China’s largest gold producer is already a force to be reckoned with. But if the visionary head of China National Gold Corporation gets his way, it’s going to be much, much bigger.
The fact that China is talking about the role of their gold reserves now, in the Financial Times no less, speaks volumes as to where they are in achieving their reserve ratio of gold to foreign exchange reserves for the Yuan. It's a well-known secret that China has effectively nationalized their mining industry with not an ounce of production leaving the country for export or exchange purposes (except to buy the ood lot of Iranian oil at cut-rate prices) and that they've been doinng this for years.
The last time they announced a change in their official Gold reserves it was June 2009 and it shocked the markets. from that point forward central banks have been net buyers of gold on a monthly basis far more often than they were net sellers. The hoarding of Gold for reserve purposes had begun with that announcement.
They've imported 383 tons of Gold in the first half of the year through Hong Kong. That's a staggering amount of Gold.
The timing caused maximal damage to the U.S. politically as well. It is also no secret that China and the U.S. are headed for a real showdown. Military showdown? I don't think so. I think WWIII is already happening and it's happening in the oil fields of the Middle East and the OTC derivative and gold swap markets in London, NY and Hong Kong.
So, what do we expect to happen with the next announcement? My guess is it will ignite a massive sale of the Dollar and a commensurate rush into Gold. China has inked no less than 30 bilateral trade agreements with countries around the world. They are needing fewer dollars to facilitate their trade and this loss of flow is what is staying the Fed's hand on above-board QEIII. The Fed has been in a tightening/sterilizing mode for months trying to use the Dollar and the Euro-zonefear tradeto attack its rivals in the currency markets.
With the Bond markets topping I'm wondering if the acceleration of gold importation is being done now with U.S. treasuries and not just recycled trade dollars now that the U.S. economy is falling off a cliff.