Commentary: With gold dropping to more affordable levels, a window of opportunity is opening. My estimate is that this event will not last for long. Certain countries are reconsidering the volume of US Treasuries they have been buying (emphasis mine). I have not yet examined fibonacci levels on gold or copper, but anticipate upward movement with all the fiat dollars that are circulating in growing numbers.
In this climate, western central banks are increasingly reluctant to sell their gold reserves and non western central banks with large dollar reserves are looking to diversify into gold. Zhang Guobao, Head of the Chinese National Energy Administration, said today that China should use part of its nearly $2 trillion in foreign exchange reserves to buy more gold, oil, uranium and other strategic commodities.
His statement was echoed by similar calls by Fu Jun, Vice Chairman of All-China Federation of Industry & Commerce who said that China should invest and diversify the world’s largest stockpile of forex reserves in gold, rather than in U.S. Treasuries to seek higher returns.
“We don’t need to buy more Treasuries as the returns are low, whereas if China buy copper and gold, the annual returns could be as high as 10 percent,” Fu said.
With supply and demand already tight, official Chinese demand could propel gold to far higher prices.