China's Rise and the New Age of Gold

China's Rise and the New Age of Gold: How Investors Can Profit from a Changing World
By Stephen and Donna Leeb
Published in November 2020
272 Pages
Thibault’s Score: 3/5

This interesting little book makes the case that China’s obsession with the yellow metal will result in significant price increases.

On one hand, this book was very “markety.” I hate books that feel like they are trying to sell you something. The last few chapters - which I skipped - literally list the author’s favorite gold stocks.

Markety books are usually written in the second person. “You should do this.” “You should not do that.” I hate cookbooks, and I hate second person books.

However, that being said, I expected the book to be written that way, so I wasn't disappointed.

Under communism, the Chinese government discouraged citizens from storing value. Gold was especially discouraged, because it allowed private citizens to hide wealth from the government. Communism discourages the private accumulation of wealth, because it makes central planning more difficult.

Over time, this policy slowly relaxed as China opened up. Many exceptions - such as the ownership of gold jewelry - were carved out. In 2009, the Chinese government made a radical U-turn. The government legalized private ownership of gold, and began encouraging it.

Historically, the Chinese population are big savers. They “eat bitter” - make hard short term decisions in hopes of improving their long term outcomes. Naturally, they are attracted to gold due to its historical ability to store and preserve value.

In 2013, China announced its “Belt and Road” Initiative to connect all of Eurasia using infrastructure. One less well-known part of China’s Belt and Road Initiative is its explicit objective of destabilizing the dollar.

The BRICS treaty - a group of 40 countries led by Brazil, Russia, India, China, and South Africa - recently signed a treaty explicitly calling for the subversion of the dollar as the world reserve currency. The Chinese government plans on creating a new global currency. This new global currency will not, however, be the Yuan. China knows that it lacks the credibility that the US had during the Nixon administration when Breton Woods ended.

Instead, China’s global currency will be a basket of fiat currencies from all BRICS countries. Several commodities will also be included, such as gold, oil, and silver. Gold will likely be the most heavily weighted asset in the basket. This new currency will be a digital CBDC, managed by an international IGO similar to BIS.

Overall, Leeb makes a very strong case for the value of gold in the coming century.

​