Dear rss free blog,
The December gold future price has risen to over $1000 and this may mean that the precious metal will again trade in quadruple digits on spot markets, as it did half a year ago, however briefly. This reflects the moves by the world’s biggest coupon clipper, China.
There are various theories around the price of gold, most of them conspiratorial nonsense. Believing in plots is a tempting way to handle world complexity. You get a simple answer to why things do not work outas you think they should, with a ready-made if vague villain. Now that the Cold War is over, evil puppeteers range from Pres. Obama to the Bilderberg Group, from central banks to the ghost of J.P. Morgan. The opposite side in the Gold War…
My view is that one central bank is actively buying gold but hopes to keep this secret to avoid having the price go up against its plans. That CB is China’s. In the Daily Telepgraph, a British newspaper, international business editor Ambrose Evans-Pritchard even names the Chief Chinese Conspirator or the Chief Coupon Clipper(CCC)buying gold on the cheap.
The CCC is Cheng Siwei, nowa roving economic ambassador for Beijing. He earlier was a high administrator of impeccable Communist credentials. Mr. Cheng is setting things up in Europe to buy gold surrepticiously, the reporter says, in order to stop the market from moving against his purchases.
Earlier Mr. Cheng was a known worrier about China’s excessive holding of dollars, fearing that western central banks’ policies of quantitative easing would reduce the value of dollars that China was holding. China’s currency, the Renminbi or Yuan, is protected by exchange controls and as long as they go on, it cannot hold reserves in its own money.
That is why it is very hard for Jim Rogers to follow-up on his plan to hold RMB-denominated assets. For a round-eye, even in Singapore, they will not be easy to acquire. Except by the back (non-open) door.
Now the 64 bn RMB question: will Mr. Cheng cut his reserve diversification efforts if the gold price goes up? Or will he buy on?
China is also proposing to sell RMB-denominated bonds in Hong Kong, a tiny first step to internationalizing its currency. With severe exchange controls in place, there is now way the RMB can become a reserve currency for China or the rest of the world. Long-term, if gold backed and accessible, the reserve RMB could be China’s goal. But it will take several dynasties to reach that goal.
Other bits of China news are good for our companies outside China. First the country is buying lots of potash, initially from Russia, to fertilize its fields. And secondly it is investing again in airports and airplanes. And beefing up mobile telephony. Paid subscribers should read on. If you want to know which of our stocks is like Bibi Netanyahu, you will have to subscribe.
P.S. In an effort to avoid the sudden appearance of small black squares in my copy, which Roger the Webmaster thinks reflect non-compatible symbols, I am writing out quotation marks with double apostrophes. Please comment if this is helping you — or it you think it a bore.
