Sunday, May 31, 2015

Man Asked To Speak To Chinese Officials Issues Warning About The Most Important Move Of The Decade And China’s Golden Agenda

"...The upcoming five year review of the International Monetary Fund’s Special Drawing Rights (SDR) basket will formally be placed on the IMF agenda in October. This summer, China will be part of the negotiations to include the renminbi in a basket of the IMF’s de facto currency alongside the dollar, the yen, the euro and sterling. The move that would see it recognized as an official reserve currency is more than symbolic, it is a major step in making the renminbi more liquid since it would trigger a reallocation of investors’ global portfolios. 
China has liberalized restrictions as part of that process, such as removing the administrative cap on bank deposit rates to outsiders and lessening restrictions on inflows into its fixed income market. China has also swiftly removed capital controls with some thirty central banks. Beijing sponsored institutions like the Asian Infrastructure Investment Bank (AIIB) with 57 founding member countries and CIC were set up in part to offset Western hegemonic institutions.
Importantly the renminbi has been one of the few currencies to hold its value against the dollar. The United States is the largest holder of gold in the world at 8,100 tonnes but the holding is pale in comparison to their indebtedness. Currently the US dollar makes up almost 63 percent of the world central bank holdings while the Euro is at 22 percent.
Standing in China’s way is the lack of sufficient gold reserves at only 1.1 percent of reserves according to the last update in 2009. We believe that China’s current and seemingly insatiable purchases of gold is a key part of a move to make the renminbi an international currency and attractive as a store of value. Making the renminbi a reserve currency would require China to disclose its gold holdings which is a paltry 1,059 tonnes. In fact, for China to hold just 10 percent of its reserves in gold, equivalent to other industrialized countries’ holdings, China would need to purchase the next three year’s world output. 
Bloomberg has estimated that China has already tripled their reserves. China remains the largest producer and consumer of gold, importing 410 tonnes in the first two months of this year alone. Chinese and Indian consumer demand make up more than half of global consumer demand, according to the World Gold Council.
China needs a lot more gold. The Shanghai Gold Exchange (SGE) has already overshadowed Comex with some 50 tonnes delivered in only one week. As a potential source for gold, China has created a $16 billion gold investment fund through the country’s Shanghai Gold Exchange with some 60 member countries to fund gold mining projects across the Silk Road as part of China’s golden agenda.
Gold's Breakout Will Be The Most Important Move This Decade
If China questions the US and its currency, then others too may have doubts. What damages trust in the United States, damages the world. After the financial meltdown, investors wonder who they can trust. We believe foreign investors have become more and more cautious about financing America’s profligacy, particularly at nominal rates.
The recent bond crash is a warning signal. Another is gold’s breakout and quadruple bottom. Gold is an alternative investment to the dollar. It is a store of value when everything else seems risky. We believe that gold’s inevitable breakout from its trading range will be the most important global movement in the current decade."


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