Wednesday, June 10, 2009

China plans to buy massive volumes of gold

Gold for China.

China, The Paper Tiger, plans to buy twice the amount of gold the US has (allegedly) stored in Fort Knox. This is big news, if true and we will know soon. The plan has been leaked by rep. Kirk of Illinois and God only knows how this man got his information.
But, as the writes argues, this is a clear vote of no-confidence in the US$.
South Africa was once the biggest gold miner, so it is time we pull-up our socks. I am afraid however that the SA Government and Reserve Bank still see gold as the antique relic, as described by J.M. Keynes. They might be in for a big surprise and caught with their pants down ;)

Update1: China has 1054 tonnes in gold reserves.
They are now adding (US$ 80 Billion : US$ 950) x 32153= 2.619 tonnes, so almost tripling their reserves !

This (1054 as current reserves + additional 2.619 tonnes = 3673 tonnes) would make them the 3rd biggest holder of gold reserves, after the Eurozone (ECB) and (allegedly) the USA , but just before Germany.

Update2: Motley Fool mentions comments of Kirk.

Update 3: This is what Google Alert emailed me as a result on a news search on "China" and " gold". Thank you Google!

Update4: Why is this not bloody world news?

Rep. Kirk of Illinois leaks China’s plans to buy $80 billion worth of gold; Patrick Kerr. Tweet via USAGOLD1

Rep. Kirk of Illinois leaks China’s plan to buy $80 billion worth of gold, to protect it’s massive foreign currency reserves from hyperinflation. China is particularly vulnerable to inflation as governments around the world openly inflate their way out of the “Great Global Recession”. China currently has approximately 1% of their foreign currency reserves in gold vs the U.S. with 75%. China has less gold than Italy. China’s massive wealth accumulated over the last many years is all paper…hence China’s new label as the “Paper Tiger” of the global economy.

This is a Fox interview with U.S. Representative Kirk from Illinois about the dollar situation, in which he speaks candidly about both China and Geithner’s efforts to stave off panic about the deteriorating fundamental outlook for the U.S. dollar.

Near the end of the interview, you’ll hear Rep. Kirk indicate that China plans to buy $80 billion worth of gold in addition to ongoing efforts to expand their strategic petroleum reserve. The whole interview is worth a listen, but the $80 billion gold purchase plan is one of the biggest developments in the fundamental picture for gold since that same country revealed its prior buying to the tune of 1,054 tonnes.

“They funded a second strategic petroleum reserve and they plan to buy $80 billion worth of gold. That’s two Fort Knox’s (Allegedly, TO). Both of those investments only make sense if you expect significant dollar inflation.”

China holds a lot of paper, the US holds a lot of gold. By having such a miniscule amount of their foreign currency reserves backed by gold, China is at immediate risk of devaluing their massive wealth. Like Ronald Reagan once said “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” With governments inflating there way out of the current economic crisis fiat money is being debased, devalued and diminished. Without Gold, China will see their massive wealth erode a la Reagan’s quote on inflation. Patrick Kerr of CommodityBroker.Net

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