China Gold Reserves “Too Small” – Ensure “National Economic and Financial Safety”

Today’s AM fix was USD 1,724.50, EUR 1,353.08, and GBP 1,085.21 per ounce. 
Yesterday’s AM fix was USD 1,724.75, EUR 1,360.86, and GBP 1,091.39 per ounce.

Silver is trading at $32.47/oz, €25.60/oz and £20.54/oz. Platinum is trading at $1,585.00/oz, palladium at $637.00/oz and rhodium at $1,150/oz.

Gold is marginally lower in all fiat currencies today except for Japanese yen which has fallen nearly 1% against gold and is close to reaching record nominal highs in yen terms (see table and chart).

Gold edged down $3.40 or 0.20% in New York yesterday and closed at $1,724.50. Silver saw odd aggressive selling which saw the price fall sharply to $32.128 prior to an equally sharp price recovery as buyers took on the sellers leading to silver finishing the day with a gain of 0.12%.


Gold Prices/Fixes/Rates/Vols – (Bloomberg)

Gold inched up on Wednesday as the euro recovered against the U.S. dollar, and platinum ramped up its highest gain in the past three weeks on real concerns that supply will not meet the demand due to output issues because of the striking mine workers this year.

President Obama will hold his first solo news conference since November today and is expected to take questions from reporters at 13:15 EST.  Comments about the “fiscal cliff” may have a short term effect on gold bullion.

China needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks, Gao Wei, an official from the Department of International Economic Affairs of Ministry of Foreign Affairs, writes in a commentary in the China Securities Journal today which was reported on by Bloomberg.

China’s gold reserve is “too small”, Gao said and while gold prices are currently near record highs, China can build its reserves by buying low and selling high amid the short-term volatility, Gao wrote.

The People’s Bank of China is accumulating significant volumes of gold under the radar of many less informed market participants which is bullish.

The Chinese government is secretive about its gold diversification and buying and does not disclose gold purchases to the IMF.

Therefore, there has been no official update to their holdings since the barely reported upon announcement four years ago that Chinese gold reserves had risen from just over 500 tonnes to over 1,000 tonnes.

In 2009, State Council advisor, Ji said that a team of experts from Shanghai and Beijing had set up a task force to consider expanding China’s gold reserves. Ji was quoted as saying "we suggested that China’s gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years”.

China is likely to have been quietly accumulating another 1,000 or 2,000 tonnes in recent years and astute market participants realise that the announcement by China of a dramatic increase in gold reserves could lead to sharp price gains.

The very low level of the People’s Bank of China’s gold reserves vis-à-vis their massive foreign exchange exposure and compared to western counterparts gold reserves will continue to be a source of significant gold demand in the coming months which will support gold and may contribute to higher prices in 2013.


XAU/JPY Currency – (Bloomberg)

Today the US Producer Price Index results are at 1330 GMT.

For breaking news and commentary on financial markets and gold, follow us on Twitter.      

NEWSWIRE
(Bloomberg) — Barclays Still Favors Overweight Precious Metals, Agriculture
Barclays Plc is keeping its recommended investment weightings in precious metals and agriculture.

The bank’s largest overweight’s are in gold, corn and wheat, and the biggest underweight’s are for aluminum, U.S. natural gas, zinc, nickel and crude, it said in its monthly “research rankings” report e-mailed today.


Cross Currency Table – (Bloomberg)

NEWS
Gold to Gain to $2000 on Money Printing, Deutsche Bank Says – Bloomberg

LBMA Meet Forecasts Gold At $1,843/oz By Next Sept – Poll – Reuters

Platinum shortfall largest in decade – The Financial Times

Gold ends lower as platinum, palladium rally – Market Watch

Palladium, platinum rally after report, gold flat – Reuters

COMMENTARY
Gold Industry Cautiously Optimistic About 2013 – The Financial Times

CFTC’s Chilton Repeats Belief In Silver Market Manipulation – You Tube

Some Gold Investors Want Their Own Fort Knox – The NY Times

China Says It Must Add To Gold Reserves To Promote Yuan Globalization And As An FX Hedge – Zero Hedge


Mark OByrne

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