Wed Post#2: Wild day for Gold, Silver and revelations in US Treasury's

So after wild gains yesterday - particularly in Silver), both Silver and Gold plunged dramatically today. Silver was down over $2 per ounce while Gold dropped over $100 intraday.

Algo driven liquidations followed Ben Bernanke's testimony before congress as he implied that QE3 is off for now. As the cascading price triggered the $1700 sell limits, Gold fell all the way to $1685 then reversed back over $1700.

The fundamental elements driving Gold/Silver remain the same and I note that even more dats is coming out confirming China's move away from the US Dollar.

Today the US Treasury department released its adjustment to foreign purchases of US Treasury bond holdings.  This bi-annual exercise updates the monthly reports.

A great many naysayers have been expecting the revision to show that China has in fact been building up its US Treasury stake (following the now traditional transfer of UK purchases to China), contrary to the reports that they have been dumping those Treasurys.

The reality is that China has indeed been dumping its US exposure.

China sold over $100 billion in Treasurys in December alone (bringing its total to $1152 billion,down 12% from its June total of $1307 billion.

This means the US will be forced to rely ever more on domestically funded purchases of USTs... which means Primary Dealers and the Federal Reserve.

The biggest surprise from the data is that, contrary to previous speculation, Russia has not been dumping its Treasurys.

In fact the country's holding of $150 billion are the same as they were back in June, and over $60 billion more compared to the pre-revised number.

The key element here is that unless the US finds substitute demand for it's Treasurys, the only remaining buyer will be the entity that already has the largest holding of US paper - the US Federal Reserve.

The American's are monetizing their debt.

How much longer before other nations start to follow China's lead?

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Stop children, what's that sound?... everyone look what's going down.

Back in June of 2011 I posted about the fact that the rush out of US Treasury's was intensifying with confirmation that Russia was dumping Treasury's.  This had come on the heels of a previous post in May 2011 which outlined how China was proposing to dump $2 Trillion of US Treasury's.

Last month we asked if a US dollar dump was underway. 

The thrust of that January post was that observers of the Federal Reserve's Custodial Treasury account had noted that there has been a continued, weekly selloff of US Treasury's going on.

The start of the New Year had brought six consecutive weeks in which foreigners had sold off government bonds, a sequential time period of selloffs which has been greater than ever before... meaning that someone, somewhere was very displeased with US paper.

Today the blog Zero Hedge follows up on this issue by noting that the latest Federal Reserve Custodial Treasury Report is out and the sell off continues.

Russia is now in it's 14th consecutive month of Treasury dumping as it's total US Treasury holdings declined to a fresh multi-year low of $88.4 billion. This is half of the $176 billion they held in October 2010.

Meanwhile the dumping of US paper by China also continues. China sold $32 billion in US bonds in December, bringing its total to a new post 2010 low of $1100.7 billion. 

The vastness of US dollar debt issued in Treasury's tends to dwarf the significance of all this. In December the grand total of US Treasury holding by foreigners declined from $4.75 Trillion to $4.732 Trillion. But don't be fooled... it is a significant amount and the clear pattern of the gradual selloff is now unmistakeable.

More importantly, as Zero Hedge notes, ask yourself the crucial question: "just what are China and Russia buying (ahem stockpiling) with all the dollars that are not recycled back into Treasurys?"

Does it take a rocket scientist to see what is going on? (Non-rocket scientist's can click here, here and here).

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More on Sovereign Debt: Russia to continue dumping US Treasuries

The ticking time bomb continues.

Yesterday we brought you a clip of Jim Rogers talking about the looming spectre of sovereign debt and getting ready.

Today comes confirmation that the rush out of the US dollar is intensifying, this time courtesy of Russia.

Over the past 6 months Russia has dumped 30% of it's Treasury holdings. Now the Wall Street Journal reports that "Russia will likely continue lowering its U.S. debt holdings"

"The share of our portfolio in U.S. instruments has gone down and probably will go down further," said Arkady Dvorkovich, chief economic aide to the Russian president, told Dow Jones in an interview on the sidelines of the St. Petersburg International Economic Forum.

Faithful readers will recall that China has already publicly announced they are considering dumping 2/3's of their US Treasury holdings.

This also follows Japan's public pension fund announcement that they are planning to begin asset liquidations (which means they won't continue buying US Treasuries).

Russia, China, Japan are the three countries with the largest financial reserves in the world to be able to buy US Treasuries and continue funding America's deficit spending.  Now all three are either dumping, or threatening to begin dumping, US Treasuries

And it is all coming just before Quantitative Easing 2 (aka the US printing money to buy it's own debt) is supposed to end.

Can you see why Jim Rogers is so concerned?

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China proposes dumping $2 Trillion US dollars

Big international news on this Easter Sunday.

Last Friday, deep in the body of the post on Silver, I mentioned that mainstream media had been slow to comment on the latest statement from the Peoples Bank of China (PBoC) wherein China's central bank Governor Zhou Xiaochuan spoke of the need to reduce foreign-reserves.

After a speech at Tsinghua University in Beijing on Wednesday, Zhou spoke of the need to reduce an excessive accumulation of foreign-reserves as those 'reserves' have exceeded a “reasonable” level and the management and diversification of the holdings should be improved.

This is the way you diplomatically say “we are sick of the US Dollar and will be taking steps to lower our holdings.”

Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).  At the same time China (along with Russia) has started to trade in their own currencies, NOT the US Dollar.

When you add in the numerous warnings Chinese politicians have been issuing to the US over the last 24 months, Zhou's statement last week makes it very clear that China is done playing nice and is now actively moving out of US Dollar denominated assets.

Well... today we found out just how much China feels they need to 'reduce'.

China is proposing to cut two thirds of it's $3 Trillion in US dollar holdings.

The $2 Trillion China proposes to dump is equal to the amount of dollars the US Federal Reserve has been printing during QE.

• China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
• The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.
• Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.
• Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.
• However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

This is huge news.

It brings to mind this highly sensationalized, fictitious account of how a US dollar collapse might play out.

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