November 22, 2008 2:46 PM
I am in receipt of more and more reports favoring Gold. Earlier it was perceived that Gold will continue its uptrend after Gold retraced from its high of $1033 to $750.
But, as we know from stagflation and reflation to huge deleveraging and debt deflation, the latter forces dragged the economies to deflation. And this was the force, which pushed even Gold prices down.
But, now it seems many nations will follow the Tehran and Beijing . The fear is obvious, as Fed is to reduce interest rate to ZERO, soon.
Investor can start with 5 % allocation to gold.
China reported planning big shift of FX reserves into gold
Submitted by cpowell on Fri, 2008-11-14 06:32. Section: Daily Dispatches
By Benjamin Scent
The Standard, Hong Kong
Friday, November 14, 2008
The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.
Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves “in a big way,” the source said.
China’s fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson’s US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.
The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.
The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.
Beijing’s reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.
Until now the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland’s US$30 billion to US$40 billion in monthly capital inflows.
Government officials involved in the management of China ‘s reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time — in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.
“It’s the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce,” said Wan Guoli, vice secretary general of the China Gold Association.
The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.
“I think China probably will expand its strategic reserves into commodities during this downturn,” said a Hong Kong-based strategist.
” China will continue to buy treasuries … otherwise the system would get distorted,” he said. “But I think China will diversify its reserves.”
* * *
Iran switches reserves to gold: report
TEHRAN (Reuters) – Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.
Iran, the world’s fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.
“With the plans of the presidency…the country’s money reserves were changed into gold so that we wouldn’t be faced with many problems in the future,” presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.
He gave no figures or other details.
Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.
Iranian officials in July denied reports Iranian banks were moving funds from Europe , with one report suggesting as much as $75 billion had been withdrawn and converted into gold or placed in Asian banks, because of a threat of tightening sanctions.
The International Monetary Fund said in August that if the price of Iranian crude fell to $75 a barrel, Iran would face a current account deficit in the medium term that would be tough to sustain due to Tehran ‘s financial isolation.
On Friday, U.S. crude fell $1.20 at $57.04.
Gold futures ended more than 5 percent higher on Friday and bullion ended the week about $10 higher compared with its last Friday’s close of $735.95 as investors covered short positions.
(Reporting by Zahra Hosseinian; )
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