China Unlikely to Buy IMF Gold-WGC

Source: Mineweb, Lawrence Williams  (2/23/10)

". . .China is actually 'not a realistic candidate' to buy all, or any, of the IMF's remaining gold"


Contrary to much speculation among the pro-gold sector, the World Gold Council feels that China is actually "not a realistic candidate" to buy all, or any, of the IMF's remaining 191.3 tons of gold which is still up for sale. In an interview with Bloomberg, George Milling-Stanley, the WGC's New York-based managing director for government affairs is quoted as saying "We're not surprised to see that China has not" taken up any of the IMF's gold for sale and is far more likely to "buy local gold production" with which to bolster and diversify its currency reserves.

On the other hand, Jeff Nichols, in his latest commentary on gold on his website nicholsongold.com says "For some time now, we've suggested that China could be the next big buyer from the IMF, particularly if prices dipped below those paid by India for its purchases last year. Now, however, China (and other central banks) can purchase IMF gold anonymously—with less concern about looking good by acquiring metal at prices beneath those paid by the Reserve Bank of India last year. And, as prices rise, some countries may feel compelled to buy sooner rather than later to avoid missing the boat altogether."

But, the fact remains that China is now the world's largest gold producer. With China's gold mine production passing through state hands, the country's opportunity to build up its gold reserves in a less open manner, and making these purchases in local currency and not rock the dollar boat, suggests that if it feels its gold reserves need boosting above its current relatively tiny level, this may well be the better route for so doing.

Milling-Stanley commented on the IMF announcing it was opening up the sale of its remaining gold to the general market, saying: "There has been some ill-informed comment that this move tarnished the notion that governments are adding to reserves," he said. "There are a lot of central banks out there that are buying local production in local currency. The IMF would have no interest in that local currency. The IMF is looking for dollars."

"China was always buying its own domestic production and it will likely to continue to do so" said Milling-Stanley.

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