Hey Gold BugsWe have been saying this for the last 18 months,...

Hey Gold Bugs

We have been saying this for the last 18 months, Gold is a critical component of the repair process for any financial system, after a financial crisis, especially when the size of the recent crisis, the GFC, was global in nature.

Most Western Nations including Germany, USA, France, Japan etc all hold over 75% of their reserves as Gold Bullion. This gives weight to their economies and currencies as stable, safe, Reserve Currencies. CHina's current gold holdings only represent 1.6% of their Foreign Exchange Reserves. They will need 5000-6000 tonnes of gold to reach Western Nation levels.

China has been on the path of turning the Yuan into another Reserve Currency, especially with its incredible importance over the last 5-10 yrs as a trade currency for all the imports and exports that China demands and supplies on the world stage.

China has been accumulating Gold Bullion aggressively for the last 2-3 years, even though China is the largest producer of gold, yet they are also the largest importer of gold bullion. China has also recently been taking over gold miners.

As such China is extracting the most gold in the world from the ground (production), importing the most gold from international markets, surpassing India last year, and is now accumulating gold via insitue gold deposits by purchasing gold mines.

We are set for a very exciting time for Gold Prices and Gold Stocks as we head into 2013.

Cheers Nectar

IDC.AX


Demand for gold rises as central banks diversify reserve holdings


Updated: 2013-01-12 08:24
By Wu Yiyao in Shanghai ( China Daily)

Demand for gold may rise as central banks and sovereign funds are likely to replace US dollar and euro holdings with the precious metal amid the uncertainty caused by the global financial crisis, a report issued by the Official Monetary and Financial Institutions Forum said on Friday.

China may decide to increase the percentage of gold holdings in its monetary reserves in the next few years, said the report, an analysis of the world monetary system commissioned by the World Gold Council.

Demand for gold is likely to rise amid the uncertainty about the stability of the US dollar and the euro, the main assets held by central banks and sovereign funds, it added.

China almost doubled its gold reserves in the last five years. The country had holdings of 1,054 metric tons in July 2012 and is now the sixth-largest holder of monetary gold.

In 2011, gold accounted for 14.4 percent of the world's total monetary reserves.

In a country-by-country comparison, the figure was 1.6 percent in China, while it was 74.5 percent in the United States, 71.4 percent in Germany and 71.1 percent in France, according to data from the World Gold Council and the International Monetary Fund.

China holds the world's largest foreign exchange reserves, which were worth more than $3.31 trillion by the end of 2012, according to figures from the People's Bank of China, the country's central bank.

The amount is so large that China has no other currency options than holding US dollars and euros, the report said.

Driven by China's desire to increase its financial clout, the Chinese renminbi is likely to emerge gradually as a genuine international currency as the country has been easing restrictions on its use in transactions and investments abroad.

During the coming period of uncertainty and transition, asset managers at central banks around the world are likely to be more interested in gold as a result of doubts about the overall strength of global monetary arrangements, the report said.

"China has no wish to be unduly dependent on either the dollar or the euro. This is likely to have been an important reason why the Chinese authorities have decided in recent years to boost the share of gold in reserves," the report said.

The re-balancing process of the global economy through China's economic rise will occur gradually rather than abruptly and will not be straightforward. In particular, the move toward full renminbi convertibility is likely to be only gradual, the report added.

Although the renminbi's rise as a reserve currency is unlikely to pose any immediate threat to the US dollar, "during this period of change and transition reserve holders will spread their investments into a relatively wide range of assets and sectors," the report said.

While the Official Monetary and Financial Institutions Forum does not envisage a return to a gold standard, gold will increasingly have a renewed role in the global monetary system, attracting a higher level of attention from policymakers and financial market practitioners, the report added.