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Thursday, June 25, 2009
US Dollar collapse and Gold: UPDATE 1-China should buy gold to hedge dlr fall-researcher RMK.v, TNR.v, ASM.v, CGH.to, SNU.v, SGC.v, KTN.v, VTR.v, HUI
Posted by andre at 2:24 PM It looks like here on US Dollar daily chart we are close to another waterfall leg down: RSI neutral to previous Sell, Slow STO turns bearish and a very nasty bearish candle has formed today.
On the Gold bugs index chart we have a very bullish picture: three white soldiers, MACD is giving a Buy, Slow STO is positive, RSI is positive. Gold miners are moving ahead of Gold - a very bullish sign, will 1000 mark will be defeated this time with Chinese help?
"UPDATE 1-China should buy gold to hedge dlr fall-researcher
By Zhou Xin and Alan Wheatley BEIJING, June 25 (Reuters) - China should buy more gold because the dollar is poised for a fall and the metal is needed to support the greater international role envisaged for the yuan, a senior researcher with the ruling Communist Party said on Thursday.
Li Lianzhong, who heads the economic department of the Party's policy research office, said China should use more of its $1.95 trillion in foreign exchange reserves to buy energy and natural resource assets.
Speaking at a foreign exchange and gold forum, Li also said that buying land in the United States was a better option for China than buying U.S. Treasury securities.
'Should we buy gold or U.S. Treasuries?' Li asked. 'The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice.'
There is no suggestion that Li, even though he is a senior researcher, was enunciating an agreed party line.
However, a debate is swirling in China about how the country can reduce its exposure to the dollar and to U.S. assets in case America's ultra-loose fiscal and monetary policy rekindles inflation and erodes the value of the dollar and U.S. Treasuries.
To that end, China has said it will buy up to $50 billion worth of bonds denominated in Special Drawing Rights, the International Monetary Fund's unit of account, to be issued by the IMF.
Chinese companies, at Beijing's bidding, are also snapping up energy and commodity supplies around the globe to fuel its fast-growing growing economy.
Sinopec, China's largest oil refiner, agreed on Wednesday to buy Swiss oil explorer Addax Petroleum Corp for $7.24 billion in China's biggest overseas acquisition.
China disclosed on April 24 that it had increased its holdings of gold to 1,054 tonnes from 600 tonnes since 2003.
However, China's foreign exchange reserves have grown so fast over the same period that gold's share of the stockpile, the largest in the world, has shrunk.
Li cited the high share of gold in the foreign exchange reserves of the United States, Italy, Germany and France, to argue that China's gold holdings, which account for about 1.6 percent of its reserves, are too small.
REFORMING THE SDR
China does not disclose the composition of its currency reserves, but bankers assume around 70 percent of it is held in dollar assets.
China is the largest single holder of U.S. Treasuries, with $763.5 billion at the end of April, according to U.S. Treasury data..
Analysts say this data set understates the true number as it does not capture paper bought through dealers in London or elsewhere.
Li said a second reason for buying more gold would be in anticipation of the yuan one day becoming a reserve currency.
The yuan is not convertible on the capital account, meaning it cannot be freely traded for other currencies for financial transactions that are not related to trade.
This rules out the yuan's use as an international reserve currency, for central banks would not be able to convert it quickly if necessary.
But, in a very preliminary step towards that goal, China is paving the way for greater use of the yuan beyond its borders.
The People's Bank of China has arranged currency swap deals with six countries since December totalling 650 billion yuan ($95 billion) so that trade and investment with China can be conducted in yuan, not dollars.
And China will soon allow selected firms in the southern province of Guangdong that trade with Hong Kong to settle their transactions in yuan, or renminbi.
'If the yuan should go international or become a reserve currency, China needs more gold to back that,' Li said.
When the yuan does become an international currency, which Li acknowledged was a long way off, he said the composition of the SDR should be reformed to include the Chinese currency.
Ideally, in the long term, the SDR would be made up of the dollar, euro, sterling and yen and yuan, each with a weighting of 20 percent, Li said.
The SDR is currently made up of the dollar (with a weighting of 44 percent), the euro (34 percent), the yen (11 percent) and sterling (11 percent)
The four currencies in the SDR, which must be convertible, are those issued by Fund members with the largest share of global trade. The weights assigned by the IMF are based on the value of exports and the amount of reserves denominated in those currencies.
The composition of the basket is reviewed every five years. the next review is due in 2010.
(Reporting by Zhou Xin and Alan Wheatley; Editing by Ken Wills)"
On the Gold bugs index chart we have a very bullish picture: three white soldiers, MACD is giving a Buy, Slow STO is positive, RSI is positive. Gold miners are moving ahead of Gold - a very bullish sign, will 1000 mark will be defeated this time with Chinese help?
It is a very strong call - those who lived in the East know that "senior researcher" usually is a talking head of the communist party itself. Your "research " will be finished very fast if you dare to express your views on the matter of country financial security importance without clear understanding of the major trend. As we know from today's news dissidents are not very welcome there in any case.
http://webcast.streamlogics.com.edgesuite.net/customer/usglobal/2009Jun25/auditorium/resources/09-405_ThreeFactorsWC_v3.pdf
http://www.usfunds.com/docs/pdf/WDG_Report_05292009.pdf
http://www.usfunds.com/docs/pdf/WDG_Report_05292009.pdf
"UPDATE 1-China should buy gold to hedge dlr fall-researcher
By Zhou Xin and Alan Wheatley BEIJING, June 25 (Reuters) - China should buy more gold because the dollar is poised for a fall and the metal is needed to support the greater international role envisaged for the yuan, a senior researcher with the ruling Communist Party said on Thursday.
Li Lianzhong, who heads the economic department of the Party's policy research office, said China should use more of its $1.95 trillion in foreign exchange reserves to buy energy and natural resource assets.
Speaking at a foreign exchange and gold forum, Li also said that buying land in the United States was a better option for China than buying U.S. Treasury securities.
'Should we buy gold or U.S. Treasuries?' Li asked. 'The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice.'
There is no suggestion that Li, even though he is a senior researcher, was enunciating an agreed party line.
However, a debate is swirling in China about how the country can reduce its exposure to the dollar and to U.S. assets in case America's ultra-loose fiscal and monetary policy rekindles inflation and erodes the value of the dollar and U.S. Treasuries.
To that end, China has said it will buy up to $50 billion worth of bonds denominated in Special Drawing Rights, the International Monetary Fund's unit of account, to be issued by the IMF.
Chinese companies, at Beijing's bidding, are also snapping up energy and commodity supplies around the globe to fuel its fast-growing growing economy.
Sinopec, China's largest oil refiner, agreed on Wednesday to buy Swiss oil explorer Addax Petroleum Corp for $7.24 billion in China's biggest overseas acquisition.
China disclosed on April 24 that it had increased its holdings of gold to 1,054 tonnes from 600 tonnes since 2003.
However, China's foreign exchange reserves have grown so fast over the same period that gold's share of the stockpile, the largest in the world, has shrunk.
Li cited the high share of gold in the foreign exchange reserves of the United States, Italy, Germany and France, to argue that China's gold holdings, which account for about 1.6 percent of its reserves, are too small.
REFORMING THE SDR
China does not disclose the composition of its currency reserves, but bankers assume around 70 percent of it is held in dollar assets.
China is the largest single holder of U.S. Treasuries, with $763.5 billion at the end of April, according to U.S. Treasury data..
Analysts say this data set understates the true number as it does not capture paper bought through dealers in London or elsewhere.
Li said a second reason for buying more gold would be in anticipation of the yuan one day becoming a reserve currency.
The yuan is not convertible on the capital account, meaning it cannot be freely traded for other currencies for financial transactions that are not related to trade.
This rules out the yuan's use as an international reserve currency, for central banks would not be able to convert it quickly if necessary.
But, in a very preliminary step towards that goal, China is paving the way for greater use of the yuan beyond its borders.
The People's Bank of China has arranged currency swap deals with six countries since December totalling 650 billion yuan ($95 billion) so that trade and investment with China can be conducted in yuan, not dollars.
And China will soon allow selected firms in the southern province of Guangdong that trade with Hong Kong to settle their transactions in yuan, or renminbi.
'If the yuan should go international or become a reserve currency, China needs more gold to back that,' Li said.
When the yuan does become an international currency, which Li acknowledged was a long way off, he said the composition of the SDR should be reformed to include the Chinese currency.
Ideally, in the long term, the SDR would be made up of the dollar, euro, sterling and yen and yuan, each with a weighting of 20 percent, Li said.
The SDR is currently made up of the dollar (with a weighting of 44 percent), the euro (34 percent), the yen (11 percent) and sterling (11 percent)
The four currencies in the SDR, which must be convertible, are those issued by Fund members with the largest share of global trade. The weights assigned by the IMF are based on the value of exports and the amount of reserves denominated in those currencies.
The composition of the basket is reviewed every five years. the next review is due in 2010.
(Reporting by Zhou Xin and Alan Wheatley; Editing by Ken Wills)"
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