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Yes, I know you are getting tired of hearing this Asian story over & over & over.
But don’t you wish someone had strongly encouraged you to purchase Google as it was just entering the market a couple of years ago? “China said Thursday that it would diversify
its foreign-exchange reserves away from U.S. dollars and government
bonds.” “IT'S THE DEATH BLOW TO THE U.S. DOLLAR, which
had enjoyed a temporary reprieve in 2005, and another bullish
factor for gold going forward…" “Speculation
that central banks in countries including China, South Africa
and Argentina will increase the portion of gold held as reserves
is also keeping gold above $500…” Yes, this news about China preparing to “diversify” their reserves will have strong implications for a rising gold price & a very favorable long term gold market. ”The latest run for bullion follows Friday’s news that the Central Bank of China wants to diversify part of its record $769bn in reserves away from the US Dollar. ANALYSTS BELIEVE GOLD IS AN OBVIOUS BENEFICIARY OF THIS CHANGED APPROACH.” ”Hu Xiaolian, director of China’s State Administration for Foreign Exchange, said in a statement on the bank’s website that she will be looking to “optimize the structure” of the holdings and is “actively explore ways of investing foreign exchange more effectively.” ”The statement from Ms Hu, who is also an Assistant Governor of the People’s Bank of China, follows suggestions in the country’s official news media that THE COUNTRY’S GOLD HOLDINGS ARE TOO LOW.” ”At just 1,1% of its reserves, China’s is well below the international average of 10%. According to the World Gold Council, Euroland countries have an average of 39% of their reserves invested in bullion. The US is at 26%.” ”At the end of June last year, China’s gold reserves totaled a relatively modest 600 tons. A CREDIT SUISSE FIRST BOSTON REPORT CALCULATES THAT RAISING BULLION’S PROPORTION TO 5% OF CHINA’S NATIONAL RESERVES WOULD GENERATE DEMAND FOR 2,340 TONS OF GOLD, EQUIVALENT TO AROUND TWO THIRDS OF THE WORLD’S ANNUAL PRODUCTION.” ”…South African technical analyst Issy Bacher, who warned that the last big move was a temporary spike, believes bullion and gold shares have now “have broken through resistance.” http://www.mineweb.net/columns/curve_ball/780525.htm Now, let’s hold here a moment & go over the importance of part of the text we just read above. “…2,340 tons of gold, equivalent to around two thirds of the world’s annual production.” Now what the above means is that if/when China does increase their gold reserves to where they are in line with other civilized nations then the amount they will have to buy on the open market will be equivalent to 2/3s of the average annual world gold production. That should help to propel the gold price even dramatically further. What news could really ever have as great an impact on the gold price than to hear that China was potentially increasing its gold reserve a couple of thousand tons? And this is no pipe dream or fantasy either as the reality of this momentous fact appears to be gathering momentum every day. “China signals gradual dollar exit.”
“CHINA'S LATEST SIGNAL THIS WEEK THAT IT WILL DIVERSIFY
FOREIGN EXCHANGE RESERVES AWAY FROM U.S. DOLLARS and government
bonds could ripple through U.S. and global markets, analysts said
Friday.” “As of November last year, China had $769
billion in foreign exchange reserves. Up to $247.6 billion are
invested in U.S. Treasurys. Unofficially, China is believed to
invest roughly 70% of its reserves in U.S. dollar assets.”
"It seems to us that the Chinese had made a bargain with
the United States," said Richard X. Bove, analyst at Punk,
Ziegel & Co.” "Let us keep the yuan pegged to the
dollar and we will buy your debt. Force us to float our currency
and we will put our funds elsewhere." Thought I would do something different for breakfast Monday morning. Instead of the usual diner I headed to the large
glass hotel down town. And there I watched the sun rise in the
east through the clear glass walls in the towering atrium. Anyway, the entire atrium is walled on three sides by transparent glass that allows an open & outside airy type of feel for those inside. It was dark when I entered & I watched the sun slowly rise. But, at any rate, an egg is an egg whether it costs one dollar or ten. “…China should increase its gold holdings from 600 tonnes to 2,500 tonnes in the short term AND UP TO 3,000 TONNES IN THE LONG TERM.” Teng Tai, an economist at Beijing-based China Galaxy Securities Co., China's biggest brokerage firm. http://www.theglobeandmail.com/servlet/story/RTGAM.20051228.wgoldd1228/BNStory/Business/ OK. Let’s be honest here. You’re still struggling to grasp the reality of change in today’s markets…right? Back to Asia & gold? BEIJING: "We will perfect the management of our foreign exchange reserves State Administration of Foreign Exchange (SAFE) chief Hu Xiaolian AND ACTIVELY EXPLORE NEW WAYS TO USE OUR RESERVE ASSETS EVEN BETTER," said in a statement late on Thursday.” "We will further improve the currency and asset structure in the foreign exchange reserve portfolio and continue to broaden the investment channels for our reserves." “The statement, posted on SAFE’s website, said THE DIVERSIFICATION WOULD SERVE THE TWIN PURPOSES OF STRENGTHENING RISK MANAGEMENT AND BOOSTING THE YIELDS OF FOREX RESERVE ASSETS.” “China’s foreign exchange reserves, the second-largest in the world after Japan, rose to $794.2 billion at the end of November, according to previous reports in the state media.” “Some economists estimate they will soon be even bigger than Japan’s, topping one trillion dollars by the end of this year, and so China may be wanting to signal its growing clout, according to analysts.” "THIS IS THE FIRST TIME CHINA HAS COME OUT AND SAID WE ARE LOOKING AT DIVERSIFICATION. It’s an important admission," said Callum Henderson, head of foreign exchange strategy at Standard Chartered in Singapore. "IT’S ALSO AN IMPORTANT MESSAGE TO THE US. IT’S A REMINDER OF WHO HOLDS THE CARDS IN TERMS OF FOREIGN EXCHANGE RESERVES not just Japan, but China." “With most of their reserves denominated in dollars, China and its Asian neighbours now hold the greatest sway ever over the US unit’s value.” “That makes any decision to lower the dollar’s weight in their holdings important to currency markets.” http://www.jang.com.pk/thenews/jan2006-daily/07-01-2006/business/b19.htm And do you need further proof that resource (gold & silver) stocks are the place to be? “Real assets rocked in 2005.” “Natural resources funds, which invest in oil, gas and other energy stocks, soared 41%.” “GOLD FUNDS, WHICH BUY SHARES OF GOLD-MINING COMPANIES, JUMPED 30.5%.” “Gold gained $79.60 an ounce in 2005, closing at $517.10, an 18% rise.” “What's driving red-hot commodities prices? China, whose gross domestic product has quadrupled since 1978. The country's GDP grew at an estimated 8% pace in 2005 and is expected to grow at a 9% rate this year, the National Statistics Bureau of China says.” http://www.usatoday.com/money/perfi/funds/2006-01-08-2005-natural-resources-gold_x.htm Should gold act as an additional component to your retirement plan? “As outstanding as pensions and retirement plans are, THEY ARE NOT ENOUGH TO SATISFY YOUR RETIREMENT INCOME NEEDS. Yet many workers who are covered by these programs often have terrible personal savings records. MANY ARE IN FOR A SHOCK when they discover at retirement that their retirement income is a fraction of their pre-retirement pay.” http://www.ricedelman.com/planning/retirement/plans.asp Gold & silver mining stocks are where the real money will be made in the next few years. Subscribe to an Internet/email publication that will review those gold & silver stocks that will climb the highest. http://www.goldletterdv.com/ A quick question before we leave. Do you have enough money set aside for retirement? Do you believe that investing in gold equities over the course of this unique gold bull market can help you reach your financial retirement goals? Email us your answer. Thanks for coming by & please do come back. January 13, 2006 David N. Vaughn
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