Dutch Central Bank Sale Announcement Imminent? Message Board

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Politics : Dutch Central Bank Sale Announcement Imminent?

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To: sea_urchin who wrote (21146)	6/12/2004 4:38:35 AM
From: GUSTAVE JAEGER	Read Replies (1) of 81687

Re: I'll tell you one thing and that is you have made their day for all the goldbugs who visit this thread -- if there still are any. What d'you mean? China and gold are linked: atimes.com kwrintl.com Excerpt: All of the above leads us to the question what full RMB convertibility eventually means for gold prices. China can press onward toward convertibility on the capital account, which would allow Chinese people more freedom to move their savings abroad, counterbalancing the inflow of U.S. dollars. In many ways that is the best option and it is already being implemented, but it would threaten the steady increase of savings put in low interest accounts at the state banks. This is the one thing that keeps China's financial system stable at the moment. Historically, the less trust there is in the financial system the more demand there is for gold. In addition, strong capital inflows and rising Forex reserves are already sharply boosting official demand for gold in China. This is because if the PBC [People's Bank of China] is to retain its proportion of gold holdings at the current 2.4% of total reserves (European Central Bank standard: 15%), it would need to increase its gold holdings by an estimated 120 tons or 60% of gold consumption in China in 2002. China already enjoys with 40% one of the highest savings rates in the world. The closer we get to revaluation, the more USD dollar savings will be converted into gold. In order to pave the way, the PBC last year relinquished its monopoly on imports and exports of gold, the Shanghai Gold Exchange was established and many Chinese commercial banks are planning to launch personal gold investment businesses. The way forward for China's central bank and savers in the coming years is, surely, to diversify out of their huge dollar holdings and move to back its currency by gold as it heads slowly but surely towards convertibility on the capital account. After the Beijing Olympics when the snow falls in the winter of 2008, gold might truly glitter. Michael R. Preiss serves as Chief Investment Strategist at CFC Securities.

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