bleakhouse

http://business.timesonline.co.uk/tol/busi...icle6011960.ece

Beware the rush to buy a golden nest eggDavid Wighton: Business Editor's commentary

If Ecuador views gold as a safe haven, it must be expecting one hell of a storm. The country has nearly doubled its central bank gold reserves in the past three months, according to data from the World Gold Council.

Ecuador, which has a per capita GDP of only $7,700, spent an estimated $840million on 28.4 tonnes of gold in a move that has stunned analysts.

Most central banks alter their gold reserves by only a few hundred kilograms every year, while Western central banks have been sellers for a long time. Ecuador, by contrast, spent 5 per cent of the Government's total estimated budget in a mere three months.

Given that gold is typically bought as a store of wealth and a hedge against inflation and a devaluing currency, Ecuador's sudden rush into the bullion market suggests that its central bank expects its economy to take a battering.

The other large gold buyers in the first quarter of this year were Russia and Venezuela.

Russia has a policy of buying gold as a way of diversifying its foreign exchange reserves away from the US dollar. There are strategic and political reasons for Russia's antipathy towards the dollar, which are likely shared by Venezuela.

Another surprise buyer recently was the European Central Bank, which sold 71.1 tonnes of gold last year but suddenly reversed in January, spending nearly $100 million to buy 3.3 tonnes.

This change of heart has been seen by some gold analysts as an indication that the ECB expects the value of the euro to fall this year. If the ECB continues to buy gold, holders of euros should be nervous.

Apologies if this has been posted elsewhere and if its a bit old:

http://jessescrossroadscafe.blogspot.com/

ChinaStakes

Survey: Over Two-Thirds of Chinese Economists Favor Gold Over US Bonds

by CSC staff, Shanghai

March 02,2009

 

In a survey of major Chinese economists, more than two-thirds are reportedly bearish on the prospect of China increasing its holdings of US government bonds, and believe instead the nation should putting more of its hard-earned into gold.

 

According to a China Business News survey of 70 Chinese economists (including one foreign economist), the exact figure is 71.4% anti-bonds and pro-gold.

 

The use of China's huge foreign exchange reserve is a topic of concern and controversy. The remaining 28.6% of those polled believe China should continue to buy U.S. Treasury bonds. 38.6% think that China should not continue to buy, but also should not to sell US bonds. 32.8% believe that China should unload the bonds, 22.8% of whom think we should have a slight sell-off, while 10% think China should drop them like a bad habit.

 

All this is against a backdrop of China surpassing Japan to become America's largest US bond holder and of the ever-widening global financial kerfuffle.

 

The survey also brings to light the question of whether China’s gold reserves should be increased. Recent gold futures prices broke through US$1000/ounce, making gold the most outstanding asset in the financial turmoil. One economist thinks China’s current gold reserve of 600 tons is an unnecessary load and that the opportunity should be grasped to sell off a bunch of it at a good price.

 

21.4% of economists said that the gold reserve level was fine and leave it alone.

 

But 75.7% of the economists asked believe that China should increase its holdings of gold, with 48.6% opting for a slight increase while 27.1% think China should pile in.

 

At US$1000 an ounce?![/quote