Neil Ferguson: “Expect More Gold to End Up in Chinese Hands”

The world’s central banks used to think of the U.S. Dollar as the currency of all currencies. As an anchor. But now GOLD is increasingly seen as the anchor for relative valuations of other currencies.
The United States is no longer trusted to maintain the value of the Dollar since the United States basically decided to trash the value of the American currency.

China can not trust the United States anymore, not since the Federal Reserve completed round of its first QE program. It became clear to the Chinese that the Federal Reserve intends to devalue the Dollar and the $3 trillion of U.S. Dollar it bought in order to maintain a cheap Yuan against the American currency.


Source: http://pricedingold.com/us-dollar/

The first QE program lasted from November, 2008 through June, 2010. The second, QE2, lasted from November, 2010 through June, 2011. Both QE programs put enormous pressure on the Chinese either to revalue their currency or face internal inflation as they printed yuan to soak up the easy money dollars finding their way to China.
[…]
The Fed’s relentless money printing, otherwise known as QE, is the key to forcing China to revalue the yuan despite their reluctance to do so.
James G. Rickards


The United States put enormous pressure on China to allow the Yuan to appreciate against the dollar. It did in 2011.


U.S. Dollar versus Yuan. Source: Yahoo Finance

Since then, evidence shows the People’s Republic of China has been responding to the Federal Reserve through stepping up central bank gold stock drastically at the People’s Bank of China.

The balance sheet of the Federal Reserve has about $5 trillion of base money, up from about $3 trillion.

http://www.hussmanfunds.com/wmc/wmc110411.htm

China is now racing to stockpile gold, in order to earn a place at the Bank of International Settlements table when a new global currency regime will be negotiated.

China wants the Yuan to be included within the new global currency, necessitating an increase in the People’s Republic of China’s gold hoard of an estimated 2,000 tons.

Nobody knows how much gold China has, but China IS both the largest gold importer and the largest gold producer in the world.

China’s mines are producing more than 300 tons a year. And a lot of that 300 tons is going to China’s central bank.


Source: ZeroHedge

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