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silversurfer1
10th September 2009, 17:03
China issued "Beijing Put" on gold

1) Comments by Mr Cheng (until recently Vice-Chairman of the Communist Party's Standing Committee) validate the long-held belief of gold bugs that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction.

2) Comments by Mr Cheng (on record) also validate the long-held belief of gold bugs that China has fundamentally lost confidence in the US dollar and is going to shift to a partial gold standard through reserve accumulation.

3) China is buying the dips in gold prices, and will continue to do so as a systematic policy. Mr Chengís comment captures exactly what observation of gold price action suggests is happening. Every time it looks as if the bullion market is going to buckle, some big force (Chinese buying) steps in from the unknown.


Conclusion: Gold is never going back down. Donít expect to ever see gold beneath $900 again. Prices that low would result in too much Chinese buying, so those short gold canít allow it to happen.

Meanwhile the yuan continues to strengthen as an alternative to the dollar. By the time a dollar panic begins at the end of 2009, the currency will be ready to serve as a makeshift replacement for the dollar in international trade.

DaleFromCalgary
11th September 2009, 09:50
I've been buying gold and silver weekly on a dollar-cost averaging basis, but have learned the hard way it is impossible to consistently time the dips. But I see the point of what the Chinese are doing, and more strength to their arm.