Wednesday, October 30, 2013

Perspectives On Central Bank Gold Buying: Gold Experts

Gold Bullion
Gold bullion Reuters
Given the Russian central bank’s recent sale of gold, its first sale in a year, we sought perspective on central bank gold-buying trends from experts on the yellow metal.
Carlos Sanchez, CPM Group, Commodities Trader and Asset Management Director
Sanchez pointed out first that Russian central bank holdings are up about 32 million ounces for the year to date, adding that the 12,000 ounces sold in September is a minimal amount.
Collectively, central bank holdings are up about 1.7 million ounces this year, even though the pace of buying may have slowed compared to last year, said Sanchez.
“Overall, we would expect continued net central bank buying of gold,” Sanchez told IBTimes.
“Russia may be selling to meet certain standards, or for other reasons that we’re not aware of, but I wouldn’t be surprised to see buying continue over the next several months,” he continued. “They’ve been buying since the late 1990s." He said it's uncertain if there will be Russian sales in October or November, but the following several quarters should see net buying.
Even though central banks are less fickle than most investors, since they buy gold to diversify reserves for the long haul, they may be waiting on more-stable prices, Sanchez said.
World Gold Council Executives
World Gold Council executives told reporters on Wednesday that they aren’t adjusting 2013 forecasts for central bank gold buying. The latest council data projects central banks purchases of 300 to 350 metric tons this year.
That compares to 544 tons bought in 2012.
“Russia has over 1,000 tons of gold in reserves,” said council investment researcher Juan Carlos Artigas. “Extrapolating from one particular point, I think, is not really capturing the [buying] trend that Russia has had, or many of the other central banks.”
Council data showed central bank buying down by over 90 tons, or 57 percent, from last year in the second quarter.
Central banks have bought about 218 tons so far this year, according to UBS analyst Joni Teves. Russia has been a strong buyer, said Artigas, alongside countries from the Caucasus region, like Azerbaijan and Kazakhstan.
The council doesn’t forecast how much each specific central bank might buy, because asset management strategies vary, said council investment director Kevin Feldman.
“We’re looking at it on the aggregate and saying the important point is that they are net buyers, not net sellers,” he said. “The European banks are not selling right now.”
Scott Carter, CEO of Precious Metals Retailer Lear Capital ($350m in Annual Revenues)
Carter contrasted Germany, Italy, the U.S. and France, who maintain more than 80 percent of foreign reserves in gold, with emerging markets like China, Russia and India, where reserves are usually less than 10 percent held in gold.
“There’s a concerted effort to diversify to some extent away from the U.S. bond market, U.S. dollars, and buy hard assets like gold, China being the leader,” Carter told IBTimes.  
“With China, they want to obtain enough gold to back their currency,” he continued.
In a decade, China could have 6,000 to 8,000 tons of gold backing the Chinese yuan, which could be a “game-changer” in global markets in terms of reserve and dominant currencies, he said.
China now holds about 1,025 tons of gold, according to International Monetary Fund data. Carter underlined countries who are long on the dollar, or who have large pools of U.S. Treasury bonds, as the ones most likely to accelerate buying.
Carter added that not enough is known about why and how central banks lease out their gold holdings, for their own opaque purposes. Lease mechanisms are obscure, he said.
Bank Analysts
UBS analyst Joni Teves noted that central bank’s gold appetite remains intact but has slowed significantly from last year.
“The pace has certainly slowed down this year,” she wrote in a research note from Tuesday. “Net purchases to August reflect a year-on-year decline of just under 40 percent.”
Analysts interviewed by the Wall Street Journal were more outspoken and bearish on what slower central bank purchases could mean for gold prices.
“It really does blunt the support that gold has,” H.C. Wainwright & Co. analyst Jeff Wright told the newspaper. “Purchasing by central banks was the fail-safe, the line in the sand [supporting prices in] a volatile market. It’s a very important shift.”
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chow@royalindexuae.com

Tuesday, October 29, 2013

Central Bank Gold Buying Slows, As Russia Sells Precious Metal In September: IMF Data

Gold buying by the world’s central banks has slowed so far this year compared to last year, though central banks as a whole remain net buyers of the metal, the latest International Monetary Fund (IMF) data shows.
But the surprise is that Russia, a key and consistent buyer in recent years, sold 12,000 ounces of gold in September.
Still, the country now owns 32 million troy ounces of gold, up from the 20.8 million it owned in 2009.
Central banks buy gold to diversify their reserves, away from simply foreign and paper currencies. Central banks as a whole became net buyers of gold in 2010, reversing an older trend that saw them selling gold to raise cash. Emerging markets like China and Russia drove the trend, as advanced economies held and still hold vastly more in gold reserves.
That buying trend looked stable, until now. Emerging-market banks may have less cash to help add gold to their reserves, thanks to currency volatility and capital outflows this year, reports the Wall Street Journal. That volatility may have been driven by a buoyed North American stock market, as investors shift attention away from emerging economies and back toward a slowly recovering U.S.
“Although buying appetite remains intact, the pace has certainly slowed down this year,” wrote UBS AG (VTX:UBSN) analyst Joni Teves in a research note on Tuesday. Central bank purchases from January to August 2013 are 40 percent lower than the same period last year, she said.
Monthly Central Bank Buying, 2013, UBS Joni TevesMonthly Central Bank Gold Buying in 2013  UBS AG Research, Joni Teves
Advanced economies owned 706 million ounces of gold as of August 2013, relative to 215 million ounces owned by emerging and developing countries, according to IMF data. But emerging countries added about 40 million ounces since 2009, compared to less than 2 million ounces by advanced economies since then.
“It is virtually impossible to ascertain the exact motivations behind central bank gold movements,” added Teves. She noted, however, that Russia also sold gold in September 2012, so there could be a seasonal explanation.
Russian central bankers may have also taken advantage of gold’s 11 percent price rally from August to September, selling a small amount of metal for a quick profit, she wrote.
Central banks are likely to slow gold buying by 34 percent in 2013, according to precious metals tracker Thomson Reuters GFMS, after two straight years of net purchases.
Part of the problem is the steep, 20 percent decline in gold prices this year, which ended 12 years of strong price upticks. That may have prompted central bankers to wait for a stable market.
"It really does blunt the support that gold has," said Jeff Wright, an analyst with H.C. Wainwright & Co., to the Journal. "Purchasing by central banks was the failsafe, the line in the sand [supporting prices in] a volatile market. It's a very important shift."
Others, like gold strategist George Milling-Stanley, who has advised central banks on gold buying for years, have been more optimistic.
Western European central banks tend to have 75 percent or more of their external reserves held as gold, compared to less than 5 percent for many emerging economies, he said.
“All of the buying is coming from what we used to call the emerging markets -- China and India, Russia, Brazil, Mexico -- that have very, very low proportions,” he told IBTimes at a commodities conference in September.
“Most of the central banks I’ve talked to in the developing world simply say, 'We need to have more gold in our reserves, without a specific target,'” he said.
Gold hit a five-week high in trading on Monday and opened in New York at $1,352 per ounce on Tuesday morning.
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chow@royalindexuae.com

Monday, October 28, 2013

Gold ends over $1,350; Fed still seen on bond-buying spree

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Gold settled slightly lower on Monday, having hit a fresh five-week high earlier after weak U.S. economic data buoyed investors' belief the Federal Reserve would stick with its bullion-friendly stimulus measures at a policy meeting later this week.
Pending home sales slumped 5.6 percent in September, a rate that was far steeper than expected and the biggest drop in more than three years.
The Fed starts its two-day policy meeting on Tuesday and is widely expected to keep its bond-buying stimulus unchanged at $85 billion per month. Most expect the central bank will delay withdrawing stimulus until March 2014.
Spot gold hit a best since Sept. 20 at $1,361.60 an ounce after the data, and was up 0.2 percent to $1,354 an ounce. U.S. gold futures for December delivery settled 30 cents lower at $1,352.20 an ounce.
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chow@royalindexuae.com

Sunday, October 27, 2013

Gold may stumble towards $1,400

Getty Images
Gold will likely build on last week's four-week high, reflecting expectations that the Federal Reserve will not cut bond purchases until well into 2014, though some warn there isn't enough momentum to lift prices above the late-August highs of $1,400, according to CNBC's latest market survey.
CNBC's latest poll of gold market sentiment showed 68 percent (15 out of 22 respondents) expect prices to gain this week, 18 percent (4 out of 22) predict price declines while 3 respondents sees prices trading around current levels.
"With a lower dollar, Fed QE (Quantitative Easing) and markets at all-time highs, technicals are being backed up and strengthened by macro (factors)," said Matt Fanning, CIO and Fund Manager at Fanvestments in Providence, Rhode Island. "Technically, $1,333 was major resistance for a while and that was taken out."
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Bullion recorded a 1.7 percent gain last week as it benefited from weaker-than-expected U.S. non-farm payrolls data, building the case for a delayed Fed taper.
The Fed may signal stimulus remains intact for longer at its two-day policy meeting this week. Market consensus points to the U.S. central bank cutting back bond purchases only in March 2014 after recent U.S. economic data missed forecasts and fears that the October numbers may be even worse due to the impact of the government shutdown.
"Tapering this year is off the table," said Scott Carter, the chief executive officer of Los Angeles-based Lear Capital. "It's doubtful that we will see any tapering of bond purchases until much later in 2014. This should provide a tailwind for gold to move up in the coming months."
Liquidation
Gold bulls argue recent gains can be sustained by a weaker dollar and physical demand as the festive season in India - the world's largest consumer - approaches its peak next month although selling in exchange-traded gold back funds continues to underscore investors' faith in gold is fading.
After a 12-year bull market, the metal has underperformed falling by more than 20 percent this year.
"We continue to see liquidation on the ETF side despite this recent take higher," said Mark Keenan,
Metals post gains for week
CNBC's Sharon Epperson reports gold closed slightly higher to end the week. Gold prices have added about $100 an ounce in less than 2 weeks.
Cross Commodity Research Strategist at Societe Generale told 'Squawk Box' on Friday. "Heading into the month of November, it's the peak month for the Indian wedding and festival gold buying period so we might get slightly higher numbers from these levels.
Judging by the historical performance of gold in past Novembers, "we can expect about a 3.8 percent rise in the price over this month," Keenan said. "We might see a little bit more strength from these numbers, but frankly anything approaching $1,400 will be very surprising."
Credit Suisse precious metals analysts led by Tom Kendall said in a report last week that the macro environment has not shifted enough for gold to challenge its late-August high above $1,400 though UBS commodity analysts disagreed.
"The shutdown showdown and the short-term punt of the budget fight to early 2014 delays in our view the Fed taper from December 2013 to March 2014," said UBS' Dominic Schnider and Giovanni Staunovo. Taper delays will fuel "weakness in the U.S. dollar and the subsequent strength in the gold price could run further in the coming weeks,"they said, adding that if the euro tested $1.40 against the dollar, that "would facilitate a gold price move above $1,400."
As a gauge of investor sentiment, holdings in the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, fell 0.2 percent or 1.8 tons last Thursday, Reuters reported. An outflow of more than 10 tons occurred last Monday followed by an increase of six tons on Tuesday.
Demand for gold coins issued by the U.S. Mint, however, jumped in October after the budget impasse hit confidence in the dollar, causing a scramble into hard assets.
"Current demand has exhausted existing supply which has led to a mini-surge in newly made American Eagle gold bullion coins," said Edmund Moy, Chief Strategist at Morgan Gold and a former director of the U.S. Mint. "October sales so far of 39,000 ounces have tripled from September sales of 13,000 ounces." This showed investors who previously questioned gold as a safe-haven are "rethinking their doubts."
— By CNBC's Sri Jegarajah. Follow him on Twitte
http://www.cnbc.com/id/101146535
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chow@royalindexuae.com

Saturday, October 26, 2013

Diwali craze: Gold, silver prices jump on frantic buying

NEW DELHI: Gold and silver prices climbed in the national capital today on frantic buying by stockists and jewellery fabricators for the approaching Diwali festival amid firm global cues.

Gold prices gained Rs 170 to Rs 32,570 per ten gram, while silver spurted Rs 450 to Rs 49,900 per kg on increased offtake by jewellers and industrial units. 

A firm global trend on speculation that the US Fed might maintain stimulus to boost economic growth also supported the sentiment, they said.
Bullion merchant said frantic buying by stockists and jewellery fabricators to meet upcoming festivals like Dhanteras and Diwali mainly led to rise in precious metal. 

A firm global trend on speculation that the US Fed might maintain stimulus to boost economic growth also supported the sentiment, they said. 

Gold in New York, which normally sets price trend on the domestic front, rose by 0.2 per cent to $1,352.50 an ounce, the highest since September 20. 

On the domestic front, gold 99.9 and 99.5 per cent purity climbed Rs 170 each to Rs 32,570 and Rs 32,370 per ten gram, respectively, while sovereign held steady at Rs 25,300 per piece of eight gram. 

Silver ready rose Rs 450 to Rs 49,900 per kg and weekly-based delivery by Rs 50 to Rs 49,700 per kg. Silver coins, however, remained flat at Rs 88,000 for buying and Rs 89,000 for selling of 100 pieces.


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chow@royalindexuae.com


Wednesday, October 23, 2013

Money Can't Grow on Trees, But Gold Can



Much of the land of the Goldfields-Esperance Region of Western Australia is arid and inhospitable. Only the hardiest plants and animals take up residence. The aged, salt-ridden soils are almost entirely infertile, and there are no flowing rivers to breath life to the area.
But it is here, roughly 40 kilometers north of the town of Kalgoorlie, that many men and women venture, hoping — ironically — to live a life of luxury. By digging 35 meters below the spartan surface, they might just find the key to unlocking such an existence, a shiny, soft, and lustrous metal: gold.
Approximately 30% of the world’s demonstrably accessible gold reserves lie buried in the region. The notoriety beckons more than just gold-lusting prospectors; it also brings curiosity-stricken scientists. Recently, a team of researchers visited the area and turned up an interesting finding: Gold is growing on eucalyptus trees.
“We show the first evidence of particulate gold within natural specimens of living biological tissue,” the researchers report in Nature Communications.
euctree.jpg
Rain rarely falls in Goldfields-Esperance, which sports average summer temperatures around 93 degrees Fahrenheit. So the hearty, but thirsty eucalyptus trees extend their roots far underground in search of water, sometimes as deep as 40 meters! Along the way, the roots run through gold-enriched earth, drinking in both moisture and metal. Carried by water, the gold flows through the trees’ vascular systems and gets deposited within the cells, themselves. The researchers found leaves and twigs to contain particularly high concentrations of gold: 80 and 44 parts per billion, respectively. That’s not enough to make the tree shimmer and sparkle in the midday sun, or even to make a gold ring — one would have to cut down 500 of the trees just to extract enough metal. But it’s still a lot in a biological sense.
Interestingly, the team found that gold is being released from the trees through falling leaves, begetting quite a compelling conclusion: In Western Australia, gold is literally falling from trees (although in admittedly microscopic amounts)! One couldn’t simply rake up the leaves and become rich, but those leaves may very well indicate the presence of more tangible stores of gold buried below.
Source: Lintern, M. et al. Natural gold particles in Eucalyptus leaves and their relevance to exploration for buried gold deposits. Nat. Commun. 4:2614 doi: 10.1038/ncomms3614 (2013).
(Image: Mel Lintern)
A version of this post originally appeared at RealClearScience.
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chow@royalindexuae.com

Tuesday, October 22, 2013

Dollar pain may spell further gains for gold

Akos Stiller | Bloomberg| Getty Images
As the inverse relationship between goldand the U.S. dollar strengthens, the yellow metal appears to be on track for firm gains in the final three months of the year as the greenback heads south, strategists say.
U.S. nonfarm payrolls for September - released on Tuesday following a delay due to the partial government shutdown - came in at 148,000, well below expectations of 180,000. The reading boosted gold prices 2 percent to a three-week high of $1,344 per ounce, while the dollar index tumbled to an eight month low.
Analysts told CNBC that the inverse relationship between gold and the dollar is strengthening, which is good news for battered gold prices given expectations that the Federal Reserve will maintain its monetary stimulus for longer than previously expected.
"The relationship between gold and the dollar never really went away, it just stretched its friendship," said David Lennox, resources analyst at equity research firm Fat Prophets.
The inverse correlation between gold and the dollar weakened amid the tapering fallout, which saw gold decline around 1.8 percent from late May to mid-June, while the dollar index fell around 2.8 percent over the same time period.
According to Lennox, now that this correlation is gaining traction again, gold could see a rally to $1,500 per ounce by year-end on further dollar weakness.
"For the U.S. government to address its budget issues, it will have to spend less on programs and shrink in size within the U.S. economy. If this happens the U.S. dollar has no other direction to go but down... This U.S. budgetary issue is key to the whole gold scenario," he said.
Why you should buy gold
Peter Schiff, CEO of Euro Pacific Capital, says that while most investors are selling gold, now is actually the perfect time to go long on the metal, due to the U.S. government shutdown.
Sean Hyman, editor of the Ultimate Wealth Report told CNBC Asia's Squawk Boxon Wednesday, that he also expected gold to rally as the greenback weakens.
"We'll see the dollar continue to drop. It's broken a two year uptrend line - that's very significant so I think the draw down in the dollar will continue to push gold up," he said.
Hyman added that there were several other supportive factors for gold, including an end to some of the large investor outflows from precious metal seen in recent times, including the reported heavy outflows from gold-backed exchange traded fund (ETF) the SPDR Gold Trust on Monday.
"Most of the people that have fled gold ETFs, for the most part, have [already]. Physical demand is very strong," he said, adding that physical demand from Singapore, China and India remained resilient in his view.
"Gold tends to do well between well between October and the end of the year. [There's the] Indian wedding season, holiday seasons in U.S. and a lot of other countries so a lot of gold jewelry buying so I think it's well supported here," he added.
"Someone is rotating back into gold, as it's been in a downtrend all year," added Scott Redler, chief strategic officer at T3live.com. "At this point gold has its best chance to outperform into the end to the year... You could have a little bit more in your portfolio because it could act better as the dollar weakens."
Gold prices traded at around $1,338 per ounce at lunchtime in Asia on Wednesday.
— By CNBC's Katie Holliday: Follow her on Twitter 
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chow@royalindexuae.com

Monday, October 21, 2013

ANALYSTS AGREE: Gold Is Poised For A November Rally

Analysts at BofA Merrill Lynch and Morgan Stanley are telling clients that gold is set to rally as Indian festival season gets underway.
In a note to clients today, BAML analysts led by Michael Jalonen write:
Gold markets - Poised for a November rally?
Last week, the gold price rose 3.5% ending Friday at $1,316/oz. This belied considerable intra-week volatility as bullion fell to an intra week low of $1,255/oz before rallying sharply (some $60/oz) due to the end of US Government shutdown and an expansion of the debt ceiling. Interestingly the gold holding of SPDR Gold Shares (the world’s largest gold ETF) declined by 1% (8.8 tonnes) to 882.2 tonnes, the lowest level since February 9th 2009. Year-to-date 2013, the gold holding of SPDR has declined by 438 tonnes (-34.6%), a major reason why bullion has declined by 21% ytd 2013. Looking ahead, history would indicate that November is usually a strong month (with an average monthly gain of 3.8% in November) for gold prices thanks to the wedding and festival season in India. Thus we believe that bullion could mount a modest rally to the $1,350-$1,400/oz range over the next month or so.
Morgan Stanley analyst Paretosh Misra agrees.
"Indian festival season could provide a lift to gold," writes Misra in a note. "Traditionally, the Diwali festival (specifically, Dhanteras, the two days before Diwali) is the biggest gold buying period of the year in India. In the last 10 years, gold has risen an average 2.5% in the one month around Diwali. While government’s new import restrictions and INR depreciation could adversely affect gold imports, buying should be supported by ~20% YoY decline in gold in Rupee terms."
Société Générale analysts Jesper Dannesboe and Robin Bhar, however, believe any such rally would be very limited.
In a note to clients Friday, Dannesboe and Bhar wrote:
Short-term speculators appear to have accumulated substantial short positions over recent weeks but they were squeezed by a seasonal pick-up in Asian physical demand. Physical premiums in Hong Kong and India have risen recently and the gold forward curve this week moved into slight backwardation at the very front end of the curve. This tightness in the physical gold market is likely to be short-lived as the pick-up in Asian physical buying is partly seasonal and partly opportunistic (on big price drops) while ETF selling continues on a trend basis and we expect no significantly mine supply cuts until the gold price gets down to below $1,000/oz.
It is difficult to say exactly how much further the gold price can rally on the ongoing short- covering but we would be surprised to see the gold price much above the $1,350 level. The medium-term drivers of the gold price are, in our view, still firmly bearish. The US economy is in recovery mode, US real interest rates have risen and are likely to trend higher as the recovery gains strength, inflation is very subdued, Fed tapering, while perhaps somewhat delayed, should be completed next year.
Goldman Sachs head of commodities research Jeffrey Currie is also bearish on gold in his latest note to clients, but warns that it's not time to short it quite yet.
"We continue to argue that the key to the gold outlook is data that shows a strong US recovery and gives the market confidence that tapering will begin, says Currie. "We still believe that this is the key trigger for gold prices even as the risks of deferred tapering have increased. Accordingly, we still expect gold to trade close to our near-term target of $1300/toz until the end of this year when our economists expect economic data to begin to show some confirmation of the economic improvement embedded in the 2014 US outlook."


Read more: http://www.businessinsider.com/analysts-gold-poised-for-november-rally-2013-10#ixzz2iQZHk48T


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chow@royalindexuae.com

Sunday, October 20, 2013

China has the USA in its Crosshairs – Buy Gold and Silver Now

China has the USA in its Crosshairs – Buy Gold and Silver Now
You should stock up on gold and silver while you can – in particular, physical precious metals and high-end mining shares.
In the short and medium terms, prices of precious metals will do whatever they do. Up a little, down some and sideways for a while. Day to day, you just never know. The price chart bounces around. But long term? Hold gold. Holdsilver.
In fact, today there’s more reason to hold precious metals…
Why buy gold and silver, especially after the sell-down of the past year or so? Start with the fact that Chinese are buying lots of gold. Lots! Here’s the latest chart of Chinese gold imports from Hong Kong, showing strong, steady accumulation over the past two years:
Since September 2011, China imported 2,116 tonnes of gold. So in just two years, China has imported just under the equivalent of the entire gold reserves of France (2,435 tonnes) or Italy (2,451 tonnes).
Or look at it this way. While Western buyers and monetary players disdain gold and sell it – for example, while large Western stakes like SPDR Gold Shares (GLD) are liquidating gold holdings – the Chinese are buying gold, and then some.
Evidently, the People’s Bank of China (PBOC) is making good on its quietly stated long-term goal of creating a gold-backed national currency. That, and China is making all manner of bilateral trade deals with a host of nations, in which nations trade with China using their own national currencies and the Chinese renminbi. This cuts the US dollar out of the cycle.
So why are the Chinese so eager to buy and import gold? Why make bilateral trade deals? Why don’t the Chinese want to use the dollar? Don’t the Chinese know that yellow metal is just a so-called ‘barbarous relic’ in the eyes of many Western economists and political gurus?
Recently, we had a stunning glimpse of how the highest levels of policymakers think in Beijing. Basically, top echelons in China are worried about the overall security of the US dollar and, by extension, China’s vast holdings of dollar-based assets.

Strong Rhetoric to ‘De-Americanize’ the World

We live in ‘alarming days,‘ according to an article this week in Xinhua, China’s absolute news agency of record – in that it represents the views of the ruling Communist Party.
Apparently, the Chinese chose an opportune time to float a trial balloon that we’ve been awaiting for quite some time. Communist Party leadership wants to get a sense of what the world thinks about taking down the US – and the almighty dollar – a few notches. As I said, buy gold and silver. Beat the rush.
Indeed, Xinhua minces no words: ‘The destinies of others are in the hands of a hypocritical nation,‘ meaning the US, of course. And that’s just the start. There’s more, and it plays out like a barbed-wire back rub.
Chinese editors at Xinhua come down hard on ‘cyclical stagnation in Washington‘ over the federal budget. The US government has repeatedly failed to bring spending and debt under control. This has, according to Xinhua, ‘left many nations’ tremendous dollar assets [China's, certainly] in jeopardy and the international community highly agonized.
Overall, states Xinhua, the world has an American-made financial problem that must ‘be terminated‘. Wow. When Chinese communists use the word ‘terminated’, my instinct is to drop what I’m doing and clean my collection of assault rifles. That, and stock up on precious metals like gold, silver and…brass, if you know what I mean.
This China thing is not heading in a good direction for the US. Don’t take my word on it. Here are numerous other excerpts to ponder from Xinhua:
As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.
*****
With its seemingly unrivaled [sic] economic and military might, the United States has declared that it has vital national interests to protect in nearly every corner of the globe, and been habituated to meddling in the business of other countries and regions far away from its shores.
*****
Meanwhile, the U.S. government has gone to all lengths to appear before the world as the one that claims the moral high ground, yet covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks and spying on world leaders.
*****
A new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing… For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty and keeping hands off domestic affairs of others.
*****
Furthermore, the authority of the United Nations in handling global hot-spot issues has to be recognized. That means no one has the right to wage any form of military action against others without a U.N. mandate.
*****
Apart from that, the world’s financial system also has to embrace some substantial reforms.
*****
What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.
*****
Of course, the purpose of promoting these changes is not to completely toss the United States aside, which is also impossible. Rather, it is to encourage Washington to play a much more constructive role in addressing global affairs.

Refuting the Pillars of US Policy

Note that last item, about not ‘completely’ tossing the US aside. Gee, thanks…I think. Then again, the Chinese have reason to worry about US finances. China is the biggest foreign holder of US Treasury bonds, worth a total of $1.28 trillion according to public American data.
And note that second-to-last item about ‘a new international reserve currency‘ to replace the dollar.
In general, a commentary such as this in Xinhua means that powerful political factions in Beijing – Communist Party and/or military – hold the expressed opinions. Oft-times, a strong Xinhua piece means that the entire Chinese leadership holds the opinion and seeks to determine how it plays out around the world. (The news article has gone viral.)
Looking back, Chinese leadership has never been bashful about criticising the course and wisdom of US policy. Still, over many years, top Chinese echelons have usually limited severe criticism of the US to lower-level players – academics, midlevel ministers, retired military officers or well-regarded business people.
No senior Chinese agent has ever made a comprehensive, point-by-point refutation of the pillars of US policy, accompanied by the suggestion to rebuild the entire system of global trade and relations between nations. Until now.
This new ‘official’ Chinese commentary – from the top level – utterly deconstructs US policy in ways that go back to the end of the Cold War. Reading between the lines, one can see jabs at US policy as far back as Desert Shield and Desert Storm of 1990 and 1991. Or US intervention in the Balkans, and certainly bombing Serbia in 1999. The Middle East wars of the past decade – to include the Arab Spring coups and Libya takedown – are doubtless in the Chinese crosshairs as well.
US policymakers love to change labels on what they do from time to time, because it supports the myth that the nation is doing things differently under new presidents with ‘new ideas’, implemented by new stables of diplomats, generals and admirals. For example, the idea of so-called ‘nation building’ (at the point of a gun, some say) is now labelled ‘responsibility to protect’ (R2P). Either way, in Chinese eyes, it’s just garden-variety old US imperialism.
The Xinhua article criticizes how the US stakes out moral high ground to justify illegal detentions, summary executions by drones and torture of prisoners. At another point, the author claims that the so-called ‘Pax Americana’ is a subterfuge to foment instability, American meddling, wars and worldwide chaos justified by lies. No sugarcoating here.
Also implicit in the article is the idea that Chinese leaders are galled at the uncertainty of return on their trillion dollars and more of US bonds. Apparently, Chinese leaders are uncertain about the monetary security of US bonds, and they fear a massive loss of value over time.

The Big Takeaways

There are several critical items to note here. The Xinhua article is the first in which senior Chinese players have dared go public with a bitter, sharp-edged denunciation of the US-managed international system.
The Xinhua article does not ‘just’ stop there, either. The authors label American policies as destructive moral failures. The article openly calls on other nations across the globe to restructure politics and economics. The next version of global economy will be a dramatic reduction in the role of the US and its dollar as the world reserve medium of exchange and measure of value.
The Chinese are clear that their eventual aim is to topple the US from its position of global leadership in most respects. The rhetoric betrays intense Chinese frustration with the US. Things have reached the boiling point. From the Chinese perspective, the US government is toxic for world business, while American military power is unleashed at political whim to promote global instability.

Looking Ahead…

Now what? Well, we wait. Chinese leadership will let the Xinhua article have its day in the sun and then gauge whether other national leaders share these views. Stand by to see a flood of proposals from across the world about alternatives to US hegemony.
We’re looking at tough days ahead for the US position in the world. We’re fortunate to have the shale energy revolution going on and a rebirth in technology and manufacturing. But can this counter the chronic mismanagement of the country that comes out of Washington, DC? We’ll likely all live long enough to find out.
These are interesting times. Or as Xinhua states, ‘alarming days‘. Meanwhile, buy gold and silver.
Byron King
Contributing Editor, Money Morning
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chow@royalindexuae.com