Gold Retraces All Losses After Official Says "China Should Take Every Chance To Buy Gold, Especially When Gold Prices Fall"

Tyler Durden's picture

It was only logical that hours after Jim Cramer "Whitney Tilsoned" gold, China would come out and say it needs to buy more of the precious metal. After hitting an overnight low of $1,423/oz for some unknown reason, perhaps the latest overdue shakeout of the weakest holders, gold has since retraced half the distance to its all time highs, following a report from Reuters that "China should use some of its $2.85 trillion foreign exchange reserves to buy more gold, a government adviser was quoted as saying by local media reports on Wednesday. Li Yining, a senior economist at Peking University and member of the Chinese People's Political Consultative Committee, an advisory body to the national parliament, said that China should use the precious metal to hedge against risks of foreign currency devaluations. "China should increase its gold reserves appropriately, and China
must take every chance to buy, especially when gold prices fall," Li was
quoted by the official Xinhua news agency as saying.
" And so the immaculate record of all those calling for the "inevitable" correction in gold continues with a roughly 0% success rate.

GoldCore has more:

Renewed fears over eurozone debt have seen the euro fall against most currencies and precious metals today. The yield on Greek 10-year bonds is approaching an alarming 13% after jumping to a new record high of 12.89% today (see bond charts below). The Portuguese 10-year rose to a new record high of 7.7% ahead of today’s auction where they borrowed 1 billion euros in order to avoid a “bailout”.


The risk of contagion in the eurozone has clearly not gone away and this is another primary factor supporting gold above the $1,400/oz and the €1,000/oz level. The charts contradict those who simplistically call gold a bubble with gold having seen a period of correction and consolidation since November last year and looking like it is ready to break out and challenge new highs above $1,500/oz and EUR1,100/oz in the coming weeks.


Gold in Japanese yen has continued its gradual rise and has reached multi-year nominal highs at 119,000 yen per ounce. Gold in yen remains a long way from the nominal high of 160,000 yen per ounce seen in February 1980. This is likely a leading indicator that Japan’s deflation may be morphing into stagflation and the yen’s safe haven status is likely to be as questioned as the dollar’s in the months ahead.


While oil prices came off somewhat they remain near recent highs and uncertainty in Libya and in Saudi Arabia (where there are concerns about the coming ‘Day of Rage’ on Friday) will likely see oil remain robust with sell offs being shallow and short.


The likelihood that the People’s Bank of China is increasing and will continue to increase its gold reserves and the percentage of foreign exchange reserves held in gold, was seen in comments by Li Yining, an influential Chinese economic adviser, yesterday.

He said that China should use some of its close to $3 trillion foreign exchange reserves to buy more gold, and should use the precious metal to hedge against risks of foreign currency devaluations. Reuters reported the story this morning (Reuters Africa) and Bloomberg had a very brief news story yesterday.

"China should increase its gold reserves appropriately, and China must take every chance to buy, especially when gold prices fall," Li was quoted by the official Xinhua news agency as saying.

China does not disclose its gold reserves figures (neither on a monthly, quarterly or annual basis) but is likely quietly accumulating and will announce in the coming years that its reserves have risen from 1,054 tonnes, which is very low when compared to the Federal Reserve’s, to over 8,100 tonnes.

Gold’s recent and continuing robustness indicates that the ‘Beijing put’ is supporting the market on all sell offs and will likely continue to do so for the foreseeable future.

The Chinese are too shrewd to ‘telegraph’ their intentions to accumulate much larger gold reserves and will announce the ‘news’ when they are ready.


(Reuters) -- China adviser says Beijing should buy more gold
China should use some of its $2.85 trillion foreign exchange reserves
to buy more gold XAU=, a government adviser was quoted as saying by
local media reports on Wednesday.

Li Yining, a senior economist at Peking University and member of the
Chinese People's Political Consultative Committee, an advisory body to
the national parliament, said that China should use the precious metal
to hedge against risks of foreign currency devaluations.

"China should increase its gold reserves appropriately, and China
must take every chance to buy, especially when gold prices fall," Li
was quoted by the official Xinhua news agency as saying.

His view that Beijing should diversify its foreign exchange reserves,
the world's largest, into commodities is nothing new. Many other
academics have publicly called on Beijing to do so.

But Li's views may carry more weight than most. Many of his former
students are now high-ranking officials, including Chinese Vice Premier
Li Keqiang, who is seen as Premier Wen Jiabao's likely successor in

However, Yi Gang, head of the State Administration of Foreign
Exchange, which is responsible for managing most of the country's
foreign currency holdings, said recently that it was not possible for
China to make big purchases in the spot gold market.

"If China gets into these markets and pushes up prices to extremely
high levels, the Chinese people will bear the cost at the end of the
day as China is often the key buyer in these markets," Yi said.

He added that Chinese firms and households had purchased more than
300 tonnes of gold last year, and that it would have been hard for the
government to buy any more with foreign reserve funds.

"The gold price shot up last year, and surging gold prices have
forced Chinese people to pay more as there is strong demand for gold
for those getting married and other events," he said. [ID:nTOE71P00H]

According to the central bank, China's state gold reserves have been held at 33.89 million ounces since April 2009.

Gold prices have risen about 10 percent in the last six weeks, as
clashes in Libya and turbulence across the Arab world have encouraged
investors to seek a safe haven, while oil has gained about 17 percent
in the same period, increasing gold's inflation hedge appeal.

(Bloomberg) -- Li Yining Says China Should Raise Gold Reserves, Radio Reports
China should boost gold reserves “appropriately,” to secure the safety
of the country’s foreign exchange reserves, Li Yining, an economist,
was quoted as saying by China National Radio today.

(Bloomberg) -- Shanghai Gold Exchange to Extend Trading Time for Night Session
The Shanghai Gold Exchange plans to extend trading hours for the night
session from late April, the bourse said in a statement posted on its
website today.

The closing time for the night session will be 3:30 a.m., the statement said.

(Bloomberg) -- Merrill Lynch Says Brent May Break Through $140 in Three Months
North Sea Brent crude may trade at more than $140 a barrel in the next
three months amid rising global demand and halts to production in
Libya, Bank of America Merrill Lynch said.

“To reflect a tighter market, we upgrade our average second quarter
2011 Brent crude oil forecast to $122 a barrel from $86 a barrel,” the
bank said in a note today. “On average for 2011, we now project Brent
crude oil prices at $108 a barrel.” For West Texas Intermediate, the
bank forecasts an average of $101 a barrel for this year, up from $87.

(Bloomberg) -- London Accounted for Two-Thirds of Global Gold Trading Last Year
More gold trading takes place in London than any other city, according
to the latest commodities report by the financial industry-sponsored

The U.K. capital captured 67 percent of the record $25.1 trillion in
global gold trading last year, compared with 74 percent in 2009,
according to TheCityUK. New York had 22 percent of the gold market, up
from 16 percent in 2009, followed by Mumbai with 6 percent and Tokyo at
5 percent.

London kept its position as the center of the precious metals market
that it established with the daily gold fixing in 1919. HSBC Holdings
Plc, based in London, holds the gold on behalf of the SPDR Gold Trust,
the biggest exchange-traded fund for the metal.

“London doesn’t have any competition when it comes to
over-the-counter trading in gold,” said Marko Maslakovic, senior
manager of economic research at TheCityUK in London. “OTC trading has
been losing to exchange trading over the past five or six years because
we’re getting more and more products traded on exchanges such as ETFs.
It’s becoming easier to access the market through exchanges.”

London had 40 percent share of the $3.2 trillion silver market last
year, down from 52 percent in 2009, according to the report. New York’s
share climbed to 31 percent from 19 percent followed by Mumbai at 27
percent, down from 29 percent in 2009, according to Maslakovic.

The actual gold traded last year in London was 13.8 billion ounces
of the global total of 20.48 billion ounces, according to TheCityUK.
The silver total in London was 64.6 billion ounces, of a global 157.5
billion ounces, it said.

(Bloomberg) -- Gold Rises to 118,620 Yen an Ounce, Most Since Feb. 15, 1983
Gold for immediate delivery rose 0.4 percent to 118,620 yen an ounce, the highest price since Feb. 15, 1983.


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hugovanderbubble's picture

Gold +Silver + Palladium + Platinium = New World Commodities Basket Currency Linked System


Crude oil - Venezuela New Currency Linked


+Rare Earth Metals 5%


Physical is the key To collateralize money and of course the infinite debt .....but remember physical is not infinite as Bernanke Printer....¡¡¡¡


Zero Debt's picture

Just add just 5% sugar and 5% chocolate and it's perfect!

fasTTcar's picture

You forgot rice, corn and wheat.

smeagol's picture
China Buys 47% of the World's Gold

 In fact China is already set to buy almost half of all the gold that'll be mined this year.

You read that right: The Chinese may buy nearly 50% of total world gold production in 2011.


zaphod's picture

Gold production means nothing compared to past production


China could do this for 50 years and still not have as much as the French, let alone Fort Knox (I know I know tungsten bars, I still have to believe they've got a decent amount stored, say what you will but we're not as dumb as the bank of england....)

doggings's picture

one day we'll see I suppose.

EscapeKey's picture

Huh, come again?

The US sits on about 8,100 tons of Gold. If the Chinese buy 50% of the annual 2,500 ton production, that would mean they would catch up from scratch in less than 7 years.

The French sit on 2,400 tons. That would be surpassed in less than 2 years.


Oh regional Indian's picture

Think this may impact many things.


Please see: The Axis of Evil Doing


It is the fulcrum.




hugovanderbubble's picture

Why the star is in the middle of Algerie?


Oh regional Indian's picture

Look at the start points (Zimbabwe-Black, Iceland-White) and then all the others, Ireland, Tunisia (flash point)...
It's all there, on that axis.
HydroC goes Super Nova there.


cossack55's picture

Interesting, but to tell the truth, the Stunning Art link was really wild.  I've saved the site, tho. Thanks ORI

Oh regional Indian's picture

:-) All good Cossack. I feel the Axis tells the story. Interesting is great for a start.

And that art, mind-blowing, eh?


DollarMenu's picture

There is much on your site that is 'mind-blowing'.

Thank you!

Pegasus Muse's picture

Hmmm.  Curious thing.  

Roswell, NM:  33.4 Lat, -104.5 Long

IQ 145's picture

 you got that right. It's impacting the shit out of a lot of things right now. More to come. Stay tuned.

cossack55's picture

Gold is in a correction.  It is headed towards its real value ($8,000/oz imho), and I don't think we are talking paper gold.

Onlygold1's picture

sorry, but you are fractionally low-g-


still waiting for the jawboning to stop and the chinese to really start buying right now they like the looow prices-

Twindrives's picture

Meanwhile in America.......Bernanke's pitchman Obama tells citizens to spend, spend, spend.  


Now that's leadership!     <sarcasm>

SumDumGuy's picture

What is BTFD in Chinese?

Flakmeister's picture

Damn... the Hedge does not support Mandarin...

Mai gaisi jiang

Its the best I can come up with

IQ 145's picture

 It's what they've been doing for the past six months; pay attention.

ciscokid's picture

Gold is the ultimate money.

Henry Chinaski's picture

Trust the Chinese officials on this one, but everything else they say is lies and/or propaganda.  Just sayin.

tmosley's picture

Truth is they are already buying a lot, and have bought a lot more than they have said.

YHC-FTSE's picture

Meh. Good advice and all that, but most of the articles these days seem almost identical. Wouldn't mind seeing some contrarian stuff.

Dr. Richard Head's picture

Contrarian stuff?  Are you fucking kiding me?  Just turn on the TV here in Amerika.  CNBC, FOX, CNN, and any of the ABC, CBS, NBC nighttime news feeds.  The media is littered with all things contrarian to ZH.  I don't think any more of that sort of news is needed here. 

Flakmeister's picture

  The most even handed site for economic news in CalculatedRisk.. He presents all the data. He doesn't spin it. He is very calm and reasonable. I think his experience leads him to cautious optimism. CR was the best site for the housing meltdown, bar none.

IQ 145's picture

 Oh, okay. here you go. Paper money is wonderful. No matter how much of it you print it always gete and more valuable. Gold is a barbarous relic; gold will crash soon; your paper moneys will be worth much, much. How's that; feeling better now.?  Contrarian stuff; what the fuck is wrong with your brain; reality is determined by study of facts and history; not by voting on it. God and I make a majority.

YHC-FTSE's picture

Shit, if I had known I'd get pissed on for wanting a little variety I would have brought an umbrella. Most of the nuts think I advocate toilet paper instead of PM/IMs, but use a little imagination. There's oil, food, battery tech, green tech... the list is as long as ingenuity. Never mind.

FunkyMonkeyBoy's picture

Hmmmm... which team to be on; Team USA (+rest of western world), or Team China?

Hmmmm, decisions, decisions.

Well, seeing as the USA has become as despotic, non-productive, banana replubic, non-job service driven, propoganda hell hole ran by genocidal manics while the citizens sit idle day in day out and do nothing to stop the enemy within... well, i think my mind has been made up for me.

Dr. Gonzo's picture

Jim Rogers made that bet 7 years ago.

zaknick's picture

Where is Spalding Smailes and Team America to tell us how those 8100 tons of gold are real. Really.

High Plains Drifter's picture

He had to get up early this morning and go make a delivery of hubris..........

High Plains Drifter's picture

Its the Chinese put.  Put that in your crack pipe and smoke it Blythe


MiningJunkie's picture

Barbarous relic !

Billy Shears's picture

??????(GOLD, BITCHES!)

SuperRay's picture

what the hell is going on here? I thought the chinese were inscrutably subtle and thinking for the long term.  Why would an official actually come right out and publicly announce that they want to buy the dips?  What purpose does it serve them? Wouldn't they want Gold to correct so they could quietly buy up as much as possible, as cheaply as possible? There's a subtext here, but I can't read it..

IQ 145's picture

 It's geopolitical chess. it;'s brilliant. they attack the dollar while remaining blame free. Oh, didn't you want us to encourage our people to be free? I thought you like freedom? The central government is blameless; the people will take care of it; are taking care of it ! Brace up, there's another 50-60 million chinese who haven't bought any yet. Cleverist move I've seen in international politics in forty years. absolutely brilliant.

SuperRay's picture

...and why aren't they interested in silver?

Twindrives's picture

The Chinese know JPM have no more silver, and neither does anyone else, so they figure there is no point bringing it up.


Got silver?   

gwar5's picture

They are. They encouraged the people to acquire gold and silver.

They are redeeming silver bullion from SLV redemptions stealthily.

Pegasus Muse's picture

China says Buy Silver:

"China is also encouraging its citizens to buy silver as an investment for the first time in 60 years. Take a look at the State TV unveiling silver as an investment like Ford would show off a new F150. If a billion people by a little of anything, huge swings tend to happen in markets."

IQ 145's picture

The Chinese national currency unit was a silver casting for many, many years; everyone knows this; they are buying the shit out of silver; wake up, please.

Math Man's picture

Just like China waited for Oil to break before stocking their strategic petroleum reserve, they will wait for Gold to break before buying more Gold. 


RogueFit's picture

Hey Math Man, any way we can exchange email addresses?

I Am The Unknown Comic's picture

you trolls out there need to get busy and tell the Chinese they can't eat gold.  Obviously there must be a misunderstanding because no sane person buys gold for financial reasons, right assholes?