China's Gold Dance

Source: Mineweb, Lawrence Williams (2/25/10)

"If China or India don't cough up does it really matter?"

No sooner had most Western pundits come to the conclusion that China was unlikely to buy the IMF's remaining 191.3 tons of gold for sale, with reports in China Daily lending support to this interpretation of Chinese buying policy, than the Russians in the form of Pravda published an article saying that China was in talks with the IMF to relieve that august body of this bullion, which is obviously burning a hole in its pockets.

The Pravda report quoted the FinMarket news agency as saying that Chinese officials have confirmed the nation will buy the IMF gold—this immediately follows reports from other Chinese officials that it won't buy the IMF gold. Naturally the gold price has been bouncing up and down like a yoyo. Either the Chinese are having a huge laugh at the expense of gullible Western—and other Asian—investors, or there are groups of gold bulls and bears out there busy placing stories in the media to suit their particular investment policies.

Indeed the supposed source of the China-will-buy-IMF-gold story says, according to a Reuters report, that she didn't actually have any direct official confirmation of the story relying on Chinese news reports - which may well have just picked up on earlier Western speculation.

Naturally the IMF refuses to confirm, or deny, any of these stories—it's not in the business, officially at least, in promoting any specific purchasing agenda.

So what's the answer? Probably sit tight on your gold—the downside looks to be limited by investors coming in when the price drops below $1,100. If one of the rumored major buyers does come in and snaffles the lot, then there will be a good kicker in the price. If they don't, with the limited downside gold may well help you retain your wealth.

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