The China Securities Journal said that China's big four banks made 320 billion yuan in new loans in January and that the entire banking industry made 800 billion new loans. The People's Bank of China has yet to make a big move to loosen monetary policy, but Frank Holmes, a big gold bull, says "there is no need for anything else."
M2 supply in the country, cash in circulation plus savings, checking and any travelers checks, grew 13.6% at the end of 2011 to 85.16 trillion yuan and as today's data shows that number is increasing. Markets now await China's recent read on inflation, which will be released Thursday. Prices are currently up 4.1%. A high number means the country might be reluctant to pump a lot more money into the system but could trigger more gold buying as a store of wealth. A light reading could give the central bank room to ease monetary policy, but any deflation worries could crimp demand for gold.
Holmes thinks the gold price could more than double to $3,600 an ounce in 5 years. "People get so caught up with the next 3 minutes for gold and they should really be focused on the next 3 years," he says. "Does anyone really believe in the long term strength of the U.S. dollar?"
Holmes points to the fact that there is $18 trillion of debt rolling over this year in the U.S., Japan and Europe alone. "One looks at that magnitude then the Fed has to show leadership," as in keeping monetary policy accommodative to help the government.Gold mining stocks were struggling Wednesday. Barrick Gold (ABX - Get Report) was down slightly at $49.07 while Newmont Mining (NEM - Get Report) was 0.44% lower at $60.59. Other gold stocks, Goldcorp (GG - Get Report) and Yamana Gold (AUY - Get Report) were trading lower at $47.08 and $16.63, respectively. .
-- Written by Alix Steel in New York.
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