As for the stock of gold, this is peanuts as a percentage of reserves. Back in November, I wrote:

Aggregating the gold holdings of the ECB and the legacy central banks that comprise the Eurozone would imply a $6,300 gold price. Again using the Bretton Woods system as a model, the U.S. dollar and Euro might be designated as “global reserve currencies” because they could most easily be converted to gold. The remainder of participating global currencies could then be made exchangeable into U.S. Dollars/Euros at fixed, but amendable rates (floating foreign exchange rates).

The trickier part of converting paper currencies to a global gold standard would be persuading economies with high paper currency-to-gold ratios. Their paper currencies would suffer devaluations versus currencies with higher gold reserves. For example, the Japanese Yen’s gold price equilibrium would equate to nearly $40,000/ounce when calculated against the Bank of Japan’s gold holdings and the Chinese Renminbi’s gold price equilibrium would equate to about $117,000/ounce when calculated against the People’s Bank of China’s published gold holdings.

See post here:
http://www.creditwritedowns.com/2008/04/new-wor...

Is it substantial compared to all their other stuff? Or is it rather minor?

(If the latter, I tend to agree with Egghat: That we shouldn't read too much into it, because it's not substantial and anyway even decreasing in percentage terms.)

Do you think a decline in the dollar would be beneficial to th US, especially against the reminbi?

Maybe a decline in the dollar wouldn't actually solve anything:

“A major revaluation is unlikely to provide even incremental relief. Until now, the Chinese attitude toward exports has been that they would take any manufacturing job to boost employment. As a matter of state policy, they were not picky. The likely Chinese response to a renminbi revaluation is to slough of the lowest value-added industries like apparel to even more desperately poor countries such as India, Pakistan, and Indonesia; keep those industries where China is collectively a price-setter; and focus growth on higher value-added products. But, in addition to fueling US infation, this would just move the Chinese threat up the value chain, and threaten even more sophisticated industries and more-valuable jobs in the US. In other words, far from alleviating pressure on the US, a renminbi revaluation is quite likely to make things worse.”

1. How can China bought so much gold from the free market without being noticed? Although there are rumors about China's intention to accumulate more gold for reserve but we hardly heard any big transactions in the last few months.

2. China smartly responses to the current crisis. A few years ago, a professor in metallurgy told me that the whole world's copper natural reserve for copper is decreasing although the price of copper is dropping at the same time. If each Chinese uses the same amount of metal as American or European, we will have a big problem to the commodity prices. There is not enough metal in the world. And in the last few years, China needed to negotiate with the world major metal players, like Rio, BHP about the ferrous. There is no question that China will rise in the next 10/20 years. China will certainly take this opportunity to buy as much resources as possible for future use. Recently copper tells the tale.

3. Does gold really have it value? A few years ago, there was a debate about whether gold could still be a reserve asset. One day, when the rest of the world dry up in their gold reserve, all may vote for not using gold as reserve. Gold becomes useless by that time. In fact, gold has very limited industrial uses other than jewels.

4. Many Chinese ordinary people are not happy about US. On one hand, U.S. requests yuan to appreciate against US dollars. On the other hand, china purchases so much T-bonds each year. Of course, Americans have their different views on this matter too. Diversify their investment is a sensible way to deal with this crisis.

Just my two cents.

As for the stock of gold, this is peanuts as a percentage of reserves. Back in November, I wrote:

Aggregating the gold holdings of the ECB and the legacy central banks that comprise the Eurozone would imply a $6,300 gold price. Again using the Bretton Woods system as a model, the U.S. dollar and Euro might be designated as “global reserve currencies” because they could most easily be converted to gold. The remainder of participating global currencies could then be made exchangeable into U.S. Dollars/Euros at fixed, but amendable rates (floating foreign exchange rates).

The trickier part of converting paper currencies to a global gold standard would be persuading economies with high paper currency-to-gold ratios. Their paper currencies would suffer devaluations versus currencies with higher gold reserves. For example, the Japanese Yen’s gold price equilibrium would equate to nearly $40,000/ounce when calculated against the Bank of Japan’s gold holdings and the Chinese Renminbi’s gold price equilibrium would equate to about $117,000/ounce when calculated against the People’s Bank of China’s published gold holdings.

See post here:
http://www.creditwritedowns.com/2008/04/new-wor...

Is it substantial compared to all their other stuff? Or is it rather minor?

(If the latter, I tend to agree with Egghat: That we shouldn't read too much into it, because it's not substantial and anyway even decreasing in percentage terms.)

As for the stock of gold, this is peanuts as a percentage of reserves. Back in November, I wrote:

Aggregating the gold holdings of the ECB and the legacy central banks that comprise the Eurozone would imply a $6,300 gold price. Again using the Bretton Woods system as a model, the U.S. dollar and Euro might be designated as “global reserve currencies” because they could most easily be converted to gold. The remainder of participating global currencies could then be made exchangeable into U.S. Dollars/Euros at fixed, but amendable rates (floating foreign exchange rates).

The trickier part of converting paper currencies to a global gold standard would be persuading economies with high paper currency-to-gold ratios. Their paper currencies would suffer devaluations versus currencies with higher gold reserves. For example, the Japanese Yen’s gold price equilibrium would equate to nearly $40,000/ounce when calculated against the Bank of Japan’s gold holdings and the Chinese Renminbi’s gold price equilibrium would equate to about $117,000/ounce when calculated against the People’s Bank of China’s published gold holdings.

See post here:
http://www.creditwritedowns.com/2008/04/new-wor...

Is it substantial compared to all their other stuff? Or is it rather minor?

(If the latter, I tend to agree with Egghat: That we shouldn't read too much into it, because it's not substantial and anyway even decreasing in percentage terms.)

Do you think a decline in the dollar would be beneficial to th US, especially against the reminbi?

Maybe a decline in the dollar wouldn't actually solve anything:

“A major revaluation is unlikely to provide even incremental relief. Until now, the Chinese attitude toward exports has been that they would take any manufacturing job to boost employment. As a matter of state policy, they were not picky. The likely Chinese response to a renminbi revaluation is to slough of the lowest value-added industries like apparel to even more desperately poor countries such as India, Pakistan, and Indonesia; keep those industries where China is collectively a price-setter; and focus growth on higher value-added products. But, in addition to fueling US infation, this would just move the Chinese threat up the value chain, and threaten even more sophisticated industries and more-valuable jobs in the US. In other words, far from alleviating pressure on the US, a renminbi revaluation is quite likely to make things worse.”

1. How can China bought so much gold from the free market without being noticed? Although there are rumors about China's intention to accumulate more gold for reserve but we hardly heard any big transactions in the last few months.

2. China smartly responses to the current crisis. A few years ago, a professor in metallurgy told me that the whole world's copper natural reserve for copper is decreasing although the price of copper is dropping at the same time. If each Chinese uses the same amount of metal as American or European, we will have a big problem to the commodity prices. There is not enough metal in the world. And in the last few years, China needed to negotiate with the world major metal players, like Rio, BHP about the ferrous. There is no question that China will rise in the next 10/20 years. China will certainly take this opportunity to buy as much resources as possible for future use. Recently copper tells the tale.

3. Does gold really have it value? A few years ago, there was a debate about whether gold could still be a reserve asset. One day, when the rest of the world dry up in their gold reserve, all may vote for not using gold as reserve. Gold becomes useless by that time. In fact, gold has very limited industrial uses other than jewels.

4. Many Chinese ordinary people are not happy about US. On one hand, U.S. requests yuan to appreciate against US dollars. On the other hand, china purchases so much T-bonds each year. Of course, Americans have their different views on this matter too. Diversify their investment is a sensible way to deal with this crisis.

Just my two cents.

If you recall, the Unocal purchase, which was blocked, was yet another attempt along the same lines. The Chinese want hard assets, not paper money. Unfortunately for them, they are going to get stuffed by being linked to the dollar.

The facts:

China's holdings of gold has increased 75% in 6 years. Gold then was at 350 per ounce and is at 850 dollars at the end of 2008. So the value of gold has increased four times.

China's currency reserves at the end of 2002 were below 300 billion and are now at 1,900 billion. That's an increase of nearly 7 times.

So essentially the percentage of gold of China's reserves has *de*creased.

Or is my reasoning flawed somewhere?