Wikileaks Discloses Reasons for China's Shadow Gold Buying Spree
By Tyler Durden 9/3/2011
Wondering why gold at $1850 is cheap, or why gold at double that price will also
be cheap, or frankly at any price? Because, as the following leaked cable explains,
gold is, to China at least, nothing but the opportunity cost of destroying the dollar's
reserve status. Putting that into dollar terms is, therefore, impractical at best,
and illogical at worst. We have a suspicion that the following cable from the US
embassy in China is about to go not viral but very much global, and prompt all those
mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat
pool. The only thing that matters from China's perspective is that "suppressing
the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's
role as the international reserve currency. China's increased gold reserves
will thus act as a model and lead other countries towards reserving more gold.
Large gold reserves are also beneficial in promoting
the internationalization of the RMB." Now, what would happen
if mutual and pension funds finally comprehend they are massively
underinvested in the one asset which China is without a trace of doubt massively
accumulating behind the scenes is nothing short of a worldwide scramble, not so
much for paper, but every last ounce of physical gold...
3. CHINA'S GOLD RESERVES
"China increases its gold reserves in order to kill two birds with one
"The China Radio International sponsored newspaper World News Journal (Shijie
Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration
China 's gold reserves have recently increased. Currently, the majority of its gold
reserves have been located in the U.S. and European countries. The U.S. and
Europe have always suppressed the rising price of gold. They intend to weaken gold's
function as an international reserve currency. They don't want to see other countries
turning to gold reserves instead of the U.S. dollar or Euro. Therefore,
suppressing the price of gold is very beneficial for the U.S. in maintaining the
U.S. dollar's role as the international reserve currency. China's increased
gold reserves will thus act as a model and lead other countries towards reserving
more gold. Large gold reserves are also beneficial
in promoting the internationalization of the RMB."
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