"...Despite growing concerns about the $89 trillion global bond market and the possibility of bubbles, prices on both two- and 10-year notes were generally higher across Europe, pushing yields lower. Prospects of quantitative easing, or QE2, from the Federal Reserve and other central banks may boost bonds in the short term, and lead to lower yields, but the long term ramifications of this experimental and unprecedented monetary policy may be currency wars, inflation and higher interest rates.
China should buy strategic assets such as gold with foreign exchange reserves to avoid losses from a weakening dollar, Shao Fenggao, an official at China Construction Bank Corporation, the world's second-largest lender by market value, wrote in a commentary published in the influential China Business News today. China's foreign-exchange reserves, the world's largest, surged by a record to a new record $2.65 trillion at the end of September.
China's growing importance to the future price of precious metals and particularly gold was seen again this week. An influential newspaper affiliated with the Ministry of Commerce, International Business Daily, said China should buy gold to diversify its foreign-exchange reserves. The country should raise holdings of the metal if it wanted to "internationalise" its currency, the paper said. The comments may have been coordinated as they came after comments by the Chinese commerce minister that dollar issuance by the United States is "out of control," leading to an inflation assault on China..."
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