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Sell the IMF gold to China - it's a start
Tuesday, October 02, 2007
Here's a simple solution to the problem of China having too many dollars and the IMF not having enough - start selling the IMF gold to China.
Talk is heating up again about the International Monetary Fund selling 400 tonnes or so of its gold reserves in order to square its books after revenue shortfalls the last couple years.
It just so happens that there might be a buyer in Asia who would be interested in beefing up their bullion reserves - China is woefully short of the Euro-area recommended 15 percent of reserves that prudent central banks should hold as gold.
As shown in the annotated table above from the World Gold Council, the inventory at the streetTRACKS gold trust is about to overtake China in gold reserves (maybe this month at the current pace) and, the embarrassment of this event aside, China really does need more gold.
That 400 tonnes would fetch about $10 billion at today's gold price.
Hey, China could buy all of the IMF gold for less than $100 billion - this would barely make a dent in the $1.4 trillion they have amassed in foreign exchange reserves.
Is that math right?
That sounds like that's way too many dollars and way too little gold.
6 comments:
A glance at that table brings to mind a kooky conjecture. Ignoring the fact that one is valued 55 times higher per unit mass and with respect to a purely monetary function, silver and gold have proven to be entirely interchangeable. Those that are low on the list may find it to their advantage to back some of their reserves with the white metal instead, thereby inflating away some of the gold holders' wealth. The last time China was on a metallic standard, it wasn't gold.
Tim,
Have you seen the report by Citibank that GATA has been passing areound?
http://www.gata.org/files/CitigroupGoldReport092107.pdf
Although the details of the chart might be weird, you notice the spot gold charts drop in the last 36 hours correlating with the Euro's rise? And seems like selling some of that gold and putting it into Yen or Euro's or something would be smart!
Although its only been a few years, I've noticed a correlation that whenever gold sells off and I buy, it goes back up more afterwards. Seems like saving to buy dips would be smart!
Yes, I saw the Citbank report - thanks.
the gold council site is nice.
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