Articles NewsFlow Gold & Silver Prices Market Briefing

Recevez notre Marketbriefing

overtheedge
Member since May 2012
680 commentaries - 6 followers

6 followers

has posted a comment on the article :

China’s Gold Reserves Updated: Surprised? - Dan Popescu - GoldBroker

Count me among those who feel that including gold as part of foreign reserves to be utter nonsense.
Gold has no counter-party risk.
Foreign currency always incurs risk.

Next comparing the percentage of gold holdings to the percentage of foreign currency holdings is a silly notion at best.

Consider a country like Greece.
Greece supposedly has 112.5 tonnes of gold.
Greek foreign reserves are about 5.1 billion Euros. (Billion is in US figures 1,000,000,000)
With gold at about 32,000 Euros/kilogram we see Greece holds 3.6 billion Euros in gold.
3.6/5.1 X 100 = 70.5% in gold/foreign currency ratio.

Now consider the USA where gold/foreign currency reserves are at 74.2%.
Once again we can see that the USA has few foreign currencies in reserve.
Not much better percentage-wise than Greece.

Look at China's foreign exchange holdings of $3690 billions in USD.
With a paltry 1658.1 tonnes in admitted to gold, China's gold is worth about $58.8 billion in USD.
You can do the math yourself, but ... ,

Which country do you suppose is in better shape to pay its debts to foreign countries without tapping their gold holdings?

The gold to currency ratio in foreign reserves was valid when gold was currency, but no longer.
Traditional metrics become meaningless when the operative environment changes.
The world-wide adoption of fiat currencies changed everything.
It is time to put away outdated notions and look at foreign debt/net income ratios as the valid metric.
As the world's leading economists and politicians have effectively stated, "Gold is an anachronism no different than a pet rock."
Either they are correct or they are not.
The question remains, "Why is gold still included in foreign reserves if it isn't money?"

Commented 3180 days ago

Send

Beginning of the headline :On July 17, 2015, China updated its official gold reserves as being 1,658.1 tonnes. This represents an increase since the last announcement in 2009 of just 604 tonnes (+57%). This amount is far lower than most expectations of between 2,000 and 4,000 tonnes, including mine. Surprised? Yes, I am. If we look at the amount of gold that has been brought into China, especially since the 2008 financial crisis, it is estimated China has accumulated approximately 14,753 tonnes. What we don’t know is how... Read More

Reply to this comment

You must be logged in to comment an article

8000 characters max.

	RSS feed		24hGold Mobile
	Gold Data Center		Gold & Silver Converter
	Gold coins on eBay		Silver coins on eBay
	Technical Analysis		Fundamental Analysis