Thursday, June 3, 2010

Why The PRC Turned Down The IMF's Gold

In a report for Commodity Online, three reasons are given for the PRC government not buying the IMF gold currently being sold on the open market. First of all, they doing so would drive the price up to what would likely be an unsustainable level. Secondly, the PRC seems inclined to buy gold directly from mines instead of from other governmental organizations. Thirdly, and significantly, adding gold to reserves would put some pressure on the renminbi to appreciate: that, the PRC government does not want. These reasons came from David Lew.

None of these reasons means the PRC is anti-gold; far from it. An IMF purchase just doesn't make sense to the rulership.

It's a thin reed, but the People's Bank of China could buy some (more) gold as a renminbi-raising measure if it follows through on U.S. governmental demands to raise the renminbi's value with respect to the greenback.


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