VivianLL Post time 2014-11-15 17:03:07

China hoarding gold to challenge U.S. dollar?

In aworld filled with fiat currencies, how important is gold's role in thefinancial system? Proponents often view the precious metal as a hedge againsteconomic chaos, while critics typically claim gold is hardly more than anunproductive rock. Interestingly, some countries appear to believe gold isquite important, and one former Fed chair explains why.



Alan Greenspan, who served at the helm of the Federal Reserve for nearly twodecades, recently penned an op-ed for the Council on Foreign Relationsdiscussing gold and its possible role in China, the world's second-largesteconomy. He notes that if China converted only a "relatively modest partof its $4 trillion foreign exchange reserves into gold, the country's currencycould take on unexpected strength in today's international financialsystem."



Greenspan also believes the downside risks for China stockpiling gold arelimited, at least from a pure investment point of view. "It would be a gamble,of course, for China to use part of its reserves to buy enough gold bullion todisplace the United States from its position as the world's largest holder ofmonetary gold," he wrote. "But the penalty for being wrong, in termsof lost interest and the cost of storage, would be modest."



The People's Bank of China has not formally disclosed any changes to its goldholdings in years, but it's believed that the central bank is purchasing goldto diversify its reserve holdings. In 2009, China announced that it boosted itsgold reserves by 454 tonnes via acquiring gold quietly over the previous fiveyears. That represented an impressive 76 percent increase in gold reserves.Today, China still shows that it holds 1,054.1 tonnes in reserves, but it'sspeculated by analysts to actually have around 2,000 to 3,000 tonnes.



Some market participants also believe China is building up its gold reserves tochallenge the U.S. dollar, which is currently the world's reserve currency. Afew years ago, China's official news agency, Xinhua, said, "Internationalsupervision over the issue of U.S. dollars should be introduced and a new,stable and secured global reserve currency may also be an option to avert acatastrophe caused by any single country."



VivianLL Post time 2014-11-15 17:03:40

Gold already plays a significant role in China's economy. In 2013, China's goldconsumption surged 41 percent year-over-year to 1,176.40 tonnes, exceeding1,000 tonnes for the first time on record, according to the China GoldAssociation. Demand for jewelry was the biggest contributor, with an increaseof 43 percent to 716.50 tonnes, while bullion demand rose 57 percent to 375.73tonnes. China is the largest gold consumer and producer in the world.



China faces an uphill battle if it's going to challenge America's goldstockpile. According to the most recent data from the World Gold Council, theU.S. holds 8,133.5 tonnes of gold, representing 71.8 percent of reserves andthe most held by any one country in the world. Furthermore, a behind-the-sceneslook from Greenspan reveals that the U.S. is not likely to sell its gold stashanytime soon.



"In 1976, for example, I participated, as chair of the Council of EconomicAdvisers, in a conversation in which then U.S. Treasury Secretary William Simonand then Federal Reserve Board Chair Arthur Burns met with President GeraldFord to discuss Simon's recommendation that the United States sell its 275million ounces of gold and invest the proceeds in interest-earningassets," said Greenspan. "Whereas Simon, following the economistMilton Friedman's view at that time, argued that gold no longer served anyuseful monetary purpose, Burns argued that gold was the ultimate crisisbackstop to the dollar. The two advocates were unable to find common ground. Inthe end, Ford chose to do nothing. And to this day, the U.S. gold hoard haschanged little, amounting to 261 million ounces."





HailChina! Post time 2014-11-16 01:27:04

Revolutionar Post time 2014-11-16 01:46:34

Go ask China planners how much paper losses on gold holdings they are already suffering?


;P;P

robert237 Post time 2014-11-16 05:25:22

Revolutionar Post time: 2014-11-15 09:46 static/image/common/back.gif
Go ask China planners how much paper losses on gold holdings they are already suffering?




Paper losses on gold holdings. ;P

You keep your paper, China will stick with gold.

Revolutionar Post time 2014-11-16 06:57:18

robert237 Post time: 2014-11-16 05:25 static/image/common/back.gif
Paper losses on gold holdings.

You keep your paper, China will stick with gold.



One day you will be introduced to the story of Midas with all the gold in the world but nothing to eat.



Revolutionar Post time 2014-11-16 07:00:04

robert237 Post time: 2014-11-16 05:25 static/image/common/back.gif
Paper losses on gold holdings.

You keep your paper, China will stick with gold.

Instead of buying gold........if they have held US Treasuries, those planners would be much richer.




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