Monday, November 30, 2009

China: Dubai Crisis Good for Buying Gold, Oil

call it "Beijing Put"...

Chinese are counting on the Dubai crisis to linger for a while so that they can buy gold cheaper. Will they get their wish?

Dubai crisis gives China chance to buy oil, gold: report (11/30/09 Reuters via Washington Post)

"BEIJING (Reuters) - Dubai's debt crisis could be China's opportunity to snap up gold and oil assets, a senior Chinese official said in remarks published on Monday.

"No Chinese banks have yet reported exposure to debt from Dubai World, a flagship firm that last week said it was seeking to delay debt payments by six months. Some Chinese real estate and construction firms have limited exposure to projects in the emirate, state television reported this weekend.

"China's $2.27 trillion in foreign exchange reserves are mostly parked in U.S. treasuries, despite calls from some in China to invest the reserves in oil and other natural resources that the fast-growing Chinese economy will need in future.

"While the impact of the Dubai crisis on the global economy and on China was not known yet, it would last a while at the very least, Ji Xiaonan, who chairs the supervisory board for big state-owned companies under the State Council's state assets commission, told the Economic Information Daily.

""That could give China a buying opportunity to put some forex reserves into gold or oil reserves," Ji was quoted as saying by the paper, which is widely read by Chinese officials.

"Another paper, the China Youth Daily, quoted Ji as saying that a team of experts from Beijing and Shanghai had set up a task force last year to look at the issue of gold reserves.

""We suggested that China's gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years," the paper quoted him as saying."

Currently, China's gold reserve is 1,054 tons, making it the 6th largest gold reserve holder in the world just above Switzerland. The U.S. gold reserve, in comparison, is 8,133 tons, the world largest. The second largest gold reserve holder is Germany, with 3,408 tons.

"Beijing put" is indeed on gold price.


In Debt We Trust said...

I suspect that Dubai is secretly buying their own debt on the cheap through intermediaries and cut-outs. I have nothing to prove this; just a hunch.

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