Systemic risk in China a reason to buy gold

|By:, SA News Editor

Gold (GLD +0.3%) isn't moving much on this risk-off day, but Newedge's Robbert van Batenburg thinks the Chinese jitters which may be contributing to today's selloff could accelerate in the coming weeks.

"Chinese authorities have initiated a number of measures to reign in the froth in the domestic credit markets and speculative capital," he says, taking note of banking regulators requesting inventories of subprime loans and derivative positions, and today's story of Chinese banks cutting lending to industrial firms by up to 20%.

"The 2008 financial crisis has taught us that excessive leverage has to potential to create systemic risks if a virtuous credit cycle turns vicious. If these problems in China escalate, a flight in gold and Treasuries is likely to ensue."

ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, GLDI, DGZ, AGOL, DGLD, TBAR, UBG, GLDE, GYEN, GEUR, GGBP