It’s well known that China has been making huge strategic purchases of commodities in order to support its rapidly growing economy over the coming years.
What’s also interesting is that the country is placing financial bets on these commodities as well.
The nation’s big sovereign wealth fund, the China Investment Corp, has revealed that it’s the No. #4 investor in the US Oil Fund ETF (USO), as well as a major investor in the SPDR Gold Trust (GLD), both of which are the pre-eminent market traded vehicles for their respective commodities.
One theory put forth by an analyst to Bloomberg: these investments are basically a hedge. They know that when they buy into a commodity they push up the price, so these bets allow them to recoup some of that upside.
Of course, if deflation causes commodities to slump, then they’ve got trouble on both ends.
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