Quote of the Day – China hold the cards

If you wonder why we go on about the incredible amount of physical gold China is buying, this gives some insight…

"The motivations and the strategies of the Chinese are incredibly important.  We've seen this happen slowly.  At first it was small swap agreements between China and other countries.  But very slowly the amount of world trade that's being done in renminbi [yuan] has gone from zero to about 17% in the last few years....

"That's a very, very big number (17% of global trade) and still growing.  So China is going to do what's in China's best interest.  They are vacuuming up gold because they understand it is money.  They also have an enormous amount of US Treasuries [$3trillion!], so selling them right now would be against their better interest.

But if we do get a Treasury crisis, the price of gold is going to go through the roof.  So, this is a delicate balancing act for China right now.  But when the Chinese reach a point where they feel the increase in the value of their gold holdings will offset that of their Treasuries, it removes the shackles, and that is when it will get very dangerous for the US dollar.”

- Grant Williams