I’m still in Mexico. Here’s some news that has my attention …
Beijing’s Treasury holdings fall as it diversifies
A U.S. government report this week showed Chinese holdings of Treasury bills fell by $34 billion in December. That fueled concern Washington might have to pay higher interest to attract creditors to finance this year’s forecast $1.5 trillion budget deficit.
It came as Chinese leaders, facing pressure to pay for social spending and other expenses, are trying to make more money by diversifying their $2.4 trillion in reserves beyond safe but low-yielding Treasurys. A $200 billion sovereign wealth fund launched in 2007 is investing in riskier but more profitable stocks and commodities.
XX Sean’s note – so the Chinese are diversifying. What will they diversify into in the future. May I make a modest proposal …
The IMF just announced it would resume selling the balance of its preapproved for sale gold, of which 191.3 tons remains. The sales would be in a phased manner over time to avoid disrupting the gold markets. This is not major news as this is inline with the IMF’s September 2009 announcement to sell 403.3 metric tons of gold. As is well known the IMF has already sold 212 metric tons. Nonetheless, gold is selling off after hours. As gold was bought via dollar shorts, the current unwind is sending the dollar proportionately higher.
XX Sean again – Gold may have sold off after hours, but it’s up slightly as I write this. What do you think the odds are of China adding to its gold reserves as the IMF sells? I’d say better than average.
And remember, Beijing’s foriegn reserves are so big that if it decided to shift even 5% into gold, that would require an amount of gold bullion equal to the annual production of all the world’s gold mines.
However, not everyone agrees. Here’s an opposing view …
Will China miss IMF gold buying bus?
as gold price zoomed to record highs of $1,227 per ounce in December after India’s IMF gold buy, China has been waiting for a chance to somehow buy the rest of the IMF gold. The chance that China looked for was a crash in gold price. China said in various forums that the country obviously did not want to buy IMF gold for the high price that India paid for, and the high price that IMF expects its gold to be sold.Officials of Chinese central bank—the People’s Bank of China—have been hinting that China would be comfortable buying IMF gold, or for that matter gold from the open market, for a price of $1,000 or less per ounce. “China has been waiting for gold prices to plunge to buy the IMF gold. But it looks gold price is not going to plunge below $1,000 per ounce in the nearest future. In that case, China has to either buy IMF gold from the open market around $1,120 per ounce or just miss the opportunity,” says Kevin Julian, a bullion analyst stationed in Beijing.
XX Sean’s note. We’ll see how it plays out, and we’ll see who’s missing the bus.
Related Posts
- Big News in Gold — China Doubles Reserves (04/24/09)
- Will China Ban Exports of Gold and Silver? (09/17/09)
- Very Bullish News on Gold out of China (06/27/10)
- China’s Gold Rush — Huzzah for the Yellow Metal, Comrade! (06/10/10)
- China, China, China! (11/11/08)
{ 1 trackback }
{ 0 comments… add one now }