Wikinvest Wire

The Chinese want more gold

Wednesday, July 01, 2009

It comes as no surprise that the Chinese want to swap some of their U.S. dollar holdings for dumb 'ol gold bars, but the amount is a bit of a shock. Numismaster has the details:

It wasn't until about June 9 that the mainstream media was told that the Chinese government was planning to purchase an additional huge quantity of gold. The information became public when U.S. Rep. Mark Kirk (R-Ill.) was interviewed on Fox News by Greta Van Susteren.

Kirk accompanied Treasury Secretary Timothy Geithner on his trip to China in May. While the Chinese were laughing at Geithner during his speech at Beijing University for claiming that the U.S. dollar was strong (By the way, laughing at a speaker is a major social no-no in China, a sign that Geithner's comments were not respected at all!), Kirk was engaged in a private conversation with lesser Chinese officials. In this non-public discussion, Kirk was told that the Chinese were extremely concerned about the likely near term decline in the U.S. dollar because of the explosion of government debt. As part of the reaction to this concern, the Chinese government had established another reserve to stockpile petroleum and was planning to purchase another $80 billion of gold (about 85 million ounces at today's price level).

Kirk's revelation about the Chinese plan to purchase another $80 billion of gold was the very last comment in the interview. This extraordinary news received almost no coverage until last week when multiple hard-asset Web sites picked up the interview.
The Chinese are different than the Japanese in many ways - this is one of those ways...

7 comments:

Anonymous said...

85 million oz ~ 2665 tonnes. That is about 1/3 of official US reserves. You cannot get that for $80B.

Tim said...

At today's price of $940 an ounce, you can buy 85 million ounces for $80 billion ($80E9/940=85E6).

And 85 million ounces is 2409 tonnes or about a third of the U.S. stock.

Support said...

Gold is clearly undervalued.

staghounds said...

Look for a drop in the price- I just bought some.

Anonymous said...

Bought some more silver yesterday.

Anonymous said...

Tim,

Those are troy oz (14.583 troy oz per lb). So, it is about ~2650 tonnes. I don't think there is anyone dumb enough to sell that much at $950/oz ($80B). But, maybe the IMF will prove me wrong.

Tim said...

The type of ounces always seem to mess up my calculations...

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