The key point to China’s increase in gold holdings is that the world was informed not over six years, but practically speaking, in one day.
What does that mean for the dollar when young Chinese students are smart enough, if not a tad rude, to laugh when the Secretary of the US Treasury informs them that the dollar is safe?
Why is China Buying Gold?
Jun 1st, 2009 | By Byron King
Remember the old expression, “I wouldn’t do that for all the tea in China.” People used to associate China with tea. Well, now it’s time to associate China with gold, and a lot of it. Because the Chinese recently announced that they control over 33.89 million ounces of gold for monetary purposes. That’s an increase of 75% in Chinese gold holdings over the past six years.
This kiloton of Chinese gold makes the Middle Kingdom the world’s sixth largest holder of the yellow metal. The U.S. — courtesy of President Roosevelt’s gold confiscation in 1933 – tops this list of the world’s largest gold holders, followed by Germany, the IMF, France and Italy.
How did the Chinese accumulate so much gold? China purchased it over the past six years through its State Administration of Foreign Exchange (SAFE). SAFE is quite distinct from the People’s Bank of China (PBOC). The SAFE purchases meant that the gold did not appear as part of China’s officially reported monetary reserve figures.
The Chinese gold purchases, evidently, were part of a slow and steady buying program between 2003 and the present. It makes you wonder what the Chinese were thinking back in 2003. I happen to know, courtesy of an acquaintance at the Naval War College, that the Chinese were quietly forecasting that the U.S. would destroy its dollar by going to war in Iraq.
