China Central Bank Advisor Urges Increase In Official Gold And Silver Reserves

Tyler Durden's picture

And so the long anticipated incursion by the PBOC, whose holdings of gold are behind even those of GLD, begins. Bloomberg has just reported, that "China central bank adviser Xia Bin said the country should increase its gold and silver reserves, the Economic Information Daily reported today, citing an interview with Xia." But how can this be: after all China has trillions in USD-denominated reserves, and any indication that it believes these are based on a currency that may actually be impaired will be an act of Mutual Assured Destruction. Well, yes and no. China is merely taking the next defection step in what is already failed Nash equilibrium. The first? The Fed's gross monetization of all US debt. The observant ones will realize that Chinese holdings in November were lower than they were in June of 2009! Who has picked up the slack? Why the Federal Reserve of course. Simply said, the Fed is explicitly making China's creditor status increasingly less relevant. Zero Hedge has long been wondering how much longer China will take this direct defection in what previously had been a stable equilibrium balance in which China provides the US vendor financing, while the US imports China's crap. As the Criminal Reserve is increasingly taking away the leverage that China used to enjoy as Creditor numero uno, it is only a matter of time before China fires back. And it may have just done that.

More from Bloomberg:

China should encourage foreign companies to list in the yuan-denominated market, the report said, citing Xia. The nation should slow the overseas listings of Chinese companies, especially resources related, strategic and monopoly firms, the report said, citing Xia.

For now this is still merely sabre ratling. However, one day soon, a report will come out confirming that the PBOC has purchased anywhere between 10 and 100 tonnes of gold (which it is rumored to be doing now in the form of stealth accumulation). That's when things for the gold shorts, especially those whose massive position shorts have been grandfathered by the C(riminal)FTC, will get ugly.

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Rahm's picture

Buy the f-ing duck sauce!

treasurefish's picture

Duck sauce does you no good without guns, ammo, and ducks.

Fish Gone Bad's picture

The first one out of the money pool wins!!

dlmaniac's picture

FOFOA supporters have to change their pants before posting here. So much for that only gold can be money whopper now you have China, AKA daddy of both US and Europe, showing their hand a little bit. Better pay attention.

The other day I was at FOFOA's blog watching him shooting about gold to silver ratio of 1 : 2000, "only speculators buy silver" and so on I was wondering if this guy ever read news at all. The very fact China imported 110 millin Oz of Ag last year is like firing 110 million bullets at that nonsense and blowing as many holes along the way. You bet they'd be glad to sit on the buy side if you are willing sell any more silver.

chumbawamba's picture

I'm not so sure.

From my reading of FOFOA and the general reaction his comments on silver got, it seems his treatise is broadly misunderstood.  To my mind, silver is, in fact, an investment, and it will eventually bubble out, albeit at a higher valuation than currently.

Yes, it has been and can be money, but it isn't gold.

I am Chumbawamba.

tmosley's picture

He fundamentally misunderstands money, so it is not surprising that he fails to recognize that silver is money that has been made rare from industrial usage.  His misunderstanding stems from the artificial barrier he has placed between use of currency as savings and as a medium of transaction.  He thinks you can somehow use unbacked paper money for transaction, but not for savings, and that that won't cause any sort of problem, which is simply nuts.  It's like trying to separate wetness from water.  You can't flat a boat on pieces of paper that say "wet" on them.  Similarly, any system where governments are free to print the transactional currency will collapse into hyperinflation almost immediately, because you have inherently destroyed any concept of value of the currency, and monetary velocity goes to unity as everyone takes the currency and buys gold right away since it is losing value so quickly.  Since everyone has gold (as savings), and everyone wants and accepts gold for their fast depreciating fiat, there is nothing to stop them from just dumping the paper money and trading in gold directly. "Freegold" is at best a transition state between a fiat currency and a gold standard (whether de facto or official).  

Because he doesn't understand this simple fact about money, he doesn't understand that the value of money is a function of the goods and services available at market and money supply.  Just like an increasing population leads to more goods and services being available at market, and thus price deflation in terms of gold, silver has the added deflationary factor of decreasing supply.  Sure, you will rarely see long term contracts being written in terms of silver, that is a function purely of it's upward price instability.  Once the price rises to an amount that forces silver recycling to the extent that an equilibrium is reached between mining production and garbage dump deposition, then you will get contracts being written in terms of silver.  

You will notice that physical sales of silver far exceed physical sales of gold.  This is Gresham's Law in action.  Silver is money, but it is extremely undervalued.  It won't circulate until the price rises.  Gold circulates in some places now (Vietnam, for example), but only at a significant premium to current prices.

chumbawamba's picture

Hey T.

Like I said, he was broadly misunderstood.

Silver is money, but not a store of wealth.  There's too much of it.

That's the gist.

I am Chumbawamba.

dlmaniac's picture

T was exactly right. FOFOA biggest mistake is regurgitating what FOA fed him w/o really thinking through why silver has been money throughout thousands years of history.

Money has to be having value of own, divisible, durable, stable, precious, availabe and backed up by production. It's those qualities making both gold and silver money rather than some bizaar theories cooked by certain bankers.

Money by its nature has to be store of wealth, which is why you use precious metal as money. This notion of "too much of it" shows that you don't know about silver fundamentals very well.

TeMpTeK's picture

Sree dolla estra for derivery

spekulatn's picture

"I make a special won ton soup for you"



bankrupt JPM buy silver's picture

Find more info and 'da bears' on my blog and some updates on the silver trade....

DoctoRx's picture

Chinese would love to buy gold cheaper than $1300

NOTW777's picture

really. since when is PBOC transparent or honest?  buying gold all along?

announcements are jokes

Careless Whisper's picture
China Central Bank Advisor Urges Increase In Official Gold Reserves

correction: Gold AND Silver Reserves

"China central bank adviser Xia Bin said the country should increase its gold and silver reserves, the Economic Information Daily reported today, citing an interview with Xia."

(thanks dewd)

SlipStitchPass's picture

Called a larger metals dealer in maryland on Friday. He said that someone had walked in that morning and bought his supply of 100oz silver bars. He had 185 in the safe. Told me to call on Monday and see if anything came in.

gaoptimize's picture

Middle Eastern embassy staff or their agent?

SlipStitchPass's picture

More than likley one of the many Americans with 500K+ in FRNs setting around who are st arting to say "Oh shit I'd better do somthing to protect my wealth". Consider the reverse leverage that buying physical silver has on the paper market. There is very little Silver around to cover this type of demand.

Cathartes Aura's picture

interesting that your supposed subject, with 500k in ben-bux would be buying silver, not gold, hmmm. . .

chumbawamba's picture

Because gold is even harder to get?


I am Chumbawamba.

tmosley's picture

No.  This is Gresham's Law being applied.  People recognize that silver is undervalued, so they hoard it.  They recognize that gold supply is only increasing, but that silver is being consumed twice as fast as it is produced, and that it makes no sense for silver to even be correlated with gold at this point.

chumbawamba's picture

Yes, but for what period of time?

Silver will have its day in the Sun, but Sun's light shines golden.  Eventually silver will recede back into the shadows of Moon light.

This is what you're missing.

I am Chumbawamba.

Campagnolo's picture

Just watch at Tulving's silver supply. They say they have only 500,000 oz. in stock. Since Tulving sell orders over 500oz it is only 1000 orders to run out of silver. Considering as tulving as one of the big metal dealer in the US.

walcott's picture

Campagnolo just checked Tulving's site everything sold out or so it says here



ILikeBoats's picture

Nope, try this page:

Gold first, then some more ugly HTML, then Silver, a little more ugly HTML, then Platinum and Palladium.

DoctoRx's picture

PS Disagree w TD here.  IMHO China simply wants less exposure to the USD.  The Prez wants to spread the wealth by diluting the savings of those not named Lloyd etc. who have savings, which Gentle Ben is happy to accommodate.  Thus Team Fed buys whatever the ROW doesn't.

chumbawamba's picture

Donald Trump is like the Chuck Norris of the financial world.

Do not fuck with Donald Trump, or else he will fire you.

I am Chumbawamba.

THE DORK OF CORK's picture

That Fat Vain Nero !!! - he can go fuck himself , Vandalising Scottish landscapes for another fucking golf course - enough with these fuckers - they make me fucking sick.

I am Dork

UninterestedObserver's picture

But you can't eat gold or silver.

asdasmos's picture

And you can garnish food with dollar confetti.

Rahm's picture

You can get it on the way out; FRN=TP

pan-the-ist's picture

But you can eat taco bell. 88% beef! 

Been thinking about buying a taco tommorow to see how much different they will taste now that they're forced to remove the fillers.

They'll be out of business before long if they have to maintain it.

Dr. Sandi's picture

Wow, it's been years since I've heard anybody mention "taste" and "Taco Bell" in the same sentence.

Hook Line and Sphincter's picture

i remember their run for the toilet campaign well...or was that border?

Spalding_Smailes's picture

Davos 2010: Chinese central banker Zhu Min warns of new Asian crisis China's deputy central bank chief Zhu Min warned that tighter US monetary policy could spark a sudden outflow of capital from emerging markets, evoking the 1990s Asian financial crisis.


A rapid withdrawal of funds would not only cause volatility in the currency exchange markets, but could also generate currency moves similar to those during the Asian crisis of over a decade ago.

"Capital flows - it's a real risk this year for the economy," Zhu Min told participants at the World Economic Forum's annual meeting in Davos.

Mr Zhu noted that investors are increasingly borrowing the cheap US dollar, and investing the borrowed funds in emerging markets, where interest rates are higher, and therefore generating a better return than saving in the dollars.

This phenomenon called carry trade in the US dollar is a "massive issue today," said Mr Zhu.

"It's bigger than the Japanese yen carry trade 12 years ago," he said.


tickhound's picture

And who doesn't talk their book in the face of a poor investment...

trav7777's picture

sound rike China WANT cheaper dorrah

JonNadler's picture

Appaling Smell

How does your post relate to bashing gold?

Stick to your job of scaring goldbugs away from gold or go away

Yen Cross's picture

Huh? A dollar hedge on YUAN revaluation? Oh wait the reserve currency thing. Now I got it. Jeese.

Yen Cross's picture

A small last note. Don't get head faked on xag and xau. I wouldn't touch gold above 1297.

tmosley's picture

Oh snap, is China officially buying silver?

Not a lot of silver out there, guys.

I counted at least 360K toz of silver on APMEX.  That's less than $10 million worth. If China starts buying AT ALL, this is likely to blow up immediately.

I'm talking $200 a troy oz in weeks, here.  Of course, it could just be bluster.  They may wait to accumulate more gold before blowing up the silver market.  Who knows?

bronzie's picture

"is China officially buying silver?"

or do they just stop the export of same - then accumulate the production from their own mines as well as the output from smelting foreign ores

remember that they accumulated about 4 or 500 tons of gold without telling the world until it was a done deal

also remember that China is number one producer of gold at this point and third largest producer of silver - they can do some major accumulation just by keeping their own output - they don't have to actively buy on the open market


tmosley's picture

They are already doing all of that.  They went from being the worlds largest exporter of silver a couple of years ago, to being one of the largest importers.  That was on private demand alone.  

trav7777's picture

huh?  China doesn't buy from fkin Apmex, dude.

the retail end of things is runt hog on this trough.

China could negotiate with silver miners if they want silver.  There are 750Mtoz per year out there, no shortage

bobert's picture

How many ounces is that per person (just the Chinese)?


tmosley's picture

That's great, except that would mean that there wouldn't be any for anyone else.

Once again, you utterly fail because you ONLY look at the production side of the equation, as if stockpiles and demand didn't matter.

Production is 710 Mtoz per year:

Demand is 900 Mtoz per year:

Tell me, what is 710,000,000 minus 900,000,000?