13:10 December 08, 2009
Apparently they are smarter than that – they just talk. The PBOC, taking a leaf from Paul Volcker in early 1980s (but without backing its talk by any action), warned that it “is alarmed by the gold asset bubble”. And almost immediately gold price fell back to below US$1,200/oz.
That was some amazingly rich talk – the PBOC hasn’t done a damn thing to deflate the astonishing (and most consumption-damaging) real estate bubbles in China, yet it is worried about a harmless and useless metal whose price has no economic impact to our real economy. Remember that gold price is purely reactionary – it doesn’t cause inflation, credit crisis or anything else; it is the other way around. So why the PBOC is “alarmed” by the gold price is simply beyond me.
But perhaps the PBOC does have a purpose – talking down gold price so that they can buy the remaining 203 tonnes of IMF gold cheaper, for example. They might well be playing the game that was started by RBI. This time around, they got back some ground from RBI with mere talk; it might also be retaliation to RBI’s pre-empting their purchase.
Now the PBOC got even with RBI. I continue to believe that the remaining 203 tonnes of gold will fall into Chinese hand (who else dares now to take them after the PBOC just demonstrated that it is able to simply talk down the price?). When that happens, gold will certainly get back to above US$1,200/oz.