China reported planning big shift of FX reserves into gold

China reported planning big shift of FX reserves into gold

Submitted by
cpowell on 10:32PM ET Thursday, November 13, 2008. Section: Daily
Dispatches
By Benjamin Scent
The Standard, Hong Kong
Friday, November 14, 2008
http://www.thestandard.com.hk/news_detail.asp?pp_cat=30&art_id=74335&sid...
The mainland is seriously considering a plan to diversify more of its massive
foreign-exchange reserves into gold, a person familiar with the situation told
The Standard.
Beijing is considering changing its asset allocations during the financial
tsunami in order to build up gold reserves "in a big way," the source said.
China's fears about the long-term viability of parking most of its reserves
in US government bonds were triggered by Treasury Secretary Henry Paulson's
US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget
deficit balloon to well over US$1 trillion this fiscal year.
The US government will fund the bailout by printing new money or issuing huge
amounts of new debt, either of which will put severe pressure on the value of
the greenback and on government bond yields.
The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23
billion. China holds gold reserves of just 600 tonnes, worth only US$13.89
billion.
Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich
Futures senior vice president Colleen Chow Yin-shan said.
Until now the United States has had little choice but to issue massive
amounts of debt to fund its deficits, and China has had little choice but to
purchase it, as there are not many markets deep enough to absorb the mainland's
US$30 billion to US$40 billion in monthly capital inflows.
Government officials involved in the management of China's reserves are
beginning to see gold as an attractive place to park some of these funds. They
see it as a real, tangible asset that will not lose its value over time -- in
stark contrast to the greenback, which is becoming more disconnected from
economic realities as more bills are printed.
"It's the right time to increase the gold reserves, as the price is about
US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China
Gold Association.
The International Monetary Fund has made reducing global payment imbalances
one of its priorities in the aftermath of the financial tsunami.
"I think China probably will expand its strategic reserves into commodities
during this downturn," said a Hong Kong-based strategist.
"China will continue to buy treasuries ... otherwise the system would get
distorted," he said. "But I think China will diversify its
reserves."

* * *
Join GATA here:
New Orleans Investment Conference
Thursday-Monday, November 13-18,
2008
New Orleans Marriott Hotel
http://www.NewOrleansConference.com
* * *
Help Keep GATA Going
GATA is a civil rights and educational organization based in the United
States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail
dispatches are free, and you can subscribe at http://www.gata.org/.

China urged to buy gold to hedge dollar decline

Submitted by
cpowell on 10:40AM ET Friday, November 14, 2008. Section: Daily
Dispatches
By Xiao Yu and Ron Harui
Bloomberg News
Friday, November 14, 2008
http://www.bloomberg.com/apps/news?pid=20601012&sid=aODaEiMnEoeI
China, the second-biggest overseas holder of U.S. Treasuries, should increase
its bullion holding to diversify its reserves because the dollar may decline,
the country's gold association said.
"China should have at least several thousand tons of gold in its reserves,
five to six times the officially announced 600 tons," Hou Huimin, vice chairman
of the China Gold Association said by phone from Beijing. The group represents
producers, traders, and retailers.
The U.S. budget deficit climbed to a record in October, and some investors
are betting the dollar may weaken as the Treasury would need to sell more debt
to finance its $700 billion financial-rescue package. Gold has tumbled 29
percent from its March record.
"There's no doubt that gold would be attractive, as U.S. debt is likely to
swell," said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager
at Daiwa SB Investments Ltd. in Tokyo. "In the long term, both the dollar and
Treasuries will probably weaken. It's possible that China will buy more gold,
though the country is likely to do so gradually."
The dollar dropped 0.5 percent against a basket of six major currencies at
3:25 p.m. Beijing time. Gold declined 0.8 percent to $730.54 an ounce.
China has the world's biggest foreign-exchange reserves at $1.9 trillion,
according to data compiled by Bloomberg. It is also the largest overseas holder
of Treasuries after Japan. China's demand for gold jumped 23 percent in 2007,
making it the world's second-largest consumer.
The Asian nation may buy more gold for its reserves on concern the $700
billion U.S. bank bailout will cause declines in the dollar and Treasuries, the
Standard newspaper in Hong Kong reported today, citing an unidentified person.

The People's Bank of China spokesman in Beijing declined to comment on the
newspaper report.
Zijin Mining Group Co., China's largest gold producer, and rivals Shandong
Gold Mining Co. and Zhongjin Gold Corp. jumped by their daily limit of 10
percent in Shanghai trading.
Zijin rose to 3.87 yuan at the 3 p.m. close, the highest in a month. Shandong
Gold gained to 38.13 yuan, and Zhongjin Gold climbed to 29.34 yuan.
"Chinese gold stocks are probably rising on the speculation that China may
buy more bullion," said Wayne Fung, a Hong Kong-based analyst at China
Everbright Securities Ltd. "It won't surprise me if China goes ahead, as it's
not the first time the rumor has emerged in the market."
Some Asian central banks may seek to build up gold holdings a little as the
percentage in their reserves is rather low, said Dominic Schnider, commodities
analyst at UBS Wealth Management Research. "But I don't think they will go into
the market and destroy the balance and push it to ridiculous prices," he said.

Gold more than doubled in the past six years and reached a record $1,032.70
an ounce March 17 as the dollar slumped and oil advanced, increasing concern
inflation would accelerate. In the past eight months, the precious metal has
plunged about 30 percent as the dollar rallied, oil collapsed and the global
credit crisis pushed the world toward a recession.
The U.S. dollar index advanced to a 30-month high yesterday.
"The dollar has gone up and gold come down, so if you want to diversify it's
a decent time to do so," Larry Kantor, head of research at Barclays Capital,
said in Singapore. If countries want to shift into gold from currencies, "they
will do it over a very long period."
The U.S. budget deficit climbed to an all-time high of $237.2 billion in
October, spurred by the purchase of stakes in some of the nation's largest
banks, according to Treasury Department data released yesterday in Washington.

The Treasury this month said it will more than triple its planned debt sales
this quarter to help finance this year's budget shortfall. The government needs
to raise money not only for the package, but also to pay for its bailouts of
mortgage companies Fannie Mae and Freddie Mac.

* * *
Help Keep GATA Going
GATA is a civil rights and educational organization based in the United
States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail
dispatches are free, and you can subscribe at http://www.gata.org/.

héhé... et si on rajoute cet échange de mail relaté par Murphy, ce soir
www.lemetropolecafe.com

But, PERHAPS, the most significant reason gold is trading differently is the CHINESE. Yesterday, we received the email from Carolyn in Hong Kong about the front page article in The Standard re the Chinese adding to their gold reserves…
"Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said."
Well, I can’t get into any details, so please don’t email me for them, but I can say GATA, through an intermediary, has been in contact with the Chinese about doing just that. We had one conference call in April and were to have another weeks ago. It was postponed because they were too busy and rescheduled for this week. However, during this time the emails regarding our second conference call dried up … then, SILENCE.
When I saw the Hong Kong gold article, I immediately sent it to our contact. The response was right to the point:
"It’s happening."
Does that mean the Chinese are in the market now, which is why gold traded so differently today? Don’t know. However, there is a lot of in-sync smoke about them doing so. Time will tell. IF they are, the Gold Cartel is in the deepest of trouble, as any meaningful Chinese physical gold buying will blow them out of the water.
One more thing. The Chinese, unlike the Japanese, are known to be superb traders. It would make sense that they would be taking advantage of cabal orchestrated price collapses. And we know that they know EXACTLY why the price of gold has been slaughtered the past many months, just at a time when it should have soared.

les Russes songeraient quand à eux, carrément à un rouble convertible en or


http://chinaconfidential.blogspot.com/2008/11/russian-officials-weighing-gold-backed.html

http://silverstockreport.com/2008/china.html
Is China Ready to Buy Gold at Last?


(Do the math on this one!)


Silver Stock Report


by Jason Hommel, November 19, 2008



There has been a recent flurry of news articles saying China may begin to
diversify into Gold. But the articles conclude that China will move slowly,
over years, so as to not disturb the markets. Funny.
It's funny because it's like they don't know basic math.
China wants 4000 tonnes of gold, to help "diversify" their $1.9 trillion in
U.S. bonds. It's quite a joke. Please bear with me as I explain.
A tonne of gold is 32,151 ounces. Please search "troy ounces per tonne" at
google to confirm, because this one bit of information, and a simple calculator,
can help you unlock and decipher the meaning of what you read in the news
regarding the gold market, as gold at the national level is usually always
quoted in terms of tonnes.
The total ounces China is seeking, is thus: 4000 tonnes x 32,151 ounces/tonne
= 128,604,000, or 128.6 million ounces.
That's an interesting number because it is about half of the U.S. official
gold reserves of 261 million ounces.
It's also an interesting number because the total annual gold market
consumption is said to be about 4000 tonnes, while annual mine production is
only about 2500 tonnes.
But let's now multiply by the current gold price, to see how much of China's
reserves could be diversified if they obtained that, without disturbing the
price.
At $736/oz., times 128.6 million ounces = $94649.6 million, or $94.6
billion.
That's funny, because $94.6 billion is not very much of $1.9 trillion, which
is $1900 billion.
What's the percentage? Simple: $94.6 / $1900 x 100 = 5%.
See, if China diversified 5% of their reserves, they would dominate the world
gold market, buying an equal amount bought by the rest of the world in a year,
and that could crash the dollar by 50%, while gold prices could double!
And actually, such a diversification of $94 billion would be no
diversification at all, since China has added $600 billion to their dollar
holdings within the last 6-7 months, up from $1.3 trillion.
To truly diversify, they would need to sell more dollars than they are
accumulating, so they really need to buy about $600 billion worth of gold, or
more, in a year.
How much would a true diversification be at current prices? $600 billion /
$94 billion = 6.38 times as much gold as the world buys in a year.
Please think on that, and buy silver, instead. Because as we have seen, as
gold moves, silver moves higher faster, and runs out sooner, because it is more
scarce.
Here is a quote that has been posted for over a year at my main page at
silverstockreport.com:
"Even though the U.S. dollar is no longer backed by gold, any holder of
dollars could wise up at any time and start buying silver or gold. China, for
example, could spend their $1.3 (now $1.9) trillion U.S. dollars in bonds and
buy gold anywhere in the world, such as Switzerland, Dubai, Tokyo. China could
even send agents to buy gold at any of the 4,000 or more coin shops in the U.S.
The dollar could drop 50% or more overnight, and there's not a single thing the
U.S. government, you or I could do about it."
Please note the following news items:
China Should Buy Gold for Reserves, Association Says (Update2)
Nov. 14
(Bloomberg)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aO8E.6_D2tVo&refer=home
China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report
Wed, Nov 19
2008
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=82afe43d-8d3c-494d-894d-113c196ed750
"China's central bank is considering raising its gold reserve by 4,000 metric
tons from 600 tons to diversify risks brought by the country's huge foreign
exchange reserves, the Guangzhou Daily reported"
Two other quick news items:
Iran switches reserves to gold -
report
TEHRAN, Nov 15
http://asia.news.yahoo.com/081115/3/3s594.html
Saudi Arabia buys $3.5bn of gold in two weeks
13 November 2008
http://news.goldseek.com/PeterCooper/1226586450.php
Finally, a news item regarding China's silver.
Silver hit by rising cost of production
10 Nov 2008
http://news.alibaba.com/article/detail/metalworking/100021066-1-silver-hit-rising-cost-production.html
Key excerpt:
"The country will increasingly rely on imports to fill the
needs for silver, he said. Last year, the country's net imports were 1,067 tons,
compared with net exports of 1,085 tons in 2006, according to customs data
provided by Zhou."
Finally, it is keenly important to put the relation of gold and silver in
perspective.
The world's consumption of gold, 4000 tonnes is $94 billion.
The world annual investor demand for silver is about 100 million ounces, or
$1 billion.
Do you see why silver is the far superior investment to gold? Silver will
move higher much more easily, and you will make far more money in silver.
The bulk and weight of silver now, are the reasons why some avoid it, and are
the exact reasons why it will perform better than gold. Fewer people take the
"pain" to own it, thus, it is the more contrary investment, and will perform
better.
Reminder: 10,000 ounces of silver are available at auction this Wednesday
night, at http://www.seekbullion.com/
See also, smaller amounts of silver for sale daily at my Mom's silver shop at

www.seekbullion.com and even smaller amounts of silver for sale
daily at
http://shop.ebay.com/merchant/jkesilver
Oh yes. My mom also told me this week that she usually gets about $1 more
per ounce at ebay than at seekbullion.com. But that does not necessarily mean
that seekbullion.com is cheaper, because it's not a perfectly fair comparison,
since her auctions at seekbullion.com are usually over 100 oz., while at ebay,
they are usually less.
This same principle, China reporters seem to fail to understand. When China
moves, they will get less gold for the money, because when they move in size,
they will move the market. Communists really don't understand free market
principles, as a matter of general principle. But then again, neither do 99.9%
of Americans, who prefer paper money, instead of real silver, and
gold.



Sincerely,


Jason Hommel