Category Archives: international reserves

China Planning to Displace Dollar

19-Feb (The Epoch Times) — The author of the best-selling book ‘Currency Wars’ and the forthcoming ‘The Death of Money’ talks about how China uses gold and the IMF to remove the dollar as reserve currency.

Here are a couple of choice quotes:

Head of Precious Metals Operations at largest gold refinery in the world as recounted by Rickards: “I’m making all the gold I can, working 24 hours a day, sending as much gold as I possibly can to China, 500 tons a year and the Chinese still want more.”

James Rickards: Suffice to say that China is the coming world gold power. In terms of the world monetary system, Shanghai is becoming the center of world gold trading as opposed to London and putting these two things together, you have to ask yourself why?

James Rickards: I think [the Chinese] have acquired three or four thousand tons [of #gold] secretly, but I don’t think they are done.

Epoch Times: What can the United States do about the money owed to China?

Mr. Rickards: All we have to do is inflate our currency and pay them back in cheaper dollars and that reflects a wealth transfer from China to the United States. So China is completely vulnerable to that, which is why they are buying gold to create a hedge.

If we inflate, then gold will go up. So what they lose on the paper, they make on the gold.

[source]

Posted in Currency Wars, Gold News, Gold Views, international reserves |

China is now overtly pushing for the US dollar to be replaced as the world’s reserve currency

by Alasdair Macleod
21-Oct (ZeroHedge) — Xinhua, China’s official press agency on Sunday ran an op-ed article which kicked off as follows:

“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”

China does have a broad strategy to prepare for this event. She is encouraging the creation of an international market in her own currency through the twin centres of Hong Kong and London, side-lining New York, and she is actively promoting through the Shanghai Cooperation Organisation (SCO) non-dollar trade settlement across the whole of Asia. She has also been covertly building her gold reserves while overtly encouraging her citizens to accumulate gold as well.

There can be little doubt from these actions that China is preparing herself for the demise of the dollar, at least as the world’s reserve currency. Central to insuring herself and her citizens against this outcome is gold. China has invested heavily in domestic mine production and is now the largest producer at an estimated 440 tonnes annually, and she is also looking to buy up gold mines elsewhere. Little or none of the domestically mined gold is seen in the market, so it is a reasonable assumption the Government is quietly accumulating all her own production without it becoming publicly available.

…The West selling its stocks of gold has become the biggest strategic gamble in financial history. We are committing ourselves entirely to fiat currencies, which our central banks are now having to issue in accelerating quantities. In the process China and Russia have been handed ultimate economic power on a plate.

[source]

PG View: If you personally are disinclined to commit yourself entirely to fiat currency, now is the time to get some gold…

Posted in Gold News, Gold Views, international reserves, U.S. Dollar |

Bundesbank Disagrees With Audit Court’s View on Gold Reserves

23-Oct (Bloomberg) — The Bundesbank disagrees with Germany’s Audit Court that the central bank should take stock of its gold holdings outside Germany.

“The Bundesbank and the Federal Court of Auditors have different opinions” on the matter, the Frankfurt-based Bundesbank said in a statement posted on its website today. The foreign central banks that hold gold on the Bundesbank’s behalf verify the holdings annually and “there are no doubts about the integrity, reputation and safety of these foreign depositories,” it said.

The Bundesbank manages Germany’s gold reserves, which amounted to 3,396 tons as of Dec. 21, 2011. The gold hoard is kept at central bank vaults in Frankfurt, New York, Paris and London. The Federal Court of Auditors yesterday called on the Bundesbank to physically take stock of its gold holdings outside Germany because “they’ve never been assessed.”

[source]

Posted in Gold News, international reserves |

10 nations that control the world’s gold


20-Oct (MarketWatch) — It is now more obvious than ever that gold is becoming the new global reserve currency. Continuous and aggressive central-bank actions from the United States and Europe are driving the demand for gold. Investors have not yet seen any of the real hyperinflationary pressures that seem likely down the road.

Gold’s substantial rise in price should speak for itself. In dollar terms, gold returned 11.1% in the third quarter and was up by 16% year-to-date through the end of the quarter. The World Gold Council said that gold has a low stock-market correlation through time. That was not the case in the third quarter. Gold still outperformed almost all the major equity markets in the largest gold-holding nations in 2012.

…The World Gold Council report shows low borrowing costs and the support of financial markets spur gold accumulation. Gold is no longer just an inflation hedge; it is the key protection against a global race to devalue currencies, even if consumer prices are somewhat stable. Bonds pay historically low rates and stock market volatility has spooked many investors, so gold is becoming the true safe haven.

[source]

Posted in Gold News, Gold Views, international reserves |

High time RBI bought more gold

09-Oct (HinduBusinessLine) — In recent years, the price of gold has been on an unprecedented northbound movement. It is not only the gold bugs who are advocating increased gold holdings by central banks, but also a number of responsible policymakers and opinion makers.

Since 2008, the received doctrine is that recovery of the major industrial economies requires opening up the spigots of printing presses. While the world economy continues to remain in the doldrums, critics of the present policies attribute the absence of recovery to insufficient pump priming.

…The major reserve currencies — dollar, euro, yen and sterling — are all suspect. Countries which offer their currencies to be reserve invest substantial amounts in gold. Major industrial countries hold a substantial proportion of their reserves in gold: US (77 per cent), Germany (74 per cent), Italy (73 per cent), France (72 per cent), and the Netherlands (62 per cent). Industrial countries with a low gold proportion are the UK (18 per cent), Switzerland (15 per cent) and Japan (4 per cent).

…There are distinct advantages in being first off the block in the pursuit of increasing the gold proportion. There has all along been a strong aversion, both in the government and the Reserve Bank of India (RBI), to enhancing the gold proportion in reserves.

[source]

Posted in Gold News, Gold Views, international reserves |

Are the Central Bank Vaults Empty?

08-Oct (GoldSeek) — Is it possible that the vaults of the world’s central banks, believed to be stacked with gold bullion, are really empty? Is all the gold actually there?

Something about the numbers doesn’t seem to add up.

The importance of the question accelerates in the face of global money-printing, which is also accelerating. Since the start of the economic meltdown five years ago, the balance sheets of the world’s central banks have been growing at a frantic pace.

The U.K. has led the pack, up 362%, followed by the United States, which is up 223% – even before QE III. China is printing money as well, up 151% during the period, the European Central Bank, 146%, and Japan, 83%.

But take heart, because while the currencies of all those countries are absolutely, 100% fiat – redeemable in nothing but more of the same paper – the world’s central banks are said to have huge reserves of gold bullion. The U.S., U.K., the euro zone, Switzerland, Japan and the International Monetary Fund report having gold reserves of 23,349 tons among them.

…At this point, Eric Sprott, of the estimable Sprott Asset Management, enters the discussion, asking some inconvenient questions. Because something about the gold numbers – supply and demand – doesn’t seem to add up.

[source]

Posted in Gold News, Gold Views, international reserves, U.S. Dollar |

Denmark warns over pressure on krone


17-Jun (Financial Times) — The head of Denmark’s central bank has warned that the Danish krone is coming under intense pressure from investors seeking a haven in Europe and betting that the currency’s peg to the euro could be cracked by the crisis.

Nils Bernstein, the governor of the Danish central bank, said that the upward pressure on the krone was the most severe he had seen in his seven years as governor, and warned that negative interest rates could be on the cards if the problem continues.

[source]

PG View: Even Denmark if getting dragged into the currency wars.

Posted in all posts, Economy, European Debt Crisis, international reserves |

Kazakhstan central bank to have 20 pct of reserves in gold

13-Jun (Reuters) — Kazakhstan’s central bank plans to boost the share of gold in its gold and foreign currency reserves to 20 percent from 14-15 percent, deputy bank chairman Bisengali Tadzhiyakov said on Wednesday.

Tadzhiyakov, who gave no time frame for the move, said last week Kazakhstan planned to buy 22 tonnes of gold from local producers, which at that time he estimated would boost the share of the metal to 15 percent from about 12 percent.

“We will buy from Kazzinc corporation 20 tonnes (of gold) in 2012, and a further 4.5 tonnes from Kazakhmys,” he told journalists on Wednesday, reading out updated figures from his report prepared for presentation in parliament.

“The total volume is 24.5 tonnes.”

[source]

PG View: The 24.5 tonnes to be bought from “local producers” is 24.5 tonnes of supply that will never make it to the global market. This is further confirmation of an already familiar trend…

See The most important gold market event since 1999.

Posted in all posts, Gold News, international reserves |

Brodsky On “Gold Monetization And The Big Reset”

By Lee Quaintance & Paul Brodsky
08-Jun (ZeroHedge) —

Macroeconomic Problems:

1) The global banking system is functionally insolvent and will fail without exogenous policy action*

2) Governments and private parties are heavily-indebted and this indebtedness is growing exponentially

3) The global economy is threatened because, in real terms, it continues to misallocate capital

The Expedient Solution: Policy-Administered Asset Monetization:

1) Re-monetize gold as the asset against which newly-created central bank liabilities (base money) are created

Gold purchases would serve to promote deleveraging in two manners:
1) via base money (bank reserve) creation and,
2) by providing the currency proceeds to fiscal agents to retire existing debts
The threat of waning confidence in the currency unit in response to expanding central bank balance sheets would be arrested by a gold price peg in the aftermath of the base money expansion
Any future operations to expand the base money stock would require additional purchases of gold at, most likely, higher and higher nominal prices or exchange rates
A gold peg would thus act both as a deleveraging agent today and a fiscal/monetary policy discipline looking forward

…Asset monetization (and in, particular, gold monetization) would solve many more problems than it would create. The negatives would merely recognize the balance sheet damage already done and beginning to be manifest (first, in the private sector and now, increasingly in the public sector).

[source]

Posted in Gold Views, international reserves |

A golden idea to save (or doom) the euro


08-Jun (Globe & Mail) — Gold is back in the news, big time, and not just because the price may be on the verge of another upswing or that Peter Munk is turning Barrick, the world’s biggest gold company, into a CEO meat grinder. It’s because Germany, it appears, wants to make gold the effective currency of the euro zone before the region plunges to the bottom of the seas like a concrete U-boat.

The weakest euro zone countries are tapped out financially and economically. But a few of them are brimming with gold reserves. Take Italy, the euro zone’s third-largest economy. The Italians love gold and it’s stashed everywhere, in their central bank and in their jewellery and safe deposit boxes. (I once saw a religious-festival parade of children in a mountain town, with each child groaning under the weight of heavy gold necklaces and other baubles). At last count, the central bank had 2,451 tonnes of gold, valued at close to €100-billion ($128-billion). That’s not a fortune compared to Italy’s €1.9-trillion national debt, but it’s not bad when Rome is raiding the pantry to pay its ever-rising debt.

Germany’s idea is coyly named the European Redemption Pact and it is nothing if not creative. While details are scant, here is roughly how this gilded baby would work. Countries with debts greater than 60 per cent of gross domestic product – the (ignored) limit under the European Union’s Maastricht Treaty – would transfer those debts into a redemption fund, which would be covered by joint bonds. The scheme has been called “euro bonds lite.”

[source]

PG View: Quite frankly, I don’t think the ERP is really a viable plan, but it’s worth noting that gold is increasingly a part of the ongoing conversation…

Posted in all posts, European Debt Crisis, Gold News, international reserves |