Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

China Says Buy Gold (on weakness)

Commodities / Gold and Silver 2010 Mar 12, 2010 - 08:32 AM GMT

By: Brady_Willett

Commodities

Best Financial Markets Analysis ArticleOn March 20, 2007 China’s Central Bank governor, Zhou Zianochuan, had this to say about China’s burgeoning reserves:

“Many people say that foreign exchange reserves in China are (already) large enough…We do not intend to go further and accumulate reserves” Zhou Xiaochuan


The above comments were made when China had a $1.2 trillion stockpile in foreign exchange reserves. Over the last 32-months this figure has almost doubled to $2.399 trillion (as of December 2009). The lesson, if otherwise unclear, is that China’s policy ‘intentions’ are not necessary synonymous with policy actions.



China Says Buy Gold (on weakness)

Those that thought China was going to dump U.S. Treasuries and buy all the gold on the planet were disappointed by recent comments from Yi Gang, head of the State Administration of Foreign Exchange (SAFE).  But for those in the know Yi’s words simply meant more of the same:

“The US Treasury market is the biggest bond market in the world and our foreign exchange reserves are relatively large, so as you can imagine the US Treasury market is an important one for us… The international gold market is very limited. If I purchase gold on a massive scale, it will definitely push up global gold prices”

With Yi adding that “[gold’s] yield is not very good from a 30-year point of view”, it was of little surprise that the immediate reaction in the gold market was negative. However, upon closer investigation it was also clear that Yi was not indicating a policy shift so much as confirming that China would prefer to accumulate gold that it does not acquire from domestic production under favorable market conditions (or on weakness).

 “So, as for suggestions from many friends that we should increase gold holdings, we will give prudent consideration to this, according to market conditions.”

Suffice to say, when it comes to foreign reserves, gold, or the value of the Renminbi, policy rhetoric out of China is often intended to diffuse tensions with foreign policy makers and/or provide misdirection. Using the above comments as an example, is it coincidental that China is talking up its U.S. Treasury purchases a month before the U.S. Treasury could unleash the word ‘currency manipulator’ in a report?  As for gold, while the notion that Yi is talking up SAFE’s investment ‘book’ (or talking it down in order to add to it) may seem far fetched, remember that we live in a world where policy makers have resorted to ‘elaborate rhetorical jousting’ to try and devalue their currency. Is it really a stretch to conclude that China would like to talk speculators out of the gold market so that it might procure a larger footprint in the gold market?

As Yi highlights the fact that gold’s performance over the last 30-years has been ‘poor’, it is worth remembering that China started accumulated gold in large part because it believes nearly 30-years of U.S. dollar hegemony will slowly come to an end. Accordingly, unless the Chinese growth story is about to meet a relatively abrupt end or the U.S. is about to do the unthinkable and adopt sound money policies, it isn’t just likely that China will continue to accumulate gold – it is certain. 

In short, don’t be surprised when China feels like releasing the statistics that the country’s gold holdings have grown significantly from the current (and dated) level of 1054 tons. The China/Gold/Reserve diversification theme(s) have been active for some time (1, 2, 3), and are likely to remain active for good reason: Gold is the only currency that can not be negatively impacted by central bank printing.

“Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold”

By Brady Willett
FallStreet.com

FallStreet.com was launched in January of 2000 with the mandate of providing an alternative opinion on the U.S. equity markets.  In the context of an uncritical herd euphoria that characterizes the mainstream media, Fallstreet strives to provide investors with the information they need to make informed investment decisions. To that end, we provide a clearinghouse for bearish and value-oriented investment information, independent research, and an investment newsletter containing specific company selections.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules