The following is a collection of articles and news I have collected from the Internet, which will help the West to learn about The Extent of China's Lore, Lure And Love of Gold.
China Craves Gold
China admits to building up stockpile of gold
www.financialpost.com/news-sectors/story.html?id=1530063
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China profoundly alters gold market synergy...The Dragon's Hoard
www.gold-eagle.com/editorials_08/kosares062509.html
China Reiterates Call for New World Reserve Currency
-- China's central bank renewed its call for a global currency and said the International Monetary Fund should manage part of its members' foreign-exchange reserves, triggering a decline in the U.S. dollar.
"To prevent the deficiencies in the main reserve currency, there's a need to create a new currency that's delinked from the economies of the issuers," the People's Bank of China said in a review of the economy in 2008 released today.
People's Bank Governor Zhou Xiaochuan in March urged the IMF to expand the functions of its unit of account and move toward a "super-sovereign reserve currency." Russian President Dmitry Medvedev proposed on June 5 that nations use a mix of regional reserve currencies to reduce reliance on the dollar.
"Zhou Xiaochuan sees the current international financial system is flawed, putting too much emphasis on the dollar as a reserve currency," said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong. "The dollar should depreciate to address the global imbalance but because it's a reserve currency it cannot."
www.bloomberg.com/apps/news?pid=newsarchive&sid=aJvfiKnKAsR4
China Should Buy Gold to Hedge Dollar Fall
China should buy more gold because the U.S. dollar is poised for a fall and the metal is needed to support the greater international role envisaged for the yuan, a senior researcher with the ruling Communist Party said on Thursday.
Speaking at a foreign exchange and gold forum, Li also said that buying land in the United States was a better option for China than buying U.S. Treasury securities. Li Lianzhong, who heads the economic department of the Party's policy research office, said China should use more of its $1.95 trillion in foreign exchange reserves to buy energy and natural resource assets.
"Should we buy gold or U.S. Treasuries?" Li asked. "The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice." CON'T
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Monumental ramifications of China's necessity to buy gold to diversity foreign reserves
In recent months much news has been aired about Beijing's keen interest in diversifying its material FOREX risk, since most of it is in the US dollar. I believe the greenback comprises well more than 70 percent of its total foreign reserves.
But no one has really delineated the monumental ramifications of China's necessity to buy gold to diversity foreign reserves. Consequently, one took a close look at the pertinent numbers. To appreciate the findings it is necessary to show the following basic data:
- China has $1.8 Trillion in foreign reserves, which grow continuously by the hour (in numbers that is $1,800,000,000,000). About 70% of these reserves are concentrated in the US Dollar ($1,250 Billion).
- China's gold as a percent of total foreign reserves is about 1%....and it is reported China plans to increase the gold percentage by an additional 4% to a 5% goal.
- There are approximately 32,000 troy oz in a tonne
- Total annual gold production in the entire world is a mere 2500 tonnes
To increase gold reserves by 4% China needs to buy $70 Billion in gold on the open market. THIS IS NOT POSSIBLE WITHOUT CAUSING THE POG TO SKY-ROCKET. However, for the sake of this illustration, let's assume China could buy it all at a fixed price of $900/oz. In this event China would acquire approximately 78,000,000 ozs, equivalent to about 2,300 tonnes.
Let's put this into perspective. 2,300 tonnes represents 92% of the Total yearly gold production in the entire world (ie 2500 tonnes). Incredible but true, China must buy an entire year's production of the entire world to increase its gold reserves from 1% to 5%.
ut as I previously mentioned THIS IS NOT POSSIBLE WITHOUT CAUSING THE POG TO SKY-ROCKET.
What is absolutely certain is that China must and is diversifying its foreign reserves out of the US Dollar and into other major world currencies, including gold. It is also well nigh certain that China has for sometime been secretly buying gold...and most certainly will continue to accumulate gold until is reaches its prudent target of 5%. However, we need to to remember China's US dollar reserves will continue to mount DAILY as long as the US Trade Deficit is a reality. To be sure, the ONLY way for the US Trade Deficit to reverse is to sharply devaluate the greenback, which would propel the POG into orbit....that much faster.
Summation of the Monumental ramifications of China's necessity to buy gold:
- Indubitably, the rising POG in recent history is in part due to China's covert gold purchases. Moreover, China's gold purchases will continue unabated for years to come, during which in my opinion the POG may reach US$1200 to US$1500/oz.
- Any respite in the rising POG is an opportunity to buy more before the price surges even faster and higher.
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Yuan's rate is our business, China tells US
BEIJING - China raised the stakes today for high-level economic talks with the US by reporting a near-record monthly trade surplus and telling Washington that its exchange rate is a matter of national sovereignty.
The surplus for November of $22,9bn, just shy of October's record $23,8bn and more than double that of November last year, handed fresh ammunition to US critics who say China is unfairly holding down the value of its currency to give its exporters an edge in global markets.
Two things are obvious:
Firstly, China will persist to drag its feet in revaluating the Renminbi, facilitating continued mounting of US Dollar trade surplus. And secondly, China will methodically but orderly diversify its dangerous mounting dollar foreign reserves risk by buying gold and other major world currencies. Presently, the vast majority of its foreign reserves are denominated in US dollars --- and only a tiny fraction in gold.
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China will diversify reserves
China will diversify its $1 trillion foreign exchange reserves, the largest in the world, across different currencies and investment instruments, including in emerging markets, Chinese central bank governor Zhou Xiaochuan said on Friday.
His remarks sent the dollar tumbling for a second day and fueled a growing debate about how China should best use its fast-growing reserves, which are about 70 percent in U.S. debt securities, bankers estimate.
"(Diversification) includes currencies, investment instruments, including emerging markets," Zhou told Reuters on Friday on the sidelines of a monetary conference.
Asked about selling U.S. dollars, he said: "We do not have any new preparations for selling any currencies." He said gold sales were not under consideration.
Changes in China's massive stockpile of money are being closely watched because it could ripple through financial markets worldwide, risking a steep dollar fall if U.S. debt floods onto the market, which could push up U.S. interest rates and slow global growth.
These fears caused the U.S. dollar to hit a 2-1/2 month low against the euro, while gold prices rose to fresh two-month highs but emerging market debt was largely unaffected.
In comments published on Friday, Chinese researchers said the country's huge pile of reserves was a double-edged sword. On the one hand it increased foreign confidence in China's economic stability and laid the foundation for China to make the yuan fully convertible in future.
On the other hand the reserves symbolized China's growing economic imbalances, including a record trade surplus, and so helped spark friction with its main trading partners.
It also exposed China to more market risks, generated upward pressure on the yuan, raised the risk of inflation and made it harder for the central bank to conduct monetary policy, they said.
"China now faces a dilemma. It either keeps the exchange rate stable or sacrifices sound economic growth," Dou Erxiang, a researcher at Peking University, told the official newspaper Financial News.
www.chinadaily.com.cn/china/2006-11/14/content_732926.htm
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Chinese pile into gold on reserves talk
Retail investors in mainland China are buying up gold in anticipation that prices will rise, fueling the yuan-priced gold market in Shanghai. Gold prices got a boost last week when China's central bank governor said the country would diversify some of its US$1 trillion (HK$7.8 trillion) reserves away from the US dollar. He later refused to specify if gold - which currently makes up a tiny fraction of China's reserves - was on the list.
Rallying gold prices have made the precious metal popular among individual investors, who are not legally allowed to trade on the Shanghai Gold Exchange.
"Some investment money from retail investors is entering the domestic gold exchange through some channels," said a gold trader at a major producer in Shanghai. "They want to join the market on speculation that gold is set to reach at least US$700 an ounce by the end of the year."
Some mainland traders expect gold to reach US$800 to US$1,000 an ounce if the current rally helps the metal to break above US$680 an ounce.
www.thestandard.com.hk/news_detail.asp?pp_cat=22&art_id=31744&sid=10855318&con_type=1&d_str=20061114
China moving to hold more reserves in gold
BEIJING (XFN-ASIA) - China is likely to diversify its foreign exchange holdings of more than one trln usd away from US dollar denominated instruments in favor of gold, Numis Securities said.
'China is estimated to hold about one pct of its reserves as gold and there is speculation that the Chinese central bank could raise gold to five to six pct of total reserves over the next 15 years. The World Gold Council estimates that China holds around 600 tons of gold which at today's market price is worth 12.2 bln usd, Numis said in a research note.
It noted that People's Bank of China governor Zhou Xiaochuan had said recently that the government is seeking alternative instruments to US dollar denominated assets, which has contributed to an improvement in the gold price in the last week. con't.
www.forbes.com/home_asia/feeds/afx/2006/11/12/afx3166675.html