Koos Jansen
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Koos Jansen
Posted on 7 Jan 2014 by

China’s FX Research Center: Gold Is The Strategy

The next translation I present is from a speech by Tan Ya Ling, President of the China Foreign Exchange Investment Research Institute, given on a gold conference May 7, 2013 Beijing. Probably it’s not the whole speech as the title of the original article mentions oil, but the article itself doesn’t.

When I googled Tan Ya Ling I found a site that sells a video box (2013) from Tan Ya Ling called Currency Wars.  A concept the Chinese have been familiar with for many years. In 2007 a book, that oddly hasn’t been translated in English, came out with the same title, written by Song Hongbing. A quote about this book from Wikipedia (please click and read):

Currency Wars by Song Hongbing, is a bestseller in China, reportedly selling over 200,000 copies in addition to an estimated 400,000 pirated copies in circulation and is reportedly being read by many senior level government and business leaders in China. Originally published in 2007 the book gained a resurgence in 2009 and is seen as a prominent exponent of a recently emerged genre labeled “economic nationalist” literature.

…The book looks back at history and argues that fiatcurrency itself is a conspiracy; it sees in the abolition of representative currency and the installment of fiat currency a struggle between the “banking clique” and the governments of the western nations, ending in the victory of the former. It advises the Chinese government to keep a vigilant eye on China’s currency and instate a representative currency. The book, published in 2007, also correctly described and warned of the various forms of derivative speculation used by WallStreet which eventually became the causes of massive margin call sell offs and the stock market crash in late 2008.

Translated by LK:

Tan Ya Ling: Gold Is The Strategy, Crude Oil Is The Tool

Pusblished on: May 8, 2013 17:46 from: HeXunNet

May 7, 2013, Beijing—Hosted by the Capital University of Economics and Business, the Gold Market Research Center, Jingyi Gold Co. and CPM Group, is the first gold market discussion and development trend research: The World Gold Market Investment Report. The press conference was held on the 7th of May in Beijing.  Hexun.com reports exclusive on this conference. Tan Ya Ling, President of the China Foreign Exchange Investment Research Institute states that the gold price will definitely rise:

Tan Ya Ling Length
Tan Ya Ling

She pointed out that liquidity has contributed to the special situation now. The Gold market has gone thru periods of i) actual need and then ii) investment need was the most important factor, and has now entered the period where speculation is the main thing. Investing in gold needs a well-crafted strategy (with specific goals); just like economic development in China, we also need to find the model that is suitable for China, using suitably-adapted investment thinking, and only then can we establish ourselves in the gold market, and have control over it.

The recent report from the European Council has transpired worries on the recovery of the Euro area…. Some analysts think, investor confidence is essential for the gold market, and this is why Euro area economic problems have led to sluggish precious metal markets.

… she personally very much agrees with the view that the disintegration of the Euro area is unavoidable, but we do need to rationally see what this would really mean for the gold price… If the Euro area falls into an economic crisis, then the creditor nations would definitely like them to sell their gold reserves, just like how the news came out on Cyprus.

… for/if the Euro area to fall into crisis, then the forces / operators behind will definitely tempt them to sell their gold reserves. If this happens, the position of the USA will become even stronger. But can the USD keep its shine forever thus? The risk of the USD getting out of control still exists, and the USD has its cyclical strong and week trends. It is very likely that the world monetary system will need a restructuring, and then gold pricing will go back to the USD; but we must not forget what this gold price will mean for the USD!

We must not confuse the strength/weakness of the USD with the USD monetary regime, or the policies of the USA in this area. For now, the USD cannot be replaced in the short term; in the intermediate term, the chance of getting the USD replaced isn’t that great either, but in the long term, the USD will need to / will like to be ready to have a replacement for itself.

The gold market consists of spot and futures, as well as denomination in RMB and USD, but why do the Chinese people only like to hoard physical gold, and not futures? If too much gold is hoarded, this will invite the greed of other nations and they will come for it prepared. For now, our physical market has become very developed, but even in view of such prices and great future trends at the same time, we still need other ‘accessory/ancillary mechanisms’ to be in place and in functioning proportions in order to invest in physical gold safely.

Investing in gold is a strategic game with strategic goals. We cannot just look at the price and shift asset allocations. We need to follow and act according to the developments and changes in the markets; after the growth of the physical market, the futures market without doubt is now a better choice. Gold is very much intimately connected to the whole financial markets and macro-economic dynamics. When we invest, we need to think about / develop our own theoretical principles, and only after we have found our own thinking with respect to the needs of China, can we establish our presence in the gold market, and preside over it without getting thrown back out.

Koos Jansen
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  • eddiebe

    This is either a lousy translation, or the speaker is talking nonsense.

    • In Gold We Trust

      What’s the nonsense part?

      • sam

        The speaker does not have a fundamental knowledge of markets or dollar.
        The fundamental question is how can all western nations, Japan and India service their multi-trillion dollar debts.
        Is anyone of the creditors to these debt nations ever going to be paid? How long this ponzi scheme will continue? The future of gold is linked to uncontrollable growth in debt of western nations and Japan. There is no solution to world debt problem other than devalue against gold, say $10,000/oz. This will liquify all nations and solve present debt problem.

        • Randy

          Good analogy…..I don’t think your gold price is high enough to solve the problem, however.

          • Michaelprotects

            Agree. Some try to simply divide all USD, or USD, Euro, and a few other currencies, by the number of ounces of gold. Presto!, We have a per ounce price.
            Far too simplistic, and cannot possibly take into consideration M2 and M3, let alone shadow banking money, which is gargantuan, as well as derivatives.
            On top of this, consider that most of the gold is not for sale, and won’t be, even at 10K per ounce. Add in a dash of panic, and 10K doesn’t come close to cutting it.
            Try 50K, or Depression era comparisons, which would be more like 1 million.

        • bullionbill

          The speaker appears to be speaking past, or over, those who are thinking of financial power or controlling markets in terms of dollars. Here we have the initiation of a “theory” to be used to framework a Chinese strategy of deploying assets in an economic battle for supremacy. Gold is really described here as a possible weapon to be deployed in that struggle. Such basic understandings of elementary facts like dollars represent debt is taken for granted, and it makes no difference. As the speaker says the collapse of the Euro will strengthen the dollar, but the dollar can collapse but in the long term replace itself!! And how can gold then be deployed? It must not be simply physically hoarded, and “gold cannot be simply deployed by following the price” This speech is designed to stimulate a strategy, or unique conceptual theory. To raise questions and provoke thought, not give simple answers.

  • Gee Whiz

    The most hated investment is likely gold — why? The answer is easy it’s down and while it has had a long-losing streak, and although most of that (if not all of that) is over the Main Street investors won’t realize that until gold moves-up and it will move-up. However, there is another two problems; media and central banks. China realizes gold is currency not just currency to governments and banks but currency to their citizens — or let’s call it security. We (in North America) think our security is the currency of the nation — they in China think their security is gold. One of the two will be right, so while China puts gold into their cupboards the West continues to put debt into theirs, we must remember the currency is a promise to pay (as is gold) one can be multiplied by the stroke of a pen – the other is rare to most people on earth today. Just a little more time.

    • Ilia Kolovov

      To Gee Whiz,

      Gold is NOT some investment!
      Gold and Silver are the ONE and ONLY MONEY in our world!

  • lk

    Thanks for your post. Neither the original reporting nor the translation is satisfactory. I have found a better (Chinese) version under the same title. I will send you an email.

    • In Gold We Trust

      Thanks, I replaced the translation for your version.

  • Silverbug

    I feel that a revaluing of the US Treasury Gold now at $42 will happen. The price will shock everyone. This will also be the third or fourth time that the US has done so. I agree that $10,000 will be a good start. Hence why the accumulation by Central Banks. The FDIC and FED RESERVE has approved GOLD as a TIER 1 asset to be held as collateral against loans. This is not talked about much. The ECB states GOLD as an important anchor to sound monetary policy. Gold is moving towards the monetary system not away from it. GOLD will adavance as the minipulators on the short side will now be the same minipulators on the long side. One hope is that CHINA calls for some type of third party audit. THE U.S. has no GOLD. This will be the game changer.

    • In Gold We Trust

      Do you have any links to government policy that states gold is a TIER 1 asset for commercial banks?

      • firstname lastname

        The Basel Committee on Banking Supervision, which makes banking rules
        for 27 countries, including the U.S., is reclassifying gold from being a
        Tier 3 asset to being a Tier 1 asset in response to the 2008 housing
        crash and recession.


        • In Gold We Trust

          I emailed the BIS to ask if this is true. Their response:

          Dear Sir,

          From the Basel Committee secretariat please note:

          Under the Basel framework’s standardised approach for credit risk “at national discretion, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities can be treated as cash and therefore risk-weighted at 0%.” Moreover, for market risk capital purposes, gold is treated as a foreign exchange position rather than a commodity because its volatility is more in line with foreign currencies and banks manage it in a similar manner to foreign currencies. None of this has changed, though the market risk framework is currently under review.

          We hope this is helpful.

          With kind regards

          • In Gold We Trust

            I’m not banker, but this looks like gold is not a Tier 1 asset. Correct?

          • Michaelprotects

            “Can be treated as cash…”
            So, yes, tier 1 asset.

  • rbblum

    Upon the black swan’s inevitable flight over western skies ‘The Great Depression’ will be considered to have been a tranquil walk through the park.

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