Gold bear or bull ?

I've been pondering on this post and the previous one refering to gold traders being bearish on gold while putting in context another post i sent concerning China's intention of increasing their reserve

And i came up with the the following reflexion , if i were in China's Central Bank shoes expecting gold to come down id' probably monitor the situation closely waiting for them to drive the price near it's bottom, and then take advantage of this situation to add to what China expects to produce this year .

Considering China's peculiar situation in terms of the vast amount of money invested in the US dollar ( China's $US 1.4 trillion in treasury bonds ) i'd be concern of the possible consequencies that lies ahead for the US dollar , if the folowing situation happens : Everybody hopes for the best but the best expect the worst in order to be prepare whatever happens . So let say for a moment that the " bearieshst " of situation happens and somewhere down the road a year and a half or two ahead of us inflation comes around and the US finds itself in a situation where the economy is still lagging .

What would happen then if they have to increase interest rates and deplete monetary supply at the same time without having fixed the economy it would be a tough decision to make if businesses have not yet recovered and employment is still relatively high then .

Would they choose to preserve the value of the Chinese and other investors assets in treasury or would they choose to preserve US employments and buying power ? Would they choose to balance both in a relative measure trying to preserve both interests and making both mad ?

Now remember politicians ,american politicians foreseeing an election not far ahead would be call to make that decision... Humm tough call isn't it ? or maybe obvious !

But for the benefit of our argument let say the chinese have given a little more time and pondering on this matter following what happened recently with the economy . Let say they figure they come second after america's interest in american politicians and population's mind , would'nt they take all measures possible and some more to avoid getting their own interest in the US depleted ?

I mention in a previous post that they would probably envision various strategies to disengage themselves from this uncomfortable and risky situation and the last months have proven that through many intences . One of those strategies has to do with their gold reserve accumulation iin order to counterbalance at least in a small part the devaluation of China's assets in the US .

Considering also that exportations might worsen for still quite some times before it improves ( when and if 'cause i figure we're in a growing protectionism world market for at least a couple years ) then China's surpluses will keep depleting and if so then it might be convenient to have as much gold in reserve when comes that time when US dollar is down , inflation high , exports sluggish , employment at it's worst and gold at a all time high , then it would be China's time to sell the precious metal at a premium price .

China may be communist but the people in charge don't want and can't afford rebellion no more then our politicians hope for such events to happen here and the situation might be much more explosive there then it is here, and employment is the key especialy with 1.2 billion mouths and counting to feed .

We know how people are and when anger is directed towards them they have a tendency to point out to their neighbor rather then take the blame , and i dare say politicians wether they are communists democrats or republicans for that matter are experts at that and that's how we end up most of the time in stupid wars for some idiot's mistakes .

The Chinese Central Bank shoes are not mine ,much to big to fill , and my vision may be blurred lookin' at the future from the lowlands ,but i think China whatever it does has the great advantage of thinking and acting as one man unlike us having to deal with so many different lobbies interest, hence the consequences of division impairing our actions.

Now if i were a trader knowing China wants to increase it's reserve i'd be very cautious as the price of gold goes down especialy with the games some say are being played by banks on the COMEX , 'cause somewhere down the road if what i say could happen then someday the end of the month might have dramatic consequences for those people , none of us would cry their losses for sure , and god help them if that happens 'cause this time if they put us in a hole once again then HEADS WILL ROLL and a deep anger will spread !

When it comes to what happened this past week i figure it was a non-event a smoke screan for the gallery ( that's us ) and in terms of regulation i know some here consider it's been terrible , i"m not one of them , lots of lips service but nothing to show for it , at lest nothing to prevent another type of disaster some years from now . They walked tall but they left their big stick behind in the master's house some went in goodwill but too few of them , so we as usual we are left to ourselves to fight our own battles

good luck to you

How gloomy can i get on a cloudy day.