China Wants More Gold

It comes as no surprise that the Chinese want to swap some of their U.S. dollar holdings for dumb 'ol gold bars, but the amount is a bit of a shock. Numismaster has the details:

It wasn't until about June 9 that the mainstream media was told that the Chinese government was planning to purchase an additional huge quantity of gold. The information became public when U.S. Rep. Mark Kirk (R-Ill.) was interviewed on Fox News by Greta Van Susteren.

Kirk accompanied Treasury Secretary Timothy Geithner on his trip to China in May. While the Chinese were laughing at Geithner during his speech at Beijing University for claiming that the U.S. dollar was strong (By the way, laughing at a speaker is a major social no-no in China, a sign that Geithner's comments were not respected at all!), Kirk was engaged in a private conversation with lesser Chinese officials. In this non-public discussion, Kirk was told that the Chinese were extremely concerned about the likely near term decline in the U.S. dollar because of the explosion of government debt. As part of the reaction to this concern, the Chinese government had established another reserve to stockpile petroleum and was planning to purchase another $80 billion of gold (about 85 million ounces at today's price level).

Kirk's revelation about the Chinese plan to purchase another $80 billion of gold was the very last comment in the interview. This extraordinary news received almost no coverage until last week when multiple hard-asset Web sites picked up the interview.

The Chinese are different than the Japanese in many ways - this is one of those ways...

Comments

[yellowhoard:]

Why would the Chinese want gold?

According to Buffet, it just sits there and they'll have to pay someone to guard it.

Hey Warren, those Chinese sure are dumb huh?

Jul 02 08:49 AM

[USisCorrupt:]

I think it also GREAT that the US & London continue to manipulate both the price of Gold and Silver. It just gives me more time to keep adding to my stash. I will be one happy camper among so many sad faces when the corrupt US markets fail. Too bad the the crime and violence in the world will be so bad I can't enjoy my riches. Oh well, off to Wal-mart to add more bullets to my arsenal. What a wonderful world we live in.

Just when will the people who caused this will ever see jail time?

deepcapture.com is sure doing their part.

Jul 02 09:06 AM

[SW Richmond:]

That's 2644 metric tonnes of gold.

One has to wonder how much of the gold out there really isn't out there, how many certificate holders are holding gold that's encumbered multiple times.

Jul 02 09:10 AM

[yellowhoard:]

Bingo SW.

What the banks are doing with gold will make Madoff look like a mere shoplifter.

Jul 02 09:15 AM

[optionsgirl:]

Bet ya China will scarf up the IMF gold ( when they get around to selling it) and we won't feel much of a ripple on the retail level.

Jul 02 09:22 AM

[CautiousInv...:]

I don't think China views its current Treasury holdings as a sunk cost and will pursue a strategy tooled to preserve the value its US holdings while, at the same time, reducing its proportional exposure to the US dollar.

In the short-term we could deal the threat of deflation but over the long-run, with the irresponsible creation of fiat gone wild, inflation is bound to return to an economically racked and crippled globe. In this somewhat apocalyptic view, there is only one asset class to reflate: gold.

The Chinese are playing a clever game of chess and are preparing themselves.........as in hedging........ for different economic scenarios.

Jul 02 09:25 AM

[Vuke:]

Here is Mark Kirk on YouTube speaking on the subject of Chinese concerns. A very sobering set of comments on the US/Chinese relationship. The odd thing is the public mention of gold purchases. You can bet your last coin on the fact the Chinese have already bought and will soon call for delivery.

www.youtube.com/watch?...

Jul 02 09:30 AM

[optionsgirl:]

That's a good clip, Vuke, thanks for posting it. China has been buying gold miners directly. Last year, they purchased a 40% stake in Canadian miner Jinshan, as but one of many examples. That's what they are doing with lots of other miners, too ( in base metals, earth minerals, etc) as well as farmland. They are paving the way to insure
control and supply no matter what kind of financial instability or mayhem we see down the road.

Jul 02 09:46 AM

[Ergo:]

I raise another possibility: Yes, they're clearly hedging. But they have the size and skill to attempt a measure of control. Whether or not they want to manipulate markets and currencies, I can't say. But they sure could if they wanted, and I can't imagine that some of their gurus aren't tempted by the huge profits that can be made in American markets by just a little manipulation.

Jul 02 10:30 AM

[DONE_SONZ:]

If China is the confirmed buyer,gold will spike higher in my view.


On Jul 02 09:22 AM optionsgirl wrote:

> Bet ya China will scarf up the IMF gold ( when they get around to
> selling it) and we won't feel much of a ripple on the retail level.

Jul 02 11:02 AM

[fxmaven:]

Does anyone have information on IMF Gold Sales? Is there any requirement for public disclosure, or is this part of the many major shifts in the global balance of power which the powers that be are keeping secret ? IMF sales are the biggest obstacle to GLD price appreciation in my mind, USA / UK running out of ammo to manipulate GLD, so this will disappear quickly. California has to be bailed out with something, Obama knows that tax increases will guarantee his political oblivion.

Jul 02 11:07 AM

[HaavBline:]

Hold your breath, gold bulls. Here are the facts:

1. China has not increased the % share of reserves allocated to gold.
2. China has not buy gold in open market to increase its gold reserve, they seemly buy from their own producer, China is now the largest gold producer in the world.
3. China is in a decades long national building phase, gold is one of the least important commodity at this phase.

Gold is important for China in one aspect: China has begun to transform the RMB into an international trade and reserve currency. It will become desirable to hold a larger percentage of its forex reserve in gold in order to anchor the RMB, like most OECD countries do. But this is a very long process, and China will not need to buy gold in open market to achieve that. Those OECD countries in relative economic decline will have no need to hold as much gold as forex reserve and can transfer those to China. The combined gold reserve of all central banks in the world does not need to change.

Gold is still mainly an inflation hedge, and there may be no inflation if OECD economies do not recover. The case for gold is not as clear cut as for many other commodities.

Jul 02 11:12 AM

[Larry House:]

I don't expect this to impact gold prices as much as might be thought at first blush. I do find China's interest in gold significant. It does not produce income, but China doesn't really need income. It is a good diversifier, and it helps to support a home industry. I just don't see it as a market mover.

Jul 02 11:33 AM

[AssetReset:]

Plus its 80B less USD for them to worry about

Jul 02 11:50 AM

[doubleguns:]

As China buys gold from their own producers that is less gold on the market. I believe they have been doing this all along but now they intend to increase that purchase and that cant be kept secret. So now they tell us.

Seems it would be bullish but that would depend upon over what period of time they intend to purchase.

Jul 02 11:55 AM

[The Aft Deck:]

China's actually Gold Reserve maybe much higher than stated

Jul 02 12:48 PM

[derryl:]

HaavBline wrote, "Gold is important for China in one aspect: China has begun to transform the RMB into an international trade and reserve currency. It will become desirable to hold a larger percentage of its forex reserve in gold in order to anchor the RMB, like most OECD countries do. But this is a very long process, and China will not need to buy gold in open market to achieve that. Those OECD countries in relative economic decline will have no need to hold as much gold as forex reserve and can transfer those to China. The combined gold reserve of all central banks in the world does not need to change."

I think this is exactly China's rationale for adding to its gold holdings. China is already trading in yuan with Brazil and Argentina and I think we will see more of this. A series of these bilateral currency deals will reduce participants' vulnerability to the dollar. The move away from the dollar as the world's only reserve currency will be an evolution, not a revolution, and the evolution has begun.

Jul 03 12:54 AM

[HA65MPH:]

I think china is looking really forward , not the next day like we in the usa do ....gold will be in the basket when it all comes down to future '''money''...got to , but we'' are a rabbit running away with printing more t/p , thanks obammy !...and lil' timmy...literally cutting our own throats ...

Jul 04 02:50 AM

[kmarkt2:]

Exactly for the reasons that the US, holder of the largest gold reserves in the world needs to support thre $ peg, China is doing like wise for the RMB; only the Chinese can do the buying.
You have to physically produce gold, but you can digitize the $ trillions into the US economy - that's another big difference.

Jul 04 03:01 AM

[Steve Soden:]

Isn't the World Economy interesting, but not funny!
Alot of us Worker Bees are getting our asses kicked.
I lost my job three months ago, but I still have to pay child support which I'll do as long as I have credit or cash or ?
My Girlfriend is Broke and wants me to Help here get another house since she's lost her's to Forecloser, sorry no, Now she's left me.
Thank God I saved some cash. California Sucks!

Jul 05 05:10 AM

[The Honest ...:]

here's the video of GOP Kirk talking about China buying gold

thehonesttrader.blogsp...

Jul 05 09:07 PM

[Samsung:]

Question - china still needs to keep the yuan low in order that the world will buy more of its stuff.

china is buying the gold in dollars but it is buying them from people all over the world - so sellers of the gold will immediately swap their dollars for euros, punds, shekels

how would selling gold help china to support the dollar?

Jul 06 02:21 PM