Sunday, February 28, 2010

China says no to IMF gold?

Well, maybe.
China may not buy gold from the International Monetary Fund to avoid causing market volatility, the China Daily reported, citing an indentified official from the country’s gold association.

It is unfeasible for China to buy the bullion as any purchase would “trigger market speculation and volatility,” the paper reported, citing the China Gold Association official.

Of course, if it's true, the interesting part would be the reason why.  China has already indicated it's desire to diversify its reserves out of the dollar, but let's be open minded and consider a range of reasons China might say no to the IMF gold.

1. They feel gold is simply too pricy at the moment.
2. They foresee prices dropping based on some combination of supply/demand (perhaps another worldwide meltdown?)
3. They don't want to spook others into bailing out of the dollar while they still hold huges reserves.
4. They've had a change of heart and plan to stand by the dollar.

Of these four, I can get my head around 1, 2, and 3, but 4 seems laughable.  Am I being too hard on the dollar?



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