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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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Wed, 03/09/2011 - 08:30 | 1032426 hugovanderbubble
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....¡¡¡¡


Wed, 03/09/2011 - 09:02 | 1032494 Zero Debt
Zero Debt's picture

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

Wed, 03/09/2011 - 10:17 | 1032696 fasTTcar
fasTTcar's picture

You forgot rice, corn and wheat.

Wed, 03/09/2011 - 08:31 | 1032430 smeagol
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.


Wed, 03/09/2011 - 09:45 | 1032601 zaphod
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....)

Wed, 03/09/2011 - 10:14 | 1032681 doggings
doggings's picture

one day we'll see I suppose.

Wed, 03/09/2011 - 12:02 | 1033111 EscapeKey
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.


Wed, 03/09/2011 - 08:31 | 1032431 Oh regional Indian
Oh regional Indian's picture

Think this may impact many things.


Please see: The Axis of Evil Doing


It is the fulcrum.




Wed, 03/09/2011 - 08:41 | 1032449 hugovanderbubble
hugovanderbubble's picture

Why the star is in the middle of Algerie?


Wed, 03/09/2011 - 08:53 | 1032473 Oh regional Indian
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.


Wed, 03/09/2011 - 08:41 | 1032453 cossack55
cossack55's picture

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

Wed, 03/09/2011 - 08:48 | 1032467 Oh regional Indian
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?


Wed, 03/09/2011 - 15:57 | 1033862 DollarMenu
DollarMenu's picture

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

Thank you!

Wed, 03/09/2011 - 10:28 | 1032742 Pegasus Muse
Pegasus Muse's picture

Hmmm.  Curious thing.  

Roswell, NM:  33.4 Lat, -104.5 Long

Thu, 03/10/2011 - 02:30 | 1035778 IQ 145
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.

Wed, 03/09/2011 - 08:34 | 1032435 El Hosel
Wed, 03/09/2011 - 08:36 | 1032442 cossack55
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.

Wed, 03/09/2011 - 08:54 | 1032476 Onlygold1
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-

Wed, 03/09/2011 - 08:44 | 1032458 Twindrives
Twindrives's picture

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


Now that's leadership!     <sarcasm>

Wed, 03/09/2011 - 08:46 | 1032460 SumDumGuy
SumDumGuy's picture

What is BTFD in Chinese?

Wed, 03/09/2011 - 08:56 | 1032480 Flakmeister
Flakmeister's picture
Wed, 03/09/2011 - 08:58 | 1032490 Flakmeister
Flakmeister's picture

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

Mai gaisi jiang

Its the best I can come up with

Wed, 03/09/2011 - 09:22 | 1032549 Mark McGoldrick
Mark McGoldrick's picture


Thu, 03/10/2011 - 02:31 | 1035781 IQ 145
IQ 145's picture

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

Wed, 03/09/2011 - 08:45 | 1032463 ciscokid
ciscokid's picture

Gold is the ultimate money.

Wed, 03/09/2011 - 08:54 | 1032479 Henry Chinaski
Henry Chinaski's picture

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

Wed, 03/09/2011 - 09:09 | 1032515 tmosley
tmosley's picture

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

Wed, 03/09/2011 - 08:56 | 1032484 YHC-FTSE
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.

Wed, 03/09/2011 - 10:35 | 1032766 Dr. Richard Head
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. 

Wed, 03/09/2011 - 13:19 | 1033365 Bay of Pigs
Bay of Pigs's picture


Wed, 03/09/2011 - 14:17 | 1033541 Flakmeister
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.

Thu, 03/10/2011 - 02:36 | 1035787 IQ 145
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.

Thu, 03/10/2011 - 08:32 | 1036080 YHC-FTSE
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.

Wed, 03/09/2011 - 09:08 | 1032503 FunkyMonkeyBoy
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.

Wed, 03/09/2011 - 10:30 | 1032751 Dr. Gonzo
Dr. Gonzo's picture

Jim Rogers made that bet 7 years ago.

Wed, 03/09/2011 - 09:08 | 1032510 zaknick
zaknick's picture

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

Wed, 03/09/2011 - 09:10 | 1032514 High Plains Drifter
High Plains Drifter's picture

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

Wed, 03/09/2011 - 09:08 | 1032512 High Plains Drifter
High Plains Drifter's picture

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


Wed, 03/09/2011 - 09:17 | 1032530 MiningJunkie
MiningJunkie's picture

Barbarous relic !

Wed, 03/09/2011 - 09:16 | 1032532 Billy Shears
Billy Shears's picture

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

Wed, 03/09/2011 - 09:19 | 1032539 SuperRay
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..

Thu, 03/10/2011 - 02:39 | 1035792 IQ 145
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.

Wed, 03/09/2011 - 09:20 | 1032542 SuperRay
SuperRay's picture

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

Wed, 03/09/2011 - 09:41 | 1032595 Twindrives
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?   

Wed, 03/09/2011 - 10:08 | 1032655 gwar5
gwar5's picture

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

They are redeeming silver bullion from SLV redemptions stealthily.

Wed, 03/09/2011 - 10:44 | 1032810 Pegasus Muse
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."

Thu, 03/10/2011 - 02:41 | 1035793 IQ 145
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.

Wed, 03/09/2011 - 09:53 | 1032618 Math Man
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. 


Thu, 03/10/2011 - 08:39 | 1036091 RogueFit
RogueFit's picture

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

Wed, 03/09/2011 - 09:56 | 1032623 I Am The Unknow...
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?

Wed, 03/09/2011 - 10:07 | 1032647 Dr. Gonzo
Dr. Gonzo's picture

After they get all the gold they are coming for the silver. Hide it!

Thu, 03/10/2011 - 02:48 | 1035797 IQ 145
IQ 145's picture

 They already went from selling millions of ounces of silver per year to buying in, and "disappearing", millions of ounces now; you're a little out of date.

Wed, 03/09/2011 - 10:22 | 1032717 Snidley Whipsnae
Snidley Whipsnae's picture

From the WSJ...

"“China Buys In to Gold’s Allure” — cites key data released by China’s state-run Xinhua news agency showing that China imported 209.7 metric tons of gold in the first 10 months of this year. That’s a five hundred percent increase compared to the same period in 2009."

Read more: China Massively Buying Gold

Wed, 03/09/2011 - 10:25 | 1032729 Stuck on Zero
Stuck on Zero's picture

The Founders knew that with a gold standard the economy could be stimulated by the government buying gold with cash.  The cash didn not lose value because it was backed up by gold but it did circulate and accelerate spending.   Of course, there's the Bernanke way of juicing the economy - print cash and give it to billionaires.  I wonder which is better?

Wed, 03/09/2011 - 10:30 | 1032746 gwar5
gwar5's picture

If China is overtly ramping up calls for acquisition of gold, then they are trying to drive up the price. It's as if they already have enough and not concerned about stealth acquisitions anymore.

Is China already sitting on 25,000 tonnes? Don't know, sounds like a lot, but Alisdair Macleod makes his case:

Chinese puzzles | Finansiella Insikter

His premise: If China has mined and revered PMs for centuries, and never been conquered by an outside force, how much gold could they potentially really have?  Perhaps a lot more than they claim. From Marco Polo: "Gold is so plentiful that no one who did not see it could believe it."

"....So we should not be surprised if total gold under the control of the Chinese government exceeds perhaps 25,000 tonnes. This is considerably more than the holding of 8,134 tonnes claimed by the Fed on behalf of the US government. If this is true, then China’s economic policy and precious metal dealings begin to make sense."   -- Alisdair Macleod, 2-7-2011.



Thu, 03/10/2011 - 02:50 | 1035801 IQ 145
IQ 145's picture

 If; ? WTF you mean by If? They are doing it, dude. never mind the If. Ramping up the calls; yes; now, today. what If. what are you talking about ?

Wed, 03/09/2011 - 10:32 | 1032763 Bahamas
Bahamas's picture

Can you imagine Li Yining appearing in public at a Cinese press conference with a Zero Hedge t shirt telling the audience to BTFD.....bitches

Wed, 03/09/2011 - 10:43 | 1032796 Grand Supercycle
Grand Supercycle's picture

Gold/Silver weakness is expected now the equity correction has commenced.

Gold chart at blog.

Wed, 03/09/2011 - 11:35 | 1033021 oddjob
oddjob's picture

Your shitty equities are going down,just call your broker and sell,its that fucking easy.No more tears.

Wed, 03/09/2011 - 10:47 | 1032818 Bansters-in-my-...
Bansters-in-my- feces's picture

Fuck Fiat.....
Burns well though.

Wed, 03/09/2011 - 12:10 | 1033153 PulauHantu29
PulauHantu29's picture

Hard Assets are the way to go:

Gold + Oil + Palladium + Platinum + Silver



Good luck to all as currency debasement is the New way to Default.

Wed, 03/09/2011 - 13:10 | 1033339 Reptil
Reptil's picture

7,2 earthquake 14 km offshore Japan low tsunami danger

fear trade

Wed, 03/09/2011 - 17:08 | 1034079 Reality Monger
Reality Monger's picture

Anybody have any thoughts as where the alleged huge short squeeze in silver is?

So far, it is MIA and time is running out. 


Thu, 03/10/2011 - 02:53 | 1035806 IQ 145
IQ 145's picture

 Sorry it's internet "wisdom"; there is no short squeeze; there never was. It's simply an international market that responds to peoples opinions as to whether to buy or sell. That;s all. The Comex never controlled anything; you've been brainwashed by bullshit artists.

Thu, 03/10/2011 - 02:53 | 1035807 j0sh1130
j0sh1130's picture

looks like Li reads ZH - BTFD!!

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