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Copper Catcher
Administrator
USA
2092 Posts |
 Posted - 06/27/2010 : 11:06:17
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BEIJING: In the last few months, speculation has been rife in bullion markets around the world that China will be buying the gold that the International Monetary Fund (IMF) is disposing of these days. But is China buying the IMF gold? It looks, despite the hype about Chinese plans to amass gold reserves in place of the US dollar, the dragon country is not in a mood to buy gold from IMF.
This week, again IMF said that it has sold 14.4 tonnes of gold in April, carrying out with its programme of planned bullion sales. IMF had 403.3 tonnes of gold to be sold as part of its bullion sales plan. Out of this, India--one of the largest gold consuming and importing nations in the world--bought 200 tonnes in November 2009. India’s gold buying from IMF sent gold prices to the dizzying height of $1,227 per ounce in early December last year.
Sri Lanka and Mauritius bought small quantities of gold--12 tonnes--from IMF in between. Thus, IMF had 191.3 tonnes of remaining gold for sale.
Two months ago, IMF announced that it would sell the remaining 191.3 tonnes of gold in the open market. So, as part of the open market sale, IMF sold 5.6 tonnes of gold in February, 18.5 tonnes in March and 14.4 tonnes in April. So far, IMF has sold 38.5 tonnes of gold in the open market.
IMF has now 152.8 tonnes of gold up for sale. The moot question is whether China, that has been eagerly looking at buying gold and stepping up the yellow metal reserves, would buy the remaining IMF gold that is to be sold in the open market.
And the surprising question is why China is not buying IMF gold, even as central banks of several countries are buying gold from the international organization. Is the rising price of gold one reason that is forcing China to go slow on its gold buying programme? Or is China, in fact, buying gold from open market and then would come out with a surprising announcement next year that its gold reserves stand at 2000 tonnes? (Currently, the Chinese gold reserves held as foreign exchange reserve is around 1054 tonnes)
David Lew, a keen gold market follower and bullion analyst, says there are several reasons why China is not buying gold from IMF, though there have been rumors that the Chinese central bank was planning to buy the entire 191.3 tonnes of gold from IMF.
First and foremost is the fact that gold market in the world will turn into an immediate playground of speculation and excessive volatility if China is to buy gold from IMF. “Even rumors that China was buying IMF gold two months back turned the bullion market highly volatile,” points out Lew.
China has a relatively small position as far as gold reserves are concerned. The Chinese central bank--the People’s Bank of China--holds only 1,054 tons of gold, amounting to just 1.2% of the country’s gross domestic product. The large chunk of China's reserves--around 70%--are held in US dollars.
Secondly, Lew says the fact that China is not jumping into to buy IMF gold does not mean that the country is not interested in amassing gold reserves. “It looks China is buying gold these days from gold mines, rather than gold bullion. Clearly, China wants to balance its gold reserve position very carefully and meticulously,” he pointed out.
Lew feels that another reason for China not buying the IMF gold is that in doing so, the Chinese currency Yuan would appreciate. “China does not want its currency to appreciate by buying gold from IMF,” Lew added.
China has been nursing ambitions to step up its gold reserves in the last one year, driven by the declining value of US dollar that the Chinese central bank holds as foreign exchange reserve. China also continues to aggressively promote gold investment. Jewellery shops continue to sprout across Chinese cities, towns and rural areas.
A recent report from the World Gold Council (WGC) said that gold demand in India and China will continue to grow driven by jewellery demand, in spite of high local currency gold prices. In Q1 2010, India was the strongest performing market as total consumer demand surged 698% to touch 193.5 tonnes. In China, demand proved resilient; demand increased 11% in Q1 2010 to 105.2 tonnes.
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June 22,2010 COEUR D'ALENE, Idaho (AP) - Coeur d'Alene Mines Corp. said Tuesday a subsidiary will sell gold concentrates from a new mine to China National Gold Group Corp.
Financial terms were not disclosed.
The gold concentrates will be produced at Coeur's Kensington gold mine in Alaska. Coeur said it was the first such deal between a Chinese state-owned company and a U.S. precious metals mine.
Coeur said the deal would cover about half the concentrates to be produced at the mine, which it said has reserves of 1.5 million ounces.
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Copper Catcher
Administrator
USA
2092 Posts |
Posted - 06/27/2010 : 11:12:47
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This is another key to undestanding China and Gold....
Why is China Buying Gold?
Posted on: Jun 1st, 2009 | By Byron King | Filed under Financial News, Gold Market
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Remember the old expression, “I wouldn’t do that for all the tea in China.” People used to associate China with tea. Well, now it’s time to associate China with gold, and a lot of it. Because the Chinese recently announced that they control over 33.89 million ounces of gold for monetary purposes. That’s an increase of 75% in Chinese gold holdings over the past six years.
This kiloton of Chinese gold makes the Middle Kingdom the world’s sixth largest holder of the yellow metal. The U.S. — courtesy of President Roosevelt’s gold confiscation in 1933 – tops this list of the world’s largest gold holders, followed by Germany, the IMF, France and Italy.
How did the Chinese accumulate so much gold? China purchased it over the past six years through its State Administration of Foreign Exchange (SAFE). SAFE is quite distinct from the People’s Bank of China (PBOC). The SAFE purchases meant that the gold did not appear as part of China’s officially reported monetary reserve figures.
The Chinese gold purchases, evidently, were part of a slow and steady buying program between 2003 and the present. It makes you wonder what the Chinese were thinking back in 2003. I happen to know, courtesy of an acquaintance at the Naval War College, that the Chinese were quietly forecasting that the U.S. would destroy its dollar by going to war in Iraq.
At any rate, SAFE bought all of the gold from domestic Chinese suppliers, so the overall impact was minimal on the international gold markets. Now the Chinese gold holdings have been transferred from the SAFE books to the PBOC. Hence, the official announcement. And here’s what REALLY matters. China is monetizing its gold!
This SAFE-to-PBOC transfer marks a profound decision by Chinese government leaders. Obviously, the Chinese government has bought gold over the past six years. But the Chinese have been engaged in an internal debate over whether to add the gold holdings to the official Chinese monetary reserves. That is, if the gold was not “monetary,” then it was just another non-monetary investment commodity like iron ore or copper or petroleum.
But now, with the announcement by the Chinese Central Bank, it appears that the debate is resolved. The gold has been added to Chinese monetary reserves. This action by China is part and parcel of an under-the-radar global effort to rehabilitate gold as a monetary reserve asset.
Gold has not been a factor in global trade and currency exchange since the late 1960s. But there’s a powerful movement afoot in the world to reestablish gold as part of an international monetary system. It’s because the U.S. dollar has been so badly mismanaged over the decades. No, you won’t read about it in your local newspaper, or even in the standard, mainstream business media. But that movement is out there. It’s happening.
At the same time, for many decades, the U.S. establishment has pooh-poohed the “gold effort.” U.S. policymakers, politicians, bankers and academics were collectively smug in their empirical certainty that, as Lord Keynes once noted, “Gold is a barbarous relic.” Apparently, the Chinese don’t agree. Not anymore. Indeed, the Chinese may well be thinking that the U.S. dollar is the real “barbarous relic.”
So now the Chinese are primed to begin using gold as a monetary asset. What’s the practical impact? I expect to see central banks worldwide start to add gold to their monetary reserves. The floodgates are opening. The PBOC and other central banks from here to Timbuktu are going to become net purchasers of gold in the years ahead. And people who own physical gold, as well as shares in well-managed mining companies, will benefit greatly.
One important commentator on gold prices is Peter Munk, founder of Barrick Gold, the world’s largest gold-producing firm. Recently from Switzerland, Munk remarked, “I have to think [gold prices] are going to be significantly higher than last year, just like last year was higher than the year before.”
According to Munk, the recent injection by the Federal Reserve of new currency into the money supply is an “enormous, enormous inflationary factor” for the dollar. This will make gold and silver “more and more desirable.” In addition, “Gold has got a very strong and stable support right now as long as we have this enormous uncertainty out there. And I think this uncertainty will probably last for a while, because I don’t see any major catalyst that can turn this around.”
Finally, Munk said, “Every year in the last three years, as the world becomes less and less secure in terms of normal investments and people lose faith and confidence in bonds, stocks, secured debt instruments, people turn to gold. It automatically attracts people in direct proportion to their fear, and that is fear of losing their money.”
Founded by Munk in 1983, Barrick Gold is among the world’s largest gold miners. Barrick has pursued growth through judicious expansion and a continuing process of acquisitions. “Barrick has grown,” said Munk, “primarily through an aggressive acquisition program in the last 25 years. So of course, we’d be on the lookout all the time for strategic acquisitions or mergers…The major gold deposits throughout the world in the main have already been found, so it’s getting more and more difficult, and that’s why you see global gold production heading downward, despite higher prices and increased spending on production.”
The bottom line in all of this is that you should be sure to pad your portfolio with gold and silver, both the physical metals and shares in quality mining companies. America’s political leaders have promised to fight recession by debasing the dollar. That may be the one and only political promise you can ever really trust.
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Copper Catcher
Administrator
USA
2092 Posts |
Posted - 06/27/2010 : 11:37:05
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In August of 2009 China first started to encouraged it citizens to buy gold on state run TV. Just for a second think about what adding a potential 1.3 billion new investors to the market can do for ya!
Chinese dumping worthless currency for gold (17May10)
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wolvesdad
1000+ Penny Miser Member
USA
2164 Posts |
Posted - 06/27/2010 : 20:06:23
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don't know what the second article said,
but I don't think the governement is buying IMF gold because, as mentioned, they are getting Gold from ore or directly from mines, probably at large discounts (70-90% of spot).
Does IMF gold sell for spot or slightly below? |
"May your percentages ever increase!" |
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China & Gold
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