By: Gene Arensberg

HOUSTON — As expected gold paused just after attempting a second assault at the big round number target with three zeros, US$1,000 this past week.   We could all feel a pullback or correction coming.Apparently sensing that the market for gold had moved too far or too fast, the very large commercial futures traders had strongly positioned for a gold correction as readers of this report know. They finally got a correction going this past week.

Gold had advanced a total of $326, or 47%, since its October panic lows near $681 in not all that much time. Indeed, the largest of the largest futures traders were evidently willing to take the short side of gold futures contracts aggressively as gold was crossing the $900 line of the gold futures battlefield as we reported in early February. As the yellow metal neared the $1,000 mark mid-month,

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Interesting letter from Jason Hommel. He mentions some numbers here of what gold would have to be valued at to pay off the US Debt.

Something to think about for sure.

What if They Returned to the Gold Standard? (They can’t, but we can.) Silver Stock Report by Jason Hommel, December 10th, 2008

What if the Government went back on a Gold Standard?

Do do that, they would need to use their gold to pay off all their debt.

That would give a price of gold if the U.S. Government backed the dollar with gold.

We only need to know two numbers, and do a simple problem of division.

First number:  The national debt. http://www.treasurydirect.gov/NP/BPDLogin?application=np

The government tells us this is: $10,656,119,227,403

That’s 10.6 trillion dollars.

Second number:  The U.S. Gold stock. http://www.fms.treas.gov/gold/current.html

The government tells us this is: 261,498,899 ounces of gold

That’s 261 million ounces of gold.

So  $10,656,119,227,403 divided by 261,498,899 = $40,750/oz.

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Several reputable news sources are now covering the breaking story that China will likey raise is gold reserves.

They are talking about adding 4000 tonnes. To put this in perspective, thats about equal to the ENTIRE global demand in a typical year for gold.

The PPT better put their thinking caps on for this one, because if this happens gold could come off the leash.

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China Should Buy Gold for Reserves, Association Says

By Xiao Yu and Ron Harui More Photos/Details

Nov. 14 (Bloomberg) — China, the second-biggest overseas holder of U.S. Treasuries, should increase its bullion holding to diversify its reserves because the dollar may decline, the country’s gold association said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aO8E.6_D2tVo&refer=home

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China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

Wed, Nov 19 2008, 01:51 GMT http://www.djnewswires.com/eu

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

BEIJING (Dow Jones)–China’s central bank is considering raising its gold reserve by 4,000 metric tons from

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