“Made in China” never sounded so “Golden’”

By:  John Fisher

China has actively begun to diversify its mountain of foreign reserves stemming from its trade surpluses. Their central bankers failed to diversify their reserve holdings out of primarily US Treasuries.

Last year, China’s reserve holdings declined substantially due to both dollar devaluation and lower Treasury yields.  Future prospects are for more of the same.  The Chinese are not stupid.

China has now essentially stopped buying our Treasuries.  The Bernanke policy of Quantitative Easing is now our purchaser of Treasuries of last resort.

Presently, China has 27 times more foreign reserve holdings than the US and more than 4 times the total foreign reserve holdings of the US, Germany, Italy and France, combined!

**This figure is unaudited.  There is currently a bill before Congress calling for an independent audit of the Federal Reserve gold holdings.  The bill is meeting with very stiff resistance.  Our country’s gold holdings have not been audited since 1913, the year the Federal Reserve was created.  For more information see www.auditthefed.com.

As you can see, China has an Achilles heel. Only a meager 1.5% of its Total Foreign Reserves are gold. China has long been subject to the whims of the Federal Reserve, Congress and the US dollar.  They are deficient in diversifying out of their US dollar reserves and into traditional reserve value storage – gold.  That is changing.

So, how much gold might China acquire?  If China were to bring their gold holdings up to approximately 65% of their Total Foreign Reserves, The Peoples Bank of China would need to buy an additional 44,619 tonnes of bullion.

To put this quantity into perspective, consider that:

• The world’s total existing above ground supply of gold in all forms is only 166,000 tonnes
• The world’s total yearly mine production is only about 2,500 tonnes

China’s gold deficit represents 27% of the total existing above ground gold.  If China were to buy up all newly mined gold in the world, it would take 18 years to accumulate 44,619 tonnes.

All Things Considered – John’s Commentary

What do you think China will do?  What would you do if you were China?  China is THE new super-power.  If China begins to turn their Treasuries gold, my position will do very, very well.  Will  yours?

Action to take now: We are in a period of consolidation.  Can’t you feel the uncertainty all around.  People don’t know what to do and what not to do.  The stock market, the deficit, real estate, stimulus, unemployment, the dollar, budget deficit, trade deficit, defaults, the election, the administration, the Congress, Fed and Treasury.  Do I need to go on???

One thing I know for sure – no two:  1.  God is in control.  2.  Gold and Silver have personally served me well for 15 years, and I see no reason why that won’t continue.

What to buy: If it were me today, and I was either just starting or adding to a modest position, here is what I would buy:

$10,000: $7500 in pre-1965 90% silver coin and $2500 in gold Medallions, 100 Coronas and/or Maple Leafs

$25,000: $13,000 in pre-1965 90% silver coin, $2,000 in silver Eagles or silver Maple Leafs.  In gold $10,000 in gold Medallions, 100 Coronas and/or Maple Leafs

$50,000:         $25,000 in pre-1965 90% silver coin, $5,000 in silver Eagles or silver Maple Leafs and $4,000 on 100 oz. silver bars.  In gold, $16,000 in gold Medallions, Krugerrands and/or Maple Leafs

$100,000: $45,000 in pre-1965 90% silver coin, $10,000 in silver Eagles or silver Maple Leafs and $10,000 on 100 oz. silver bars.  In gold, $35,000 in gold Medallions, Krugerrands and/or Maple Leafs

Quote of the day: “If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold.”  –  Robert Ringer