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China Hoarding Gold As Hedge Against Dollar Devaluation
Posted February 19th, 2014
TANGIBLE INVESTMENTS - Los Angeles - by James ODell - Gold and Silver prices were slightly lower on Wednesday with Gold at $1,320.62 an ounce and silver at $21.85 an ounce, but investor concerns about global economic growth still support the safe-haven appeal of gold. VTB Capital's Andrey Kryuchenkov says that demand has countered attempts at profit-taking as investors remain undecided ahead of the release of the minutes of the January FOMC meeting.
"More weak U.S. data could allow the Fed to push back tapering and in turn could push back expectations for a stronger dollar ... that could still help the metal to rise towards $1,350 in the short term," said Kryuchenkov. Experts continue to point to the recent spate of inclement weather as the reason for much of the recent troubling economic news. “We certainly cannot blame interest rates, as yields have actually fallen over the past several weeks and therefore have not had much to do with the sharp declines we are seeing in housing and manufacturing,” says Edward Meir, of INTL FCStone.
Meanwhile, James Rickards, noted author of "Currency Wars" makes a pretty good case for why China is hoarding gold, and why it will use that gold to remove the dollar as reserve currency. "I think [the Chinese] have acquired three or four thousand tons [of #gold] secretly, but I don’t think they are done," says Rickards. He says that China is quietly accumulating the bullion in case the U.S. inflates the dollar to pay off our debt to them, they will then use the gold as a hedge. In that way "If we inflate, then gold will go up. So what they lose on the paper, they make on the gold," said Rickards.
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