Jason Hommel

SilverSeek

November 20, 2008

There has been a recent flurry of news articles saying China may begin to diversify into Gold. But the articles conclude that China will move slowly, over years, so as to not disturb the markets. Funny.

A d v e r t i s e m e n t



It’s funny because it’s like they don’t know basic math.

China wants 4000 tonnes of gold, to help “diversify” their $1.9 trillion in U.S. bonds. It’s quite a joke. Please bear with me as I explain.

A tonne of gold is 32,151 ounces. Please search “troy ounces per tonne” at google to confirm, because this one bit of information, and a simple calculator, can help you unlock and decipher the meaning of what you read in the news regarding the gold market, as gold at the national level is usually always quoted in terms of tonnes.

The total ounces China is seeking, is thus: 4000 tonnes x 32,151 ounces/tonne = 128,604,000, or 128.6 million ounces.

That’s an interesting number because it is about half of the U.S. official gold reserves of 261 million ounces.

It’s also an interesting number because the total annual gold market consumption is said to be about 4000 tonnes, while annual mine production is only about 2500 tonnes.

But let’s now multiply by the current gold price, to see how much of China’s reserves could be diversified if they obtained that, without disturbing the price.

At $736/oz., times 128.6 million ounces = $94649.6 million, or $94.6 billion.

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