil shortages in the U.S. and other developed countries.
China’s oil imports grew 17% in 2006, which is very strong but still down from the blistering 35% growth in 2004. Demand continues to be strong for the world’s second largest consumer of oil, but as you can see, the growth rate is slowing down. In this environment it is important to buy oil companies with unique competitive advantages, and I believe we own one of the best. Click here to get complete details on this stock when you join China Strategy today.
Posted by Tom O'Brien
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