China Will Not Deversify It’s Foreign Reserves Into Gold

The dream of every gold bull got shattered today by Yi Gang, head of the China State Administration of Foreign Exchange (SAFE):

It is, in fact, impossible for gold to become a major investment channel for China’s foreign exchange reserves. I have 1,000 tonnes now, and even if I doubled that holding, according to current prices, that would be about $30 billion.

It is obvious that the China currency rate and foreign rate policy is only aimed at  retaining China trade advantage. The U.S. treasuries are the the primary investment vehicle because of U.S. -China symbiotic production-monetary and deficit-surplus relationship.

The U.S. Treasury market is the world’s largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us.

Reuters story: China says committed to U.S. debt, wary on gold.

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This entry was posted on Tuesday, March 9th, 2010 at 2:13 pm and is filed under Commodities, Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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