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Sep 21, 2009

Gata Dispatches

China reported to consider buying IMF gold

By Eadie Chen and Tom Miles
Monday, September 21, 2009
BEIJING -- China is considering buying gold being offered for sale by the International Monetary Fund, Market News International said on Monday, citing two unnamed government sources, but the report could not immediately be confirmed.
"China will consider buying if the price is right and the return is relatively high," MNI quoted one of the government sources as saying.
Gold, which had dipped just below $1,000 an ounce, rebounded to $1,003.45 after the report. That would put the market value of the 403.3 tonnes on offer from the IMF at close to $13 billion.
"There was a small reaction to the news that China may discuss its gold plans at the G20, it recovered a little, but overall the market isn't overly concerned, not yet anyway," a Europe-based trader said.
China, the world's biggest producer and buyer of gold, revealed earlier this year that it had lifted its own stocks of gold to 1,054 tonnes from 400 tonnes when it last reported its holdings in 2003.
The IMF formally endorsed a plan on Friday to sell 403.3 tonnes of gold, one eighth of its holdings, to central banks or in the gold market.
Two Chinese central bank officials not directly involved in the issue told Reuters China should consider buying the gold being put up for sale by the IMF, but only at a big discount.
The officials, neither of whom had direct knowledge of the gold strategy, said they were expressing personal opinions.
"China only has about 1,000 tonnes of gold reserves and the investments in other assets are performing not very well," said one official, who declined to be named. "I think we should build up more gold with foreign reserves, but when to buy is the key. It's a good idea if China can buy the gold from IMF at prices well below market level."
The official said he had no idea if the sale would be on the agenda for the G20 summit.
"I personally think China should buy the IMF gold. It will help China to diversify its reserve assets," the second official said. "For the purpose of reserve safety, it is also good to increase the proportion of gold by a suitable amount."
The estimated $13 billion cost of the gold is small beer for the Chinese exchequer, with foreign exchange reserves of more than $2 trillion. If it decided to buy the gold, China would be likely to seek a discount for the bulk purchase, since a market sale would put heavy pressure on the price.
The IMF has said it will try to sell the gold, one-eighth of its holdings, to central banks. If there are no takers, it could sell to the market, which saw world gold demand of 3,880 tonnes last year, according to World Gold Council figures.
The huge increase in reserves that China announced earlier this year had had little impact on the market because the gold was accumulated over a long period and mainly through direct purchases from Chinese producers.

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Finotec Trading UK Ltd Regulated&Authorized by the FSA ; Brief & Strategies

                    FINOTEC BRIEF & STRATEGIES

Markets were trading lower earlier today as the week’s trading kicked off on investor fears that the rally was over-optimistic. Since March 2009 markets across the globe went into a strong upward movement that traders feared is not reflecting the economic situation and company earnings. The possibility that an exit strategy should be soon implemented by the FED and the Obama administration has put further pressure on the market. The housing sector has given some recovery signals lately which might fade once the bailouts and benefits unfolds.

The first house purchase tax benefit given by the government is due to end this November. The FED has ballooned its balance of assets to record highs on its bailed out spree, purchase of mortgage backed securities and housing debt. The exit strategy may give some support to the dollar as it could lead to a cut in the US gigantic external debt.

The G20 are meeting this week and should they come up with a wide range of regulation on the financial sector and bank share prices might be under pressure.

Market Strategies:

EUR/USD the hourly’s look bearish and we might see a correction toward 1.4550/1.4500, further support comes at 1.4450, traders might be placing buying orders around those levels and we could experience a bounce back up, the medium trend still looks bullish. Resistance comes around 1.4720.

GBP/USD a bearish head and shoulder could be formed on a break of the 1.6100 support level which in turn could trigger selling orders. Close resistance comes around 1.6250, support at 1.6000.

USD/CHF support was created around the 1.0275 level, resistance at 1.0390/1.0400, selling interest could emerge around 1.0440, further resistance at 1.0500, support at 1.0200.

USD/JPY tries to break the 92.00 resistance a close above this level today might trigger some further buys on the pair toward the 93.30 resistance level. Selling interest could be located around this area.

Silver support comes at 16.50 a break might trigger sells toward the 15.00$ support, however traders might be looking to buy a bounce from that level. Intraday resistance at 16.80 and further at 17.75.

The market review and analysis content on this email, including news, quotes, data and other information, is provided for your personal information only, and is not intended as a recommendation for trading purposes. Content on this email does not provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products. Finotec does not provide investment advice or recommendations to buy or sell securities, forex