"Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing"... If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said. China's reserves are more than – $2 trillion, the world's largest. "Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets." Here's the link:
China Alarmed By US Money Printing
Basically, through Cheng Siwei as an emissary of sorts, China has made three definitive statements:
1) China has lost its patience with the U.S. fiscal policies and debt accumulation
2) China has been, is and will be dumping U.S. dollars
3) China is accumulating a massive amount of gold
With this in mind, let's take a look at a daily chart of the U.S. Dollar Index. You will see that the dollar has now lost the line of technical support which was established back in December, when the dollar engaged in a sharp rally higher, although a rally which was not in the very least supported by fundamental factors:
Unfortunately, the U.S. is in an economic and financial predicament which would not allow the Fed and the Government to take the drastic measures required to turn around the U.S. dollar without throwing the whole country into a very deep Depression. Of course, the very policies and actions being taken to avoid that outcome will, with 100% certainty, lead to the same outcome - only it will be even worse.
This is not lost on Central Banks and investors who are actively buying gold and silver. Gold is on the verge of making what could be the start of a historic move higher. For anyone doubting this, would you rather place your bets alongside China, India, Russia and several very large U.S. hedge funds, or on the clowns and bubbleheads rolled out on CNBC and Bloomberg and other media outlets who have been criticizing gold as an investment ever since it broke through $300 back in 2001? One of the world's largest gold miners, American Barrick, has definitively placed its bets on higher gold (see earlier post).