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XMFSinchiruna (28.54)

Reports from China continue to file in about a possible move away from USD and into Gold

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November 19, 2008 – Comments (4)

While we still have nothing resembling an official statement from China's Central Bank indicating a new policy of diversifying its reserve base out of the USD and into gold, we nonetheless have in ever-increasing number of unofficial reports to that effect. Taken in isolation, none of these reports can be granted much credence, but in sum I believe they start to become more credible.

Here's the most recent repost from the Chinese newspaper Guangzhou Daily and picked up by the Dow Jones newswire:

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

Wed, Nov 19 2008, 01:51 GMT
http://www.djnewswires.com/eu

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

BEIJING (Dow Jones)--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, citing unnamed industry people in Hong Kong.

The Guangzhou-based newspaper didn't elaborate on the plan.

China's forex reserves, at US$1.9056 trillion at the end of September, is the world's largest. U.S. dollar-denominated assets, including U.S. treasury bonds and mortgage agency bonds, account for a big proportion of the forex reserves.


Newspaper Web site: http://gzdaily.dayoo.com

-By China Bureau, Dow Jones Newswires; (8610) 6588 5848; djnews.beijing@dowjones.com

Now... an increase of that magnitude from 600 to 4,600 tons of gold would sink the USD to new lows and send the global financial system into meltdown mode. Furthermore, it would bethe end of China's willingness to finance additional U.S. debt, tying our hands with respect to the stated strategy of reflating our way through this crisis.

Therefore, while we can not be 100% sure this report is accurate or that China will ultimately follow through even if such a plan is under consideration, the significance of the event of it does come to pass means we should all remain vigilant and at least ponder the concept of where we would like to be invested should this occur. Got gold?

See also:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=90352&t=01006124249416869148

 

 

4 Comments – Post Your Own

#1) On November 19, 2008 at 11:46 AM, johnw106 (61.79) wrote:

I never got an answer when I asked this question in another blog so I am repeating it here :

I have a question. And I am not asking this in a smart aleck way but in a thoughtful "what if" way.

Everyone sells all their stocks and cashes out their CD's and savings accounts and buys gold,silver and platinum.

Then what? What happens to the stock market? What happens not only to the US dollar but to all the other monies? How do we use the gold and silver to buy daily needs like food? Pay the rent? Pay for gas at the 7-11?

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#2) On November 19, 2008 at 12:02 PM, XMFSinchiruna (28.54) wrote:

johnw106

That's an easy one.

First of all, the main idea is not to convert the capital you will need to pay bills this year into gold and silver, but rather a portion of the capital you have allocated for long-term investment purposes.

The 'then what' is that those who do so preserve their capital, if they eventually need to they can then convert back into USD (or some other currency if that becomes necessary) at an imprived exchange rate. Gold and silver are currencies, and this is all about exchange rates.

People buying gold and silver are not likely to impact the stock market nor the USD in significant ways... at least not in proportion to the impact that central banks will have when they transition out of USD reserves and into gold. Once gold and silver become that widely coveted for their safety, there will be no physical gold or silver available to the individual... there simply is not adequate supply. 

As to any likelihood that bartering may become part of our future in the event of a catastrophic monetary collapse.. no comment.  :)

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#3) On November 19, 2008 at 4:36 PM, jesusfreakinco (29.61) wrote:

Good find.  I can't wait to see my caps score in a year when Gold is trading well over $2,000... :)  Top 10 here I come

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#4) On November 24, 2008 at 8:08 PM, hansthered0 (< 20) wrote:

Good stuff Sinch!

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