Wednesday, December 02, 2009

As gold scales newer and newer heights, the question on the minds of many a savvy investors is the party nearing an end? Another question that some smart guys in Beijing might be wondering about is - how do we sell some of our 2.27 Trillion USD (T-Bond) reserves without letting the value of the rest of our dollar holdings fall? साप भी मरे और लाठी भी न टूटे

Money will likely start to flow out of gold as more attractive assets emerge. Assets that stand a chance to gain from further weakness in the USD and to a lesser extent, the GBP and EUR. Assets that shouldn't nosedive should it turn-out that the recovery in industrial commodities was purely a result of the Chinese government's USD 586 Billion stimulus package, and that demand appears to limp as the stimulus runs out.

As to the dilemma of the Chinese, we'll have to look at what promoter groups do when seeking to offload a part of their holdings. Some form of pump and dump appears one solution. There could be more. I'll ponder over it over this weekend..