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)
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
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