• BullionStar
    05/30/2016 - 21:24
    The US Gold Market is best known as the home of gold futures trading on the COMEX in New York. The COMEX has a literal monopoly on gold futures trading volumes worldwide, but very little physical...

Guest Post: The Geopolitics Of Gold

Tyler Durden's picture




 

Submitted by Alasdair Macleod of GoldMoney.com,

Western central banks have got themselves horribly wrong-footed as a result of not adjusting their anti-gold policies to allow for the realities of Asian gold demand. Though their dealings are shrouded in secrecy, there is compelling evidence that much – if not most – of Western central bank gold has been quietly sold over the last three decades.

More recently all members of the Shanghai Cooperation Organisation, a common security and trading bloc led by Russia and China and incorporating the bulk of Asia’s land mass, have been accumulating gold. Between current SCO and future members (India, Iran, Afghanistan, Mongolia, Belarus and Sri Lanka), with their citizens numbering over 3 billion people, they have together cornered the global market for physical supply, without even taking account of demand from the rest of South East Asia’s gold-hungry population.

The result is that gold markets are now failing to clear. The outcome is a choice: the West will either have to stop intervening and allow gold to find a level where physical and derivative markets interact properly with each other, or capital markets in the West will face a growing crisis likely to spill over into other markets. While these outcomes were always going to be a choice to be made at some time in the future, the disconnection between physical gold and derivatives has become so great that it is now an immediate concern.

At the government level it is a geopolitical clash of the titans. Russia and China are almost certainly aware of the lack of gold in Western central bank vaults: they are fully capable of thorough due-diligence in this respect. They have so far been careful not to disrupt capital markets because it has not been in their interests to do so; however, the current hiatus in gold markets is almost certain to modify their view.

Fundamental to all this is their attitude to Western currencies: the yen is now collapsing, the euro area is in deep trouble and the US economy is at very best stagnating. Until now, payment for Russian energy and Chinese goods in foreign currencies has been welcomed, because it has allowed the Russian and Chinese elites and middle classes to accumulate wealth. This balance of interests can only be maintained for so long as Russian and Chinese governments and their citizens can hedge foreign currency risks through an offsetting accumulation of foreign-owned gold.

This is no longer the case, because to all intents and purposes western capital markets are cleaned out of physical supplies, and the ability of the Western central banks to supress gold prices appears to be ending. And with the West’s financial system no longer able to deliver their most prized commodity, hitherto passive attitudes in Asia to Western currencies are likely to be reassessed.

The gold question has become central to east-west trade. The sensible approach for Western central banks is to defuse the problems arising by taking positive steps to ensure that gold markets operate properly. This is conceptually difficult, because the most likely result, a higher gold price, would risk undermining confidence in the major currencies and most probably damage the bullion banks in London.

Despite these difficulties, realities have to be faced.

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Mon, 05/27/2013 - 16:53 | 3601825 Arrowflinger
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Nothing from nothing leaves nothing, you gotta have something if you wanna be free.....

Gold is SOMETHING.

Mon, 05/27/2013 - 17:07 | 3601856 zorba THE GREEK
zorba THE GREEK's picture

When fiat fails, and it will, it always does, The Western World will have nothing to back a new

currency with and Asia will rise up and be on top, while the West goes into a deep dark hole.

The Dark Ages may be returning soon for The West.

Mon, 05/27/2013 - 17:12 | 3601868 Pladizow
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"You can ignore reality, but you can't ignore the consequences of ignoring reality." - Ayn Rand

Mon, 05/27/2013 - 17:39 | 3601945 nope-1004
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Can u repeat that?

 

Tue, 05/28/2013 - 08:28 | 3603087 Pinto Currency
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It is notable that the chatter about "tapering" (we're gonna do it, we're gonna do it) has arisen post Cyprus as investors in the West, realizing that their assets are at risk, pull gold from the financial system and we now find ourselves in a gold supply crisis at the LBMA in particular and in the mid-east and Asia in general.

The scramble is on and has revealed fraud by funds and banks to many who thought that they owned gold as they now try to secure their property.  The gold run will not stop.

Mon, 05/27/2013 - 18:00 | 3601995 Stuck on Zero
Stuck on Zero's picture

Can you ignore the consequences of ignoring reality?

 

Mon, 05/27/2013 - 19:37 | 3602182 Dead Canary
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"Just because you do not take an interest in politics
doesn't mean politics won't take an interest in you."

~ Pericles

Mon, 05/27/2013 - 19:50 | 3602227 This just in
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Just because you don't have an interest in my crotch doesn't mean that my crotch won't take an interest in you.

-Testicles

Mon, 05/27/2013 - 20:35 | 3602318 Dead Canary
Dead Canary's picture

That's bloody brilliant!

Tue, 05/28/2013 - 01:43 | 3602829 TwoShortPlanks
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The potential future purchasing power of physical Gold as an asset can be best explained in six ways;

1.       Analogy: Principles of extracting power from explosive material

2.       Analogy: Rothschild’s cornering of post war European Debt

3.       The removal of mass ignorance and the Impossibility Bias

4.       Trust within the [Mercantile] Exchanges, Commodity Trading Centres and Supply Chains

5.       Financial Markets

6.       The ‘Permanent Squeeze

http://twoshortplanksunplugged.blogspot.com.au/2013/05/gold-going-goinggone-in-this-post-i.html

7 pages as to why I believe Gold is about to go off like a Belt-Fed Mortar!

Tue, 05/28/2013 - 05:53 | 3602959 IBelieveInMagic
IBelieveInMagic's picture

Not so fast. As long as we are able to 'persuade' ME oil to be denominated in dollah, our currency will continue to have value. The cost of 'changing' this arrangement is very high for other players and hence they continue to play along.

Mon, 05/27/2013 - 21:19 | 3602418 Seeking Aphids
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The real question is: can you ignore the reality of ignoring the consequences of ignoring reality. The answer is: 46.

Tue, 05/28/2013 - 03:52 | 3602903 jeff montanye
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it was 42 but there has been some improperly acknowledged inflation.

Tue, 05/28/2013 - 05:05 | 3602938 savagegoose
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yu forgot to account for inflation

Tue, 05/28/2013 - 07:26 | 3603016 Dead Canary
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Don't forget  the 1/3 unemployed on the B ark.

Mon, 05/27/2013 - 23:07 | 3602638 WezTheJuic
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Indocrination, indoctrination.  What a beautiful world.

 

So, the question is this.  "Do you want to move forward, or do you want to move back?"

 

Pens,

Mon, 05/27/2013 - 17:12 | 3601869 Pladizow
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"You can ignore reality, but you can't ignore the consequences of ignoring reality." - Ayn Rand

Mon, 05/27/2013 - 17:15 | 3601872 Hulk
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You can say that again...

Mon, 05/27/2013 - 17:23 | 3601894 knukles
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Look at it this way.

If one keeps the price of a good artificially below its justified clearing price, demand will not subside and buyers will eat up supply.

Now, apply such to western central banks keeping the price of gold artificially low.
And what happens?
The Law of Unintended Consequences suggests that somebody somewhere is gonna soak up the supply of cheap gold.

What could go wrong?

And these guys who think they live in a world of no leakages, frictions or realities are the ones trying to establish a NWO.

Tell ya what.  I'll take any of that barbaric relic off your hands that you don't want for tradition's sake.

Mon, 05/27/2013 - 17:35 | 3601931 Hulk
Hulk's picture

Its sad indeed, but fraud and corruption always lead to destruction...

Mon, 05/27/2013 - 18:44 | 3602072 tbd108
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There is nothing sad when someone who needs a good kick in the teeth gets one. In fact, I find it very satisfying especially when you're dealing with vicious, thieving bullies.

Mon, 05/27/2013 - 19:21 | 3602149 Ignorance is bliss
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Unfortunately the kick in the teeth is aimed at the entire U.S. population, not just those that deserve to be punished for their malfeasance.

Tue, 05/28/2013 - 03:59 | 3602910 jeff montanye
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the mass of the population actually will be shocked to learn that the gold in fort knox, etc. is no longer close to 8,000 tons.  even if the relative truth of 9-11 slips out, i doubt any heads will roll in any significant sense.  

if jon corzine still walks free and bradley manning is still in jail we will know that orwell was right on the money (and everything else).

Mon, 05/27/2013 - 19:16 | 3602132 cro_maat
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What if... China has told Benny Boy that they are willing to unleash all of those US Treasuries that they own on the market.... unless the bullion banks beat down the price of gold so that they can accumulate more. No matter which way you look at it the Fed and its crony circle looks to have a weak hand.

Mon, 05/27/2013 - 19:23 | 3602153 OpenThePodBayDoorHAL
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Jim Rickards sys its the Chinese themselves who are beating up the paper gold price. Same objective, get gold at better prices. Everybody needs the Chinese to catch up their gold stores before the next global Bretton Woods reset. Just like France & Germany got a chance to rebuild their horde before the original Bretton Woods. Otherwise it's like starting a poker game and everybody has a different amount of chips.

Mon, 05/27/2013 - 17:27 | 3601910 GVB
GVB's picture

We first have to enter the stage of restriction in cash payments. Only electronic money transfers as from then. Capital controls. That's the final stage. Would not surprise me as governments and banking cartels will do "whatever it takes" remember Draghi? Of course I'm not sure but that's my best guess.

Mon, 05/27/2013 - 21:05 | 3602375 s-logic
s-logic's picture

Folks, I'm reading all your comments and thinking, you people all are really that stupid here, aren't you? The US has nothing to back it up because gold is all gone?????!

How many aircraft carriers does the US have? Something in the range of 15. Russia, one. China? None I guess. The US has the most powerful military in the world. So much more powerful, that the rest of the world is not even competing here. So if tomorrow the US says to China to go fuck themselves, what's China to do? Most likely, they will go and follow the advice, because there's nothing else they can really do. It applies to Russia even more so. I come from there, I know that for sure. In the end, it all comes down to military power, always.  Come on people, don't sell yourselves short. Be patriots.

BTW, regarding gold. In the soviet union even during hyperinflation, gold was non-existent. Why? Because, it was illegal to trade gold. Or the tax on each transaction was, like, 20-30% of the said gold transaction. So here it goes. The only thing the US government has to do to solve the gold problem, is to make gold illegal. Or better, expropriate it for the good of the people from the smart asses like yourselves. If Ben was bold enough to print like crazy, and the US president was bold enough to use drones to commit murders around the world, do you really think they will not make gold illegal when the time comes????!

Boy, you all really must be that stupid.

Mon, 05/27/2013 - 21:17 | 3602414 Missiondweller
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Gold? What gold?

Every damn one of us lost our gold in a tragic boating accident.

We are, however, going on a trip abroad. Probably via the Mexican border.

Tue, 05/28/2013 - 08:01 | 3603059 samcontrol
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Your plan is Mexico? lol. good luckwith that.

Mon, 05/27/2013 - 21:32 | 3602440 Seeking Aphids
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Yes, US has aircraft carriers...China has one that they got from Russia on sale.....but guess what, Russian fellow, there is more to the world of war than tanks and aircraft carriers....but I won't bore you with the details. As for the US making gold illegal...you are missing the point. No one will give a flying fuck what the US does with its gold.....the rest of the world will have moved on. The real question is when will the $US stop being the reserve currency...my guess is a Tuesday (lucky day in North America!) in November (after the German elections).

 

Mon, 05/27/2013 - 21:35 | 3602447 sgorem
sgorem's picture

"you people all are really that stupid here, aren't you?" wtf? i have to apologize up front for all us zher's because you must have mistaken us all for a group that gives a flying fuck what you perceive. fucking trollite..

Mon, 05/27/2013 - 22:47 | 3602594 cornflakesdisease
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I think you're the one who's "stupid'

It isn't about countries or whoes military has the sharpest stick.  China and The US are controlled by the same globalist as is Russia.  The real power is central banks and the BIS.

 

Mon, 05/27/2013 - 23:43 | 3602681 ATG
ATG's picture

Speaking of stupid:

 

Lessee, counting the USS Ronald Reagan that just came out of 18 months of Fukushima decontamination with Hanford, 10, many of them in port or Refueling and Complex Overhaul, with two more Gerald Ford Class, including the JFK and new Enterprise, in the works at >$12.3 B each.

 

And every one of them a sitting duck for the new Dong Feng 21D missiles deployed in the Taiwan Straits with a range of 3000 klicks, a speed of Mach 10 and reliable evasive navigation, thank you Bernie, Billary, Ron, Vince and Loral. 

 

Since China and Russia trade weapons now to guard their interests in Syria and Iran, might explain just why we are not floating carrier ships in harm's way lately...

Tue, 05/28/2013 - 00:15 | 3602734 Professorlocknload
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So, you lost your gold in an Aircraft Carrier accident, there logic?

Tue, 05/28/2013 - 04:30 | 3602926 jeff montanye
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yes we kicked ass from vietnam to afghanistan: 

 

I met a traveller from an antique land

Who said: "Two vast and trunkless legs of stone

Stand in the desert. Near them on the sand,

Half sunk, a shattered visage lies, whose frown

And wrinkled lip and sneer of cold command

Tell that its sculptor well those passions read

Which yet survive, stamped on these lifeless things,

The hand that mocked them and the heart that fed.

And on the pedestal these words appear:

`My name is Ozymandias, King of Kings:

Look on my works, ye mighty, and despair!'

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare,

The lone and level sands stretch far away". 

Percy Bysshe Shelley, 1818

 

 

Tue, 05/28/2013 - 05:27 | 3602948 lord of the flies
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us military will overcome ww3 are you sure? watch this first before confirming your optimistic assumption!

http://youtu.be/yE2_IZrzRak

Tue, 05/28/2013 - 05:48 | 3602955 constantine
constantine's picture

Didn't Russia have a military comparable to the USA's in the past?  Oh yeah, their currency collapsed and now the vast majority is rotting in shipyards.  If the USA makes gold illegal, where do you think the value of the greenback has gone?  Making it illegal at that point would have been irrelevant and most people will just hold onto the metal until better times regardless of taxes or legality.  Some of your points are somewhat valid; clearly they will wage any war possible against gold and, for this reason, diversification is important.  The last couple of years are testimony to this... however, most gold bashers have probably missed the move since the early 2000's... it is too difficult for them to capitulate psychologically and admit they were/are wrong so they sit on the sidelines ridiculing it and, deep down inside, praying that their financial overlords are successful in it's continued suppression regardless of what it means on a deeper level; that their financial lives are now controlled by greedy slime and their algorithms.

Tue, 05/28/2013 - 10:23 | 3603440 e-recep
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the might roman army couldn't save rome's ass because their economy was totally fucked. if you want the army to function you gotta have sound economy backing it up. no army can stay upright if the economy is in the shitters.

Mon, 05/27/2013 - 17:44 | 3601959 Groundhog Day
Groundhog Day's picture

What we need now is someone like alexander the great to rob and pillage the gold of these countries and bring it back to the west again.

Mon, 05/27/2013 - 19:53 | 3602235 This just in
This just in's picture

John Corzine?

Tue, 05/28/2013 - 00:06 | 3602722 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

Marc Rich?

Tue, 05/28/2013 - 00:34 | 3602764 hunglow
hunglow's picture

Pussy, power & gold. Or planes, boats & pussy... What ever...

Mon, 05/27/2013 - 16:59 | 3601835 francis_sawyer
francis_sawyer's picture

Won't those silly Asians be in for a surprise someday when they wake up & find out that gold isn't 'backed' by anything...

Mon, 05/27/2013 - 17:05 | 3601851 Mister Ponzi
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Our paper gold is backed by physical tungsten, at least.

Mon, 05/27/2013 - 17:11 | 3601863 orez65
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Gold doesn't need to be backed by anything because it is money!!!!!!!!!!!!!!! !!!!!!

Mon, 05/27/2013 - 17:26 | 3601904 francis_sawyer
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gold is backed by lead...

Mon, 05/27/2013 - 23:41 | 3602692 jerry_theking_lawler
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wow, my gold is backed by fiberglass.....and water.

Mon, 05/27/2013 - 17:27 | 3601909 Canadian Dirtlump
Canadian Dirtlump's picture

you sure dog? I recall this pearl of idiocy from one of the local newscasters.

 

https://www.youtube.com/watch?v=aX8lx9Mglcg

 

LOL

Mon, 05/27/2013 - 18:16 | 3602027 JeffB
JeffB's picture

Hilarious. Thanks for that laugh.

Unfortunately, the last laugh will be on us. What a complete airhead. But I guess they're a dime a dozen. Hire some pretty girl to read what you want in front of a TV camera and the zombie populace will accept it at face value.

 

Tue, 05/28/2013 - 00:25 | 3602751 Professorlocknload
Professorlocknload's picture

Ha! Investors aren't " Com-Fort-Ta-Bull" in anything but the dollar. eh?

Why, I Didn't know that. Thanks Ms. Muppet.

Where does MSM get these pieces of work?

Do NOT follow this link or you will be banned from the site!