China and Gold - Somethin' Ain't Right

A recent report out of Beijing, suggests China has become cautious about their gold purchases.According to Yi Gang, Director of China's State Administration of Foreign Exchange, "Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold." He said gold doesn't offer good long-term returns due to price swings.

Now, it wasn't but a few months ago that China openly criticized the U.S. for creating debt that it could not repay.Subsequently and secretly, China doubled its gold reserves.It was not until months after, did news of their action leak.It should be obvious why it was kept secret until the transaction was done.Had their intentions been known, it would surely have driven the price higher.

The article goes on to say, "China rarely reveals its thinking on its investment of its foreign-exchange reserves."So why now?Do you think China is making this comment because they want to sell gold?-or buy more gold? If they believed an announcement of an intention to double its reserves would affect prices higher, do they not believe, such announcement to the contrary, could send prices lower?And, if there is no intent to buy more, why say anything at all?

Something's just not right.Since China announced their secret actions, after the fact, nothing has changed to quell their criticism of U.S. policy to print more money and position gold as as an inflation hedge.Should this be a major buy signal for gold?Why don't we just say that it is a good affirmation that consistent adding of a gold coin to the portfolio is still a good move.On its own, it does not warrant any lofty new gold predictions. Just don't be lulled into ignoring the long term bull market trend that points to much higher gold prices ahead.Keep your gold hot line number handy and watch the slight dips that may result from these adverse gold market comments.

And in the case of these comments - somethin' just ain't right!