Skip to main content

China buying gold

Recently, China has minced no words in making its discomfort clear with respect to the US dollar. That it was diversifying its huge cache of dollar denominated forex reserves into other asset classes was also being speculated. Recently though, it let the cat slip out of the bag. And quite a big one at that! China's forex managing agency revealed that it has nearly doubled its gold reserves to 1,054 tonnes, up from 600 tonnes in 2003, making it the fifth largest holder of the precious metal. The disclosure is likely to have quite a few implications. Foremost among them could be a renewed surge in the price of the yellow metal, which has already quadrupled during the last one decade. There is no reason why it cannot inch even higher and scale new peaks.
Secondly, it might force a flight from the dollar by other central banks as well, who could well be spooked by the fact that if the largest supporter of the US dollar is stealthily moving out of it, significant depreciation in the greenback could only be a matter of time. If it does indeed happen, no one is going to suffer more than China itself as it still has majority of its forex reserves invested in the US dollar. Thus, caught in a Catch-22 situation, slow and steady accumulation of non-dollar assets is the only way out for the dragon nation. Otherwise it risks getting swallowed by the same beast it helped create

Comments

Popular posts from this blog

Biyani looks at the bigger picture

It is important to look at the holistic picture and have an individual opinion rather than get swayed away by the public consensus. This is the view of the man who pioneered the retailing boom in India - Mr. Kishore Biyani, the founder of India’s largest retailing company - Pantaloon. In an article in the Wall street Journal, Mr. Biyani wrote, "Almost daily doses of bad news on television screens and newspapers have possibly done as much damage to the economy as the events on either side of the Atlantic." I completely agree with him. Mr. Biyani’s predicament is based on the fact that an overwhelming majority of Indian consumers are self-employed, who can neither get laid off nor can have pay cuts. Consider some statistics he has provided. The share of the national income represented by proprietor-run concerns and partnerships is 35%. The share of companies is around 15%, government around 25%, and agriculture around 25%. Combine agriculture and the self-employed in industry a...

Infosys kick started the March quarter and full year FY09 result season today on a mixed note

Infosys kick started the March quarter and full year FY09 result season today on a mixed note. Although its fourth quarter operating performance did not have much to be enthused about, the company managed to add 37 new clients and 1,772 employees (net) during this quarter. This goes to show the consistency in the company’s long term business prospects. While the full year profits grew by a healthy 29% YoY, the company announced an earnings guidance for FY10 that would be lower by 3% to 7% YoY as compared to FY09 EPS.

Insight from the new book "The story of work" by Jan Lucassen. Work that never ends

The more things change, its turn out to be the  same as it ever was.  A new book about the history of work reveals that today’s workers have much in common with all those who have come before them over the past 12,000 years.  People’s appetites drive them to produce more than they need, and they build political and economic institutions to help them do it. Then those institutions drive them to do more. NYT ( see the story in the link)  also talks about  Gluttons for punishment.  We work so much because we want so much. That was anthropologist James Suzman’s conclusion after studying hunter-gatherers in the Kalahari Desert who satisfied their survival needs with roughly 15 hours of weekly labor. But modern, urban societies cause us to develop unlimited desires, which lead us to endless labour https://www.nytimes.com/2021/06/29/podcasts/transcript-ezra-klein-interviews-james-suzman.html?cid=other-eml-onp-mip-mck&hlkid=38845d000b404e829c41b7395739f39a&...