Sunday, November 11, 2012

China Prefers Gold to U.S. Treasuries

I pointed out in an October post that China had imported a massive 512 tons of gold YEAR TO DATE.

Prior to that I posted a remarkable quote from Romney at that now infamous fundraiser where he made the "47%" comment. As a reminder:

From Motherjones:

Romney: Yeah, it's interesting…the former head of Goldman Sachs, John Whitehead, was also the former head of the New York Federal Reserve. And I met with him, and he said as soon as the Fed stops buying all the debt that we're issuing—which they've been doing, the Fed's buying like three-quarters of the debt that America issues. He said, once that's over, he said we're going to have a failed Treasury auction, interest rates are going to have to go up. We're living in this borrowed fantasy world, where the government keeps on borrowing money. You know, we borrow this extra trillion a year, we wonder who's loaning us the trillion? The Chinese aren't loaning us anymore. The Russians aren't loaning it to us anymore. So who's giving us the trillion? And the answer is we're just making it up

Connecting the dots? China is not buying significant US Treasuries anymore and are taking delivery of physical gold. Here's the update on demand for foreign owned Treasuries:

Here is the update on Chinese demand for gold:

China has now imported a whopping 582 tons of gold, more than the official holdings of India at 558 tons, and which through November has certainly surpassed the holdings of the Netherlands, and make China's gross imports in just 2012 nominally the equivalent of Top 10 largest sovereign holder of gold.

China is hell bent on acquiring as much gold as it can before some large event happens. We can only guess that China sees its largest trading partner running trillion dollar annual deficits and a national debt now exceeding $16 Trillion with a Fed that has promised to print unlimited amounts of dollars to "create jobs". Should they keep their earnings in increasingly worthless dollar currency (via Treasuries)? Or buy gold which will enable them to buy the global resources they need long after America has gone bust? The answer is clear.

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