Since the last time it reported its holdings of gold, which was in 2009, at height of the economic collapse, China’s gold reserves have soared 57 percent.
According to the Wall Street Journal, the People’s Bank of China (PBOC) announced Friday it maintains 53.32 million troy ounces of the yellow metal in its reserves.
The International Monetary Fund (IMF) places China in fifth place when it comes to total gold holdings. The United States is first, followed by Germany, Italy and France. China is now ahead of Russia and Switzerland in overall gold reserves.
Experts say the timing of China’s announcement is interesting. As many know, China wants its yuan to be a reserve currency like the U.S. dollar, euro or British pound. However, the international community would likely reject the proposal because of its strict currency controls.
“The interesting thing about the announcement is the timing,” said Ross Norman of London-based bullion broker Sharps Pixley. “China has clear ambitions to create a global reserve currency to challenge the hegemony of the U.S. dollar and to fill the void created by the declining holdings by central banks of the euro.”
At the time of this writing, gold is trading just over $1,100, and has fallen to a five-year low.
Gold Haters Rejoice!
The performance of gold this year has generated the laughter of celebrated Keynesians like Paul Krugman.
Krugman wrote in a blog post:
“Remember when the likes of Paul Ryan accused Ben Bernanke of printing too much money, solemnly intoning that “There is nothing more insidious that a country can do to its citizens than debase its currency”? A big part of the justification for this fear-mongering was that commodity prices were rising sharply from their 2009 low, which the usual suspects claimed was a harbinger of rising overall inflation.
“So, look at what’s been happening to commodity prices, including gold, recently.
“Does this mean that deflation looms? Is it time to demand that Janet Yellen roll the printing presses?”
Here’s another misguided goodie from Krugman, who arrogantly writes:
“I mean, it could be that the inflation hawks have learned their lesson, that they realize that volatile commodity prices aren’t a very good guide to policy, and that it makes sense to focus on core inflation.”
It seems Krugman has a very short-term memory. Perhaps breaking too many windows and wallowing in his self-anointed greatness has hurt his memory. Who knows? Gold, when measured in the long-run, has been performing quite well. The yellow metal has risen 3,000 percent since the 1950s. What about the greenback? It has devalued 90 percent since the inception of the Federal Reserve.
What do you prefer?
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