This page has been archived and commenting is disabled.

Soaring Chinese Gold Demand And Its Geopolitical Strategy

Tyler Durden's picture


Submitted by Alasdair Macleod via,

Geopolitical and market background

I have been revisiting estimates of the quantities of gold being absorbed by China, and yet again I have had to revise them upwards. Analysis of the detail discovered in historic information in the context of China's gold strategy has allowed me for the first time to make reasonable estimates of vaulted gold, comprised of gold accounts at commercial banks, mine output and scrap. There is also compelling evidence mine output and scrap are being accumulated by the government in its own vaults, and not being delivered to satisfy public demand.

The impact of these revelations on estimates of total identified demand and the drain on bullion stocks from outside China is likely to be dramatic, but confirms what some of us have suspected but been unable to prove. Western analysts have always lagged in their understanding of Chinese demand and there is now evidence China is deliberately concealing the scale of it from us. Instead, China is happy to let us accept the lower estimates of western analysts, which by identifying gold demand from the retail end of the supply chain give significantly lower figures.

Before 2012 the Shanghai Gold Exchange was keen to advertise its ambitions to become a major gold trading hub. This is no longer the case. The last SGE Annual Report in English was for 2010, and the last Gold Market Report was for 2011. 2013 was a watershed year. Following the Cyprus debacle, western central banks, seemingly unaware of latent Chinese demand embarked on a policy of supplying large quantities of bullion to break the bull market and suppress the price. The resulting expansion in both global and Chinese demand was so rapid that analysts in western capital markets have been caught unawares.

I started following China's gold strategy over two years ago and was more or less on my own, having been tipped off by a contact that the Chinese government had already accumulated large amounts of gold before actively promoting gold ownership for private individuals. I took the view that the Chinese government acted for good reasons and that it is a mistake to ignore their actions, particularly when gold is involved.

Since then, Koos Jansen of has taken a specialised interest in the SGE and Hong Kong's trade statistics, and his dedication to the issue has helped spread interest and knowledge in the subject. He has been particularly successful in broadcasting market statistics published in Chinese to a western audience, overcoming the lack of information available in English.

I believe that China is well on the way to having gained control of the international gold market, thanks to western central banks suppression of the gold price, which accelerated last year. The basic reasons behind China's policy are entirely logical:

• China knew at the outset that gold is the west's weak spot, with actual monetary reserves massively overstated. For all I know their intelligence services may have had an accurate assessment of how much gold there is left in western vaults, and if they had not, their allies, the Russians, probably did. Representatives of the People's Bank of China will have attended meetings at the Bank for International Settlements where these issues are presumably openly discussed by central bankers.

• China has significant currency surpluses under US control. By controlling the gold market China can flip value from US Treasuries into gold as and when it wishes. This gives China ultimate financial leverage over the west if required.

• By encouraging its population to invest in gold China reduces the need to acquire dollars to control the renminbi/dollar rate. Put another way, gold purchases by the public have helped absorb her trade surplus. Furthermore gold ownership insulates her middle classes from external currency instability which has become an increasing concern since the Lehman crisis.

For its geopolitical strategy to work China must accumulate large quantities of bullion. To this end China has encouraged mine production, making the country the largest producer in the world. It must also have control over the global market for physical gold, and by rapidly developing the SGE and its sister the Shanghai Gold Futures Exchange the groundwork has been completed. If western markets, starved of physical metal, are forced at a future date to declare force majeure when settlements fail, the SGE and SGFE will be in a position to become the world's market for gold. Interestingly, Arab holders have recently been recasting some of their old gold holdings from the LBMA's 400 ounce 995 standard into the Chinese one kilo 9999 standard, which insures them against this potential risk.

China appears in a few years to have achieved dominance of the physical gold market. Since January 2008 turnover on the SGE has increased from a quarterly average of 362 tonnes per month to 1,100 tonnes, and deliveries from 44 tonnes per month to 212 tonnes. It is noticeable how activity increased rapidly from April 2013, in the wake of the dramatic fall in the gold price. From January 2008, the SGE has delivered from its vaults into public hands a total of 6,776 tonnes. This is illustrated in the chart below.

SGE Gold monthly (kg)

This is only part of the story, the part that is in the public domain. In addition there is gold imported through Hong Kong and fabricated for the Chinese retail market bypassing the SGE, changes of stock levels within the SGE's network of vaults, the destination of domestic mine output and scrap, government purchases of gold in London and elsewhere, and purchases stored abroad by the wealthy. Furthermore the Chinese diaspora throughout South East Asia competes with China for global gold stocks, and its demand is in addition to that of China's Mainland and Hong Kong.

The Shanghai Gold Exchange (SGE)
The SGE, which is the government-owned and controlled gold exchange monopoly, runs a vaulting system with which westerners will be familiar. Gold in the vaults is fungible, but when it leaves the SGE's vaults it is no longer so, and in order to re-enter them it is treated as scrap and recast. In 2011 there were 49 vaults in the SGE's system, and bars and ingots are supplied to SGE specifications by a number of foreign and Chinese refiners. Besides commercial banks, SGE members include refiners, jewellery manufacturers, mines, and investment companies. The SGE's 2010 Annual Report, the last published in English, states there were 25 commercial banks included in 163 members of the exchange, 6,751 institutional clients accounting for 81% of gold traded, and 1,778,500 clients of the commercial banks with gold accounts. The 2011 Gold Report, the most recent available, stated that the number of commercial bank members had increased to 29 with 2,353,600 clients, and given the rapid expansion of demand since, the number of gold account holders is likely to be considerably greater today.

About 75% of the SGE's gold turnover is for forward settlement and the balance is for spot delivery. Standard bars are Au99.95 3 kilos (roughly 100 ounces), Au99.99 1 kilo, Au100g and Au50g. The institutional standard has become Au99.99 1 kilo bars, most of which are sourced from Swiss refiners, with the old Au99.95 standard less than 15% of turnover today compared with 65% five years ago. The smaller 100g and 50g bars are generally for retail demand and a very small proportion of the total traded. Public demand for smaller bars is satisfied mainly through branded products provided by commercial banks and other retail entities instead of from SGE-authorised refiners.

Overall volumes on the SGE are a tiny fraction of those recorded in London, and the market is relatively illiquid, so much so that opportunities for price arbitrage are often apparent rather than real. The obvious difference between the two markets is the large amounts of gold delivered to China's public. This has fuelled the rapid growth of the Chinese market leading to a parallel increase in vaulted bullion stocks, which for 2013 is likely to have been substantial.

By way of contrast the LBMA is not a regulated market but is overseen by the Bank of England, while the SGE is both controlled and regulated by the People's Bank of China. The PBOC is also a member of both its own exchange and of the LBMA, and deals actively in non-monetary gold. While the LBMA is at arm's length from the BoE, the SGE is effectively a department of the PBOC. This allows the Chinese government to control the gold market for its own strategic objectives.


Quantifying demand

Identifiable demand is the sum of deliveries to the public withdrawn from SGE vaults, plus the residual gold left in Hong Kong, being the net balance between imports and exports. To this total must be added an estimate of changes in vaulted bullion stocks.

SGE gold deliveries
Gold deliveries from SGE vaults to the general public are listed both weekly and monthly in Chinese. The following chart shows how they have grown on a monthly basis.

SGE Gold monthly (kg)

Growth in public demand for physical gold is a reflection of the increased wealth and savings of Chinese citizens, and also reflects advertising campaigns that have encouraged ordinary people to invest in gold. Advertising the attractions of gold investment is consistent with a deliberate government policy of absorbing as much gold as possible from western vaults, including those of central banks.

Hong Kong
Hong Kong provides import, export and re-export figures for gold. All gold is imported, exports refer to gold that has been materially altered in form, and re-exports are of gold transited more or less unaltered. Thus, exports refer mainly to jewellery which in China's case is sold directly into the Mainland without going through the SGE, and re-exports refer to gold in bar form which we can assume is delivered to the SGE. Some imported gold remains on the island, and some is re-exported from China back to Hong Kong. This gold is either vaulted in Hong Kong or alternatively turned into jewellery and sold mostly to visitors from the Mainland buying tax-free gold.

The mainstream media has reported on the large quantities of gold flowing from Switzerland to Hong Kong, but this is only part of the story. In 2013, Hong Kong imported 916 tonnes from Switzerland, 190 tonnes from the US, 176 tonnes from Australia and 150 tonnes from South Africa as well as significant tonnages from eight other countries, including the UK. She also imported 337 tonnes from Mainland China and exported 211 tonnes of it back to China as fabricated gold.

Hong Kong is not the sole entry port for gold destined for the Mainland. The table below illustrates how Hong Kong's gold trade with China has grown, and its purpose is to identify gold additional to that supplied via Hong Kong to the SGE. Included in the bottom line, but not separately itemised, is fabricated gold trade with China (both ways), as well as the balance of all imports and exports accruing to Hong Kong.

Hong Kong plus fabricated supplies

The bottom line, "Additional supply from HK" should be added to SGE deliveries and changes in SGE vaulted gold to create known demand for China and Hong Kong.

SGE vaulted gold
The increase in SGE vaulted gold in recent years can only be estimated. However, it was reported in earlier SGE Annual Reports to amount to 519.55 tonnes in 2008, 582.6 tonnes in 2009, and 841.8 tonnes in 2010. There have been no reported vault figures since.

The closest and most logical relationship for vaulted gold is with actual deliveries. After all, public demand is likely to be split between clients maintaining gold accounts at member banks, and clients taking physical possession. The ratios of delivered to vaulted gold were remarkably stable at 1.05, 1.03, and 0.99 for 2008, 2009 and 2010 respectively. On this basis it seems reasonable to assume that vaulted gold has continued to increase at approximately the same amount as delivered gold on a one-to-one basis. The estimated annual increase in vaulted gold is shown in the table below.

Vaulted gold

The benefits of vault storage, ranging from security from theft to the ability to use it as collateral, seem certain to encourage gold account holders to continue to accumulate vaulted metal rather than take personal possession.


Supply consists of scrap, domestically mined and imported gold

Scrap is almost entirely gold bars, originally delivered from the SGE's vaults into public hands, and subsequently sold and resubmitted for refining. Consequently scrap supplies tend to increase when gold can be profitably sold by individuals in a rising market, and they decrease on falling prices. There is very little old jewellery scrap and industrial recycling is not relatively significant. Official scrap figures are only available for 2009-2011: 244.5, 256.3 and 405.8 tonnes respectively. I shall therefore assume scrap supplies for 2012 at 430 tonnes and 2013 at 350 tonnes, reflecting gold price movements during those two years.

Scrap is refined entirely by Chinese refiners, and as stated in the discussion concerning mine supply below, the absence of SGE standard kilo bars in Hong Kong is strong evidence that they are withheld from circulation. It is therefore reasonable to assume that scrap should be regarded as vaulted, probably held separately on behalf of the government or its agencies.

Mine supply
China mines more gold than any other nation and it is generally assumed mine supply is sold through the SGE. That is what one would expect, and it is worth noting that a number of mines are members of the SGE and do indeed trade on it. They act as both buyers and sellers, which suggests they frequently use the market for hedging purposes, if nothing else.

Typically, a mine will produce doré which has to be assessed and paid for before it is forwarded to a refinery. Only when it is refined and cast into standard bars can gold be delivered to the market. Broadly, one of the following procedures between doré and the sale of gold bars will occur:

• The refiner acts on commission from the mine, and the mine sells the finished product on the market. This is inefficient management of cash-flow, though footnotes in the accounts of some mine companies suggest this happens.

• The refiner buys doré from the mine, refines it and sells it through the SGE. This is inefficient for the refiner, which has to find the capital to buy the doré.

• A commercial bank, being a member of the SGE, finances the mine from doré to the sale of deliverable gold, paying the mine up-front. This is the way the global mining industry often works.

• The government, which ultimately directs the mines, refiners and the SGE, buys the mine output at pre-agreed prices and may or may not put the transaction through the market.

I believe the government acquires all mine output, because it is consistent with the geopolitical strategy outlined at the beginning of this article. Furthermore, two of my contacts, one a Swiss refiner with facilities in Hong Kong and the other a vault operator in Hong Kong, tell me they have never seen a Chinese-refined one kilo bar. Admittedly, most one kilo bars in existence bear the stamp of Swiss and other foreign refiners, but nonetheless there must be over two million Chinese-refined kilo bars in existence. Either Chinese customs are completely successful in stopping all ex-vault Chinese-refined one kilo bars leaving the Mainland, or the government takes all domestically refined production for itself, with the exception perhaps of some 100 and 50 gram bars. Logic suggests the latter is true rather than the former.

Since the SGE is effectively a department of the PBOC, it must be at the government's discretion if domestic mine production is put through the market by the PBOC. Whether or not Chinese mine supply is put through the market is impossible to establish from the available statistics, and is unimportant: no bars end up in circulation because they all remain vaulted. It is material however to the overall supply and demand picture, because global mine supply last year drops to about 2,490 tonnes assuming Chinese production is not available to the market.

Geopolitics suggests that China acquires most, if not all of its own mine and scrap production, which accumulates in the vaulting system. This throws the emphasis back on the figures for vaulted gold, which I have estimated at one-for-one with delivered gold due to gold account holder demand. To this estimate we should now add both Chinese scrap and mine supply. This would explain why vaulted gold is no longer reported, and it would underwrite my estimates of vaulted gold from 2011 onwards.

Further comments on vaulted gold
From the above it can be seen there are three elements to vaulted gold: gold held on behalf of accountholders with the commercial banks, scrap gold and mine supply. The absence of Chinese one kilo bars in circulation leads us to suppose scrap and mine supply accumulate, inflating SGE vault figures, but a moment's reflection shows this is too simplistic. If it was included in total vaulted gold, then the quantity of gold held by accountholders with the commercial banks, as reported in 2009-11, would have fallen substantially to compensate. This cannot have been the case, as the number of accountholders increased substantially over the period, as did interest in gold investment.

Therefore, scrap and mined gold must be allocated into other vaults not included in the SGE network, and these vaults can only be under the control of the government. It will have been from these vaults that China's sudden increase in monetary gold of 444 tonnes in the first quarter of 2009 was drawn, which explains why the total recorded in SGE vaults was obviously unaffected. So for the purpose of determining the quantity of vaulted gold, scrap and mined gold must be added to the gold recorded in SGE vaults.

Though it is beyond the scope of this analysis, the existence of government vaults not in the SGE network should be noted, and given cumulative mine production over the last thirty years, scrap supply and possibly other purchases of gold from abroad, the bullion stocks in these government vaults are likely to be very substantial.

Western gold flows to China

We are now in a position to estimate Chinese demand and supply factors in a global context. The result is summarised in the table below.

Global demand and supply

Chinese demand before 2013 had arrived at a plateau, admittedly higher than generally realised, before expanding dramatically following last April's price drop. Taking the WGC's figures for the Rest of the World gives us new global demand figures, which throw up a shortfall amounting to 9,461 tonnes since the Lehman crisis, satisfied from existing above-ground stocks.

This figure, though shocking to those unaware of these stock flows, could well be conservative, because we have only been able to address SGE deliveries, vaulted gold and Hong Kong net flows. Missing from our calculations is Chinese government purchases in London, demand from the ultra-rich not routed through the SGE, and gold held by Chinese nationals abroad. It is also likely that demand from the Chinese diaspora in SE Asia and Asian is also underestimated by western analysts.

There are assumptions in this analysis that should be clear to all. But if it only serves to expose the futility of attempts in western capital markets to manage the gold price, the exercise has been worthwhile. For much of 2013 commentators routinely stated that Asian demand was satisfied from ETF redemptions. But as can be seen, ETF sales totalling 881 tonnes covered only one quarter of the west's shortfall against China, the rest coming mostly from central bank vaults. Anecdotal evidence from Switzerland is that the four major refiners have been working round-the-clock turning LBMA 400 ounce bars into one kilo 9999 bars for China. They are even working with gold bars that are battered and dusty, which suggests the west is not only digging into deep storage to satisfy Chinese demand at current prices, but digging a hole for itself as well.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 04/05/2014 - 14:35 | 4628325 Fuh Querada
Fuh Querada's picture

Gold is a slam-dunk sell. Going to 800$.
(sarc off)

Sat, 04/05/2014 - 14:41 | 4628339 hungarianboy
hungarianboy's picture

In the meantime another High ranking banker committed suicide after killing his children and wife.

Dutch former Board of Managment banker Peter Jan Schmittmann.

Sat, 04/05/2014 - 14:45 | 4628350 McMolotov
McMolotov's picture

Off topic, but below is without a doubt one of the most incredibly full-retard things I've read recently:

Is this simple idiocy? Is it propaganda? Is it a dangerous mixture of both? I'm inclined to believe it's #3, and there are people who are frothing-at-the-mouth desperate to have a war.

Sat, 04/05/2014 - 14:50 | 4628358 linniepar
linniepar's picture

Audit the fed, audit Fort Knox then publicly execute the traitors.

Sat, 04/05/2014 - 15:08 | 4628397 strannick
strannick's picture

Like the London Gold Pool of the 60s prior to golds explosion in the 70s, gold suppression lasts up until it doesn't, then price takes over.

Sat, 04/05/2014 - 15:49 | 4628446 nope-1004
nope-1004's picture

The current reserve currency represents a nation with a decaying labor force, stagnating wage structure, exponential debt growth, personal privilege, and incompetent government yet all its citizens want raises, pensions, Obama phones, credit cards, and health care.  Seems like you don't even have to be a gold bug to understand the realities of what lies ahead.

And it is for those reasons that China is buying gold.  China can totally see what's happening.  The reserve currency is only valid if everyone respects what's behind it, and to that end the US reserve is on its death bed and will die.

So gold seems to be the only rational wealth preservation mechanism.  It's not an investment, it's an asset.  US dollars are not.

Ignore the trolls and do what China is doing, or be left behind.


Sat, 04/05/2014 - 15:42 | 4628447 SRSrocco
SRSrocco's picture

Not only do we have problem of WESTERN GOLD SUPPLY being drained as it relocates to the EAST, but the Industry understates the COST OF PRODUCTION  by highlighting CASH COSTS to fool SIMPLETONS into believing the price could be much lower:

The Grand Deception In the Precious Metals Industry

Sat, 04/05/2014 - 16:55 | 4628574 Ayr Rand
Ayr Rand's picture

We will know that these theories are true when either (a) the price of PMs increase dramatically reflecting the demand, or (b) the exchanges break under the weight of manipulation. Until then, unfortunately, this is speculation. 

On the other side of that equation, if money managers practiced actual risk-management and purchased a tiny position in PMs, then the price would certainly double or triple within a year. Which explains how incompetent the financial industry is, but does not expiate PMs. 

Sat, 04/05/2014 - 18:59 | 4628835 rosiescenario
rosiescenario's picture

Having not learned one thing about risk management from the LTCM debacle, the current investment managers (as Taleb has pointed out) are headed for the same cliff the prior wave of lemmings went off a few years ago.


These managers think they are "hedged" with derivatives that rely upon the ongoing strength of TBTF banks. Most funds are not hedged as hedging impeded their profits and the management's carry.


Most all of the publicly chosen mutual funds are not hedged.


Just to summarize, what little risk hedging that is being used is ill founded and most everything else ignores any form of risk.

Sat, 04/05/2014 - 21:56 | 4629170 mvsjcl
mvsjcl's picture

Do you think for one moment that the people who "create" money would allow anyone but those aligned with their interests to "manage" money? Money "managers," like everyone else in the sordid wealth theft game of high (and low) finance, knowingly or unwittingly follow the orders of the currency overlords. The epic consolidation we're seeing now signals a new, more naked phase being marshaled against

Sun, 04/06/2014 - 07:54 | 4629581 Gordon Freeman
Gordon Freeman's picture


1) Your readers may have a point--you haven't proven they don't, you have just argued with them about it.

2) You have no special access to the inner accountings of the companies you "cover"--you're just working with the publicly available garbage i.e. GIGO

3) Just as you argue that the Forces of Evil are lying about cash costs of production to keep silver prices low, it is JUST AS EASY to make the case that YOU are artificially misrepresenting the price in the other direction in order to convince your readers that silver prices have nowhere to go but up.

You're just another fringe blogger, trying to cash in--what else is new?

Sat, 04/05/2014 - 15:46 | 4628420 bigkahuna
bigkahuna's picture

@Molotov - That story is full retard - this is a gleaming example of silly (dangerous) ideas being put forth with no thought of unintended consequences.

This is also how the statist media and government establishment control weak minded people of all political persuasions.

Sat, 04/05/2014 - 17:02 | 4628589 mumbo_jumbo
mumbo_jumbo's picture

it's FOX's all 3.

Sat, 04/05/2014 - 19:45 | 4628952 Dugald
Dugald's picture


Use US oil reserves, brilliant strategy....and at the end when the reserves are gone......Russia still has her oil, and ready to stick it to you


Sat, 04/05/2014 - 23:22 | 4629279 lakecity55
lakecity55's picture

None of these western guys are thinking with a full deck.

Whether they understand it or not, the Unipolar world ended with the failure by Bath House to take military action over Syria.


Sat, 04/05/2014 - 23:19 | 4629273 lakecity55
lakecity55's picture

The guy who wrote that, Lee Spieckerman, goes way back with Roger Ailes; Big Establishment Republican. I would wager a neo-con type.  The plan is to collapse oil prices to threaten the Russians and wedging the Chinese by giving them cheap oil.

Actually, it would make more sense to withdraw the pressure on the Russians' left flank and encourage them to leave the former satellite USSR states in a neutral zone. The west went too far in interfering with the former satellites after the USSR collapse; they are still involving themselves in Ukraine, another mistake.

The Bear feels secure when his left (western) flank is secure, hence Stalin's takeover of eastern europe post WW2.

The criminal elites are trying to take by subversion that which would be more profitable if they were not so greedy and power-hungry. Putin has a big ego. Push him too hard and you push him to act aggressively.

Sun, 04/06/2014 - 06:34 | 4629524 Hobbleknee
Hobbleknee's picture

All of the MSM is controlled and scripted. Does that answer your question?

Sat, 04/05/2014 - 14:45 | 4628351 kliguy38
kliguy38's picture

yeah the only "slam dunk" on gold is that Goldman is buying the chit out of bullion while the sheep get slam dunked.........its the age old game .....and the suckers bite everytime

Sat, 04/05/2014 - 14:54 | 4628370 Magnum
Magnum's picture

Germans demanded their gold and the New York bankers could NOT deliver it.  It's interesting...

Sat, 04/05/2014 - 15:10 | 4628409 falak pema
falak pema's picture

That remark is a "two way sword".

It shows that "interesting" though it may be, the forces of darkness based in the fiat empire don't want GOLD to be the reference; as THEY condemned it back in 1971. Iredeeembly condemned and DAMNED it as monetary reference. 

THEY, all of them, since their Nixonian Oligarchy ruling the world, deemed it so; like being boxed in on a river of no return; a Watergate type conundrum with no REVOLVING doors; a one way passage into BOX Canyon;  as they didn't want to see their NEW golden Calf of "greed is good", their Friedmanian inspired fiat avatar, their OWN oil energy derived new God :  the petrodollar; source of their global POWER, burn...

This goes beyond Shamanist plays of PHDs' from Ivy League. This goes to the heart of the matter : the stuff CIVILIZATION is made of.

Read the 12/13 th century or the 16 th century time-line to understand. Clash of civilizaton and Universal Empires in name of "God wills it" or "our way or the devil's way" are as old as the Inquisition and Crusade. 


Sat, 04/05/2014 - 15:46 | 4628458 Oh regional Indian
Oh regional Indian's picture

Falak, what if it was in the name of "goLd's will"?

Sat, 04/05/2014 - 15:55 | 4628476 falak pema
falak pema's picture

lol Ori, I would believe that when I see those Bamyan Buddhas put back in their rightful place. 

God wills it would then rhyme with "golden" budha wills it. 

After Afghan, You guys have an interesting election up ahead with mr Modi representing  populist fervour. 

Sat, 04/05/2014 - 16:01 | 4628483 Oh regional Indian
Oh regional Indian's picture

India is coming up for some interesting, possibly very rough times Falak, mon ami!

We are the true picture of a civilization in decline.

We also knwo that lotuses grow in dirty water.

So all is good.

All is... ;-)


Sat, 04/05/2014 - 15:50 | 4628468 fonzannoon
fonzannoon's picture

Germany should just wipe out my lcs once a week as they always seem to have plenty. They would probably be all squared away within a year.

Sat, 04/05/2014 - 16:52 | 4628567 katchum
katchum's picture

Where does it say he killed his children and wife?

Sat, 04/05/2014 - 14:38 | 4628330 thatthingcanfly
thatthingcanfly's picture


8,562 miles east of America.

Sat, 04/05/2014 - 14:42 | 4628341 GrinandBearit
GrinandBearit's picture

Get gold or get debased. 

Sat, 04/05/2014 - 15:15 | 4628418 sampo
sampo's picture

Check Mate, Bitchez!

Sat, 04/05/2014 - 14:42 | 4628342 Salah
Salah's picture

1% rise in US interest rates = gold loses 30-40% in value.  All you need to know; the US 'Deep State' is not going to just rollover.

Sat, 04/05/2014 - 15:14 | 4628386 Pool Shark
Pool Shark's picture



Uh,.. no:

Note: how gold has gone both up and down with rising interest rates. Specifically note between 1981 and 1994 when gold went down even though interest rates dropped from 19% to 4%. The gold price falls when the U.S. economy improves and wages increase. Do you see that happening now?

You might do a just a little research before you spout-off...



Sat, 04/05/2014 - 15:49 | 4628465 bigkahuna
bigkahuna's picture

Shark, that dude is a troll, theres no way anyone else comes here and pipes off BS like that.

Sat, 04/05/2014 - 16:43 | 4628554 Urban Redneck
Urban Redneck's picture

Or do some research on the same site and find numbers that roughly support Alasdair Macleod's estimates (consider London as ETFs + "other" private stocks)

(might as well recycle links to articles as well as physical gold)

Sat, 04/05/2014 - 18:06 | 4628694 Snidley Whipsnae
Snidley Whipsnae's picture

Pool Shark... You're right. Gold can rise and fall regardless of which way interest rates are moving.

For a couple of hundred years it was said that "the Bank of England can pull in gold from the moon when they raise interest rates to 5%". But, that was when the empire and economy was functioning like a well oiled machine... and England wasn't in debt up to it's eyeballs.

The American Empire is currently not functioning like a well oiled machine. The Fed cannot raise interest rates without hammering what is left of the Main St economy and jacking up interest payments on US debt... among other bad effects. My WAG is QE forever.

A 'broken' economy does not function like one running well.

Sat, 04/05/2014 - 19:06 | 4628837 BeanusCountus
BeanusCountus's picture

Thumbs up to u for pointing that out. I was a young man back in 1980. Drove past banks showing 5 year cd rates at 14%. And gold was on a tear, heading to its (then) peak of 850 or so. True, stagflation was the rage of the day. But the point that rising interest rates automatically = drop in gold is not true. It took many interest rate hikes by Volcker to finally bring gold back to earth. The idea that "a 1% hike in interest rates would reduce gold by 30-40%" is total bullshit, not supported by anything but the mind of Mr. Basher (or whatever his name is).

Only thing he may have right is that the Deep State will not rollover. Petro-dollar status may be first test. And that would mean war. In which case gold might just be the place to be.

Sat, 04/05/2014 - 15:03 | 4628388 Stuck on Zero
Stuck on Zero's picture

1% rise in interest rates = government goes deeper into debt to pay interest on the debt.  Gold rises 30%-40%.  You got it wrong.


Sat, 04/05/2014 - 15:18 | 4628425 813kml
813kml's picture

The 'Deep State' might not roll over, but it WILL be forcibly bent over at some point in the near future.  Games of musical chairs don't last forever.

Sat, 04/05/2014 - 16:03 | 4628486 Solarman
Solarman's picture

By who?  Russia and China?  Good luck China getting your oil and food to your ports if America the Terrible feels their existence is threatened.

The mental masterbation of some of you guys is laughable.

Sat, 04/05/2014 - 16:21 | 4628519 813kml
813kml's picture

You are right, military might is the only muscle that the US has left.  But the rest of NATO sees the writing on the wall, the US will be left to fight on their own.  Military intervention might prolong the inevitable but it won't prevent it.

Sat, 04/05/2014 - 17:17 | 4628617 Seize Mars
Seize Mars's picture

Anyone who misspells "masturbation" is an idiot.
Believe me, I'm an expert.

Sat, 04/05/2014 - 17:18 | 4628619 raeb
raeb's picture

"your ports"?  and the Panama Canal.  With all the ships we have decommissioned our defenses may be getting a little thin.

Sat, 04/05/2014 - 20:52 | 4629066 BeanusCountus
BeanusCountus's picture

America the terrible is no longer the only game in town. And that is the point. We can certainly cause some problems for anyone. But the idea that our endless consumption controls the world economy is waning. It doesnt happen overnight, happens slowly over time. Throughout history always the same result. And the cracks in our invincibility are showing up. Daily. Suggest you re-read the history Roman empire, Great Britain, Japan, etc. Always ends the same.

Sat, 04/05/2014 - 15:27 | 4628433 RaceToTheBottom
RaceToTheBottom's picture

"1% rise in US interest rates = gold loses 30-40% in value. "


And that would be why when Gold is viewed, even by its detractors as an inflation hedge?

Back to the drawing board buckwheat

Sat, 04/05/2014 - 18:46 | 4628795 Atticus Finch
Atticus Finch's picture

Interest rates won't rise because that would cause the credit default swaps derivative market to collapse and bring down the world financial structure.

That's what ZIRP is about and will continue.

Sun, 04/06/2014 - 08:02 | 4629589 Gordon Freeman
Gordon Freeman's picture


You got that right, bruddah...

The ZH Poster's Motto: "I'm drunk, stoopid, and on disability--and pissed of 24/7/365"

Sat, 04/05/2014 - 14:42 | 4628343 nelsonmandella
nelsonmandella's picture

why do you guys love fucking gold - lets say you buy it physical gold @ 1300 per OZ 


and russia says only gold 


and china says only gold 


it still stays at $3000.00


x 2.7 wow so what 

Sat, 04/05/2014 - 14:54 | 4628368 logicalman
logicalman's picture

Look at it the other way around.

the dollars you are using were just devalued 1:2.7

The gold stayed just as it was before.

Might have an effect on your lifestyle.

Sat, 04/05/2014 - 15:09 | 4628404 disabledvet
disabledvet's picture

that's a big part of this story.

and that worthless dollar goes a long way towards explaining not just gold demand but demand for many other assets.

real estate, equities, debt and of course (insert drum roll here) securitized debt-CDO's, yield "hungriness", etc.

once the American people wake up and realize they are more bankrupt now than before 2008...well, that's when things get interesting.

Sat, 04/05/2014 - 16:01 | 4628481 bigkahuna
bigkahuna's picture

the American people? Most of them have placed their heads forcefully up their poop chutes. Even if you try to help them extract it, there is massive force being placed into keeping the head in there. 

In our life times if a mass "awakening" happens, it will be because uncle sugar screws up really bad (like nothing we comprehend even now) or a famine or something like that.

Sat, 04/05/2014 - 16:54 | 4628573 logicalman
logicalman's picture

I kind of agree, but you have to realize that it's very hard to give up a fairy story you've lived with most of your life.

It's kinda hard to accept that Santa doesn't exist wheen you are 5, just as it's hard for most people to accept that the government they've been told is looking out for their best interests is, in fact, a bunch of predatory thugs that doesn't give a shit about them.

As for 'awakening', it's going to take something BIG.

Sat, 04/05/2014 - 18:28 | 4628729 TheReplacement
TheReplacement's picture

Yet when someone wakes up it isn't a minor thing.  There is usually a good deal of dissillusionment and anger.   One really PO'ed person is worth how many apathetic zombies when it comes to a fight?

Sat, 04/05/2014 - 21:25 | 4629135 bigkahuna
bigkahuna's picture

I'm with you. I do wonder if all who are awake is about all we will get sometimes (until further developments of course). At this point, the media/politician corruption is just sort of out in the open. Not sure why anyone calls themselves a "democrat" or "republican" anymore. It just seems like it would be embarassing. I get a really good laugh when I hear people parroting the party lines anymore (I used to feel compeled to try and reason with them - lol)

In any case, y'all have a good night. 

Sun, 04/06/2014 - 09:18 | 4629665 Gordon Freeman
Gordon Freeman's picture

Hard to say

Sat, 04/05/2014 - 14:56 | 4628373 linniepar
linniepar's picture

Did you forget the Golden rule?

Sat, 04/05/2014 - 15:06 | 4628395 Kaiser Sousa
Kaiser Sousa's picture


Sat, 04/05/2014 - 15:39 | 4628450 Kaiser Sousa
Kaiser Sousa's picture

connecting the dots leads back to REAL MONEY - GOLD

"Former ABN Amro Group NV Netherlands Chief Executive Officer Jan Peter Schmittmann, his wife and a daughter were found dead at their home today after a possible “family tragedy,” Dutch police said.

“The bodies of a father and mother and their daughter were found at the property” in the town of Laren, 32 kilometers (20 miles) southeast of Amsterdam, Dutch police said in a statement on their website today. Leonie Bosselaar, a police spokeswoman, said in a telephone call with Bloomberg News that the deceased were Schmittmann and two family members.

The police received a call around 10:30 a.m. local time from a family acquaintance who said something may be wrong at the property, according to the statement. Bosselaar declined to comment further on what may have happened.

The Dutch newspaper AD reported, without citing anyone, that the family was discovered by Schmittmann’s second daughter when she arrived home this morning. She was scheduled to travel to India with her parents, where she had an internship lined up, the newspaper said.

Schmittmann, 57, joined ABN Amro in 1983 as assistant relationship manager and was named head of the lender’s Dutch unit in 2003. He stepped down from the Amsterdam-based bank in December 2008, after the company was nationalized earlier that year.

Management Company

ABN Amro was broken up after the 73.3 billion euro ($100.5 billion) takeover by Royal Bank of Scotland Group Plc, Fortis and Banco Santander SA in 2007. A year later, the credit crunch drove Fortis to the verge of collapse, forcing the Netherlands to take over its Dutch banking and insurance units, including assets of ABN Amro."

Sat, 04/05/2014 - 15:44 | 4628455 Kaiser Sousa
Kaiser Sousa's picture


April 3, 2013

"Last week, a rubicon was crossed in the precious metals market as one of the largest banks in Europe defaulted on their gold contracts, and informed their customers there was no physical gold available for delivery.

ABN AMRO, the largest Dutch bank in the Eurozone, issued a letter to their gold contract customers of failure of delivery, and instead will pay account holders in a paper currency equivalent to the current spot value of the metal.

ABN AMRO, the biggest Dutch bank, has sent a letter to its clients stating that they will no longer be able to take physical deliveries of the gold they have bought through ABN. Instead they are offered money at the current market rate for gold. Basically, instead of owning a risk free, physical asset (a gold bar or a gold coin), the bank’s clients now own a monetary claim on ABN AMRO, being exposed to the bank's credit risk. - Voice of Russia

Over the past two months, there has been a concerted effort by the major Western banks to bring down the price of gold and silver, even as countries like Russia, Iran, and China continue to accumulate the physical metal in large quantities. Like the folly of betting against the stock markets when the Fed is pumping up equities with $85 billion per month, going against the J.P. Morgan silver short machine in the futures market has been a losing proposition for silver bulls."

Sun, 04/06/2014 - 09:20 | 4629670 Gordon Freeman
Gordon Freeman's picture

BFD...if you still want your phyzz, you take the money you got, and go buy some

Sun, 04/06/2014 - 10:04 | 4629708 Iam_Silverman
Iam_Silverman's picture

Hey Gordon, can you still acquire PM's with a crowbar?

Sun, 04/06/2014 - 17:51 | 4630554 quasimodo
quasimodo's picture

Easier said than done if you are talking aboout daddy Warbucks sized investors. They don't just go to Apmex and place an order. 

I heard someone is selling clues down the street from you, why not go grab a few.

Sat, 04/05/2014 - 16:14 | 4628509 bardot63
bardot63's picture

Sad to hear the whole family got whacked.  That cannot be good.  ON a macro-economic scale, however, is anybody keeping track of dead bankers?  The quetion is not what's the tally now. The real question is --- how many do we have left to go? 

Sat, 04/05/2014 - 16:42 | 4628551 bardot63
Sat, 04/05/2014 - 16:57 | 4628579 logicalman
logicalman's picture

Not neccessarily bad - kid's might have followed in father's footsteps.

OT - Bardot, in '53, looked a lot better than your avatar.

Sat, 04/05/2014 - 15:09 | 4628402 bardot63
bardot63's picture

Hey, NelsonMandella...I thought you died.  Be nice and stay dead.

Sun, 04/06/2014 - 09:21 | 4629673 Gordon Freeman
Gordon Freeman's picture

Fuck you, too, needledick!

Sat, 04/05/2014 - 14:51 | 4628362 Magnum
Magnum's picture

Alasdair Macleod of,, etc etc they always say buy buy buy. Jim Sinclair is a better rational opinion to hear on gold.  

I'm a skeptic when I hear GoldMonday or KingWorld opinions.

Demand for physical is so strong that price is down $250 over the last 12 months and my local shop has whatever anyone wants to buy. Oh yeah, the market is "maniiiipuuulated".  Yeah.

To me gold is a good hedge against rotten government but for many reasons it's also a lousy bet. Gold can no longer be transported across borders thanks to metal detectors.  Governments around the world are using every possible method to grab money to cover their own reckless spending.  This is deflationary.  Many perspectives to consider.

Sat, 04/05/2014 - 15:12 | 4628403 Kaiser Sousa
Kaiser Sousa's picture

buy stawks (maybe u've heard - the Fraud Market is rigged!)....

open a 1 yr CD @.85% interest before adjusted for 9% real inflation and taxes (paid to the people who create debt coupon dollars out of nothingness)...

get some bitcoin (thats really workin out)..

there r plenty of other things u could invest your debt coupon dollars in other than the only 2 forms of real money...

best of luck...

Sat, 04/05/2014 - 15:42 | 4628453 Magnum
Magnum's picture

I'm long on manufacturing equipment that turns a reasonable profit utilizing relatively inexpensive labor, thanks.  

Sat, 04/05/2014 - 16:33 | 4628534 ThirdWorldDude
ThirdWorldDude's picture

"manufacturing equipment that turns a reasonable profit utilizing relatively inexpensive labor".


So, are you saying you're long on shovels?

Sat, 04/05/2014 - 16:41 | 4628549 Kaiser Sousa
Kaiser Sousa's picture

and thsoe profits r denominated in what?????


Since the Federal Reserve and official U.S. currency were "liberated" from the discipline of silver and gold, the dollar has steadily lost value -- and that loss has recently accelerated (Bush war and Obama inflation losses are too recent to be fully shown in this chart). This represents one of the greatest thefts in history, mostly from honest working folks who can ill afford the loss.
Sat, 04/05/2014 - 17:08 | 4628601 Magnum
Magnum's picture

You should attend trade shows of German-made machines in my particular industry, and learn what $1M buys today.  Absolutely you will have a different perspective on the world.  If I had another million the last thing I would buy is a gold hoard.  Sorry.  I am saving up for a better investment and it's a big fucking machine that will allow me to increase production.

Sat, 04/05/2014 - 20:03 | 4628989 Seize Mars
Seize Mars's picture

I think you've pointed out something very important, that many people don't know or sometimes forget. The point of having equity-money (i.e. Gold) is so that you can defer your spending until later and your savings holds it's value. What do you do with it when it's time to spend it? Well, spend it on consumables or buy some capital goods.
In your case, you've pointed out that your own preference is capital goods sooner than later. Good for you, a man should have a clear idea of what he wants.
For me, I don't know what I will want in the future, probably farm equipment. So it makes sense for me to save. But for sure I want that savings to hold its value!!

Sat, 04/05/2014 - 18:35 | 4628748 TheReplacement
TheReplacement's picture

Don't forget hammers, axes, and machetes.

Sun, 04/06/2014 - 09:12 | 4629657 Iam_Silverman
Iam_Silverman's picture

"I'm long on manufacturing equipment that turns a reasonable profit utilizing relatively inexpensive labor, thanks."

Guillotines, perhaps?

Sat, 04/05/2014 - 17:01 | 4628588 Snidley Whipsnae
Snidley Whipsnae's picture

"Jim Sinclair is a better rational opinion to hear on gold."

I have respect for Sinclair's opinions... sometimes. Remember, what Sinclair predicted, 7-20-11 (see link below)... What is really nutty is his predictions accompanied by claims of 'market manipulation' and also presentation of 'gold charts'... Hey, do you want to chart the price manipulation or predict the future of manipulation with

Imo most of the gold salesmen were as surprised by gold taking off as the average gold bug... They happened to be in the right biz at the right time... when gold once again became important to the world. Golds rise was inevetable given the printing/debt situation in the world. Sort of like Chevy salesmen found themselves selling the right thing in 1955. I'm in the boat with them since I have always believed in PMs... but I do not make predictions about future prices. For me PMs are a way to preserve purchasing power... not a get rich quick scheme.

Gold has been above and below $1764 several times without 'going hyperolic'... To many, Sinclair is like a god, and he is well spoken and knowledgeable about economics and markets... but no one can see into the future... except those manipulating the markets.

"Sinclair: We've Come to the End of the Road, Gold to Go Hyperbolic After $1764"


Sat, 04/05/2014 - 17:06 | 4628596 Magnum
Magnum's picture

I am just as "on board" with the pro gold crowd as anyone, and I like Jim Sinclair.  Having said that, it is so obvious that there are stooge clown "buy gold" hucksters the likes are on KingWorldNews constantly, I give them no credence because their song NEVER changes.  Gold could be $14,000 tomorrow and they say the same damn thing "buy gold" it never ends.

Sat, 04/05/2014 - 18:51 | 4628813 Being Free
Being Free's picture

17:06 -- I am just as "on board" with the pro gold crowd as anyone,

17:08 -- If I had another million the last thing I would buy is a gold hoard.


Sat, 04/05/2014 - 19:08 | 4628866 Magnum
Magnum's picture

I like gold better than bonds CDs or stocks but for me I allocate far less in those than I do in real machinery.

Sat, 04/05/2014 - 23:38 | 4629296 chindit13
chindit13's picture

Sinclair is to gold what Bill Gross is to bonds.  Right place, right time.  The only difference is that Gross is sinfully rich, Sinclair not so much.  Markets eventually discredit everyone who stays too long or only knows one song.  Doesn’t matter the market, doesn’t matter the man.

Elsewhere, KWN is to gold what NAR is to real estate.


Sun, 04/06/2014 - 05:25 | 4629491 Snidley Whipsnae
Snidley Whipsnae's picture

You're NAR analogy is right on.

Wed, 04/09/2014 - 00:10 | 4638193 MeelionDollerBogus
MeelionDollerBogus's picture

From all the options for gold transport if you can't avoid a metal detector you're not very bright.

Sat, 04/05/2014 - 14:53 | 4628366 Mr Giggles
Mr Giggles's picture

The only way left to save for a pension.

Sat, 04/05/2014 - 14:56 | 4628374 unirealist
unirealist's picture

We've given them our factories and our gold. I suppose they'll want our women next.

Sat, 04/05/2014 - 18:17 | 4628381 813kml
813kml's picture

Are you calling the Chinese 'chubby chasers'?

Sat, 04/05/2014 - 15:21 | 4628427 RafterManFMJ
RafterManFMJ's picture

Sadly we can only supply the Chinese with 30 metric tons of women per year from our malls and Walmarts.

This works out to ~250 delivery good women per year.

Sat, 04/05/2014 - 15:35 | 4628443 Urban Roman
Urban Roman's picture

Took a minute to do the math for that.

Sounds about right, but by emphasizing the Walmart supply we might reduce the number to just over 200 +/-.

Sat, 04/05/2014 - 15:22 | 4628430 Winston Churchill
Winston Churchill's picture

To the Chinese they smell funny, plus you really have to hand it to American women....

Another demerrit.

Sat, 04/05/2014 - 17:01 | 4628587 keninla
keninla's picture

Please take Hillary first.


Sat, 04/05/2014 - 17:31 | 4628641 logicalman
logicalman's picture

I don't think Hillary fits the term 'woman', so it's unlikely.

Sat, 04/05/2014 - 19:11 | 4628871 rosiescenario
rosiescenario's picture

Nancy should be first.....

Sat, 04/05/2014 - 17:13 | 4628608 newworldorder
newworldorder's picture

The farm land is next. May have already been "promised" as security for Chinese loans via the treasury route.

Sun, 04/06/2014 - 00:05 | 4629324 falconflight
falconflight's picture

Take our women please....

Sun, 04/06/2014 - 07:41 | 4629565 WTFUD
WTFUD's picture

Yeah right dude!!! You forgot the triple sarc.

Sat, 04/05/2014 - 15:05 | 4628392 The Abstraction...
The Abstraction of Justice's picture

Which is why I am suing them. Why so much whinging here, and nobody does anything.


Come on lads be the first to contribute. If you are going to buy 5k worth of gold or silver, why not spend 50 euro or dollars, or what you will, helping my litigation to bring it all to a head:


The only hollistic litigation that attacks the weak spot - Deutsche Bank.

Sat, 04/05/2014 - 15:14 | 4628405 JustObserving
JustObserving's picture

The land value of Beijing alone is $21.8 trillion.  All the gold mined in human history is 5.6 billion ounces worth $7.28 trillion.  All the gold bullion available in the world today is only 2 billion troy ounces or worth $2.6 trillion.  As the housing bubble deflates in China, people would do well to move some of their assets to gold and silver.  The money flowing into gold and silver would be so large that gold and silver would rise sharply:


In the first half of 2013 the total revenue of Beijings land has reached 10.8 billion U.S. dollarsand the area of land sold in Beijing is 8.1 million square metersBased on these facts we can calculate that the average price of Beijing is 1334.4 U.Sdollars per square meterIf Beijing sells all its land out the total market value of Beijing is now as high as 21.8trillion U.Sdollars.

 (Beijing has a total land area of about 16.41 billion square meters) 

A total of 174,100 tonnes of gold have been mined in human history, according to GFMS as of 2012.[2] This is roughly equivalent to 5.6 billion troy ounces or, in terms of volume, about 9261 m3, or a cube 21.0 m on a side. (Wiki)


Sat, 04/05/2014 - 15:31 | 4628439 Oh regional Indian
Oh regional Indian's picture

I think there are a few temples in India that could top that by themselves.

And there is Yamashita's gold, the curse of the Phillipines.

GATA is a front.

174,000 ever. Hah. Someone pulled that one out of their Ass one fine afternoon.

Gold has a more mysterious hoold. Midas's tale surviving the test of time is no accident.


Sat, 04/05/2014 - 17:00 | 4628585 logicalman
logicalman's picture

You rarely come up with boring stuff, so.....

care to elaborate?

Sat, 04/05/2014 - 17:33 | 4628644 logicalman
logicalman's picture

The only true value of land is what you can grow on it.

Sun, 04/06/2014 - 01:08 | 4629378 Boxed Merlot
Boxed Merlot's picture

The land value... $21.8 trillion.  All the gold mined...worth $7.28 trillion...



Gold's value is in its use in trade.  In terms of electricity it's the relationship of voltage, amperage and wattage.  One volt at one amp equals one watt.  Total gold available is voltage, trade frequency is amperage and wattage is what one gets for the trade.  7.28 "trillion" is more than enough to supply the world's requirement for currency, (amperage), without the need for vacuous and irrelevant "bankers" and their "central" systems bleeding power, wealth and strength from otherwise virtuous human activity.


Wed, 04/09/2014 - 00:07 | 4638187 MeelionDollerBogus
MeelionDollerBogus's picture

"The land value of Beijing alone is $21.8 trillion"

Value is not a price. Yuan & FRN's are rapidly devaluing relative to real goods due to massive over-issuance, making your claim specious because it's using a rubber-ruler as a basic measuring unit, and worse, because the land itself is changing and not for the better. Pollution in China is horrific and you can't much use the land without using the air over it and that's getting heavily polluted too, therefore what is the value?

Rapidly declining for anything but hazardous waste storage.

Sat, 04/05/2014 - 15:10 | 4628410 Seeking Aphids
Seeking Aphids's picture

China demand for gold before 2013 had arrived at a plateau? Really? According to the numbers presented it looks more like a steady increase followed by a sharp increase. This may seem like a quibble but the implication is that the Chinese have been gradually and then rapidly increasing their importing of gold over the last 5 years....there is a trend here and it looks parabolic..... all imho.

Sat, 04/05/2014 - 19:13 | 4628876 rosiescenario
rosiescenario's picture

It would be interesting to chart their demand vs our Feds printing.....there might be a correlation.

Sat, 04/05/2014 - 15:42 | 4628449 Vin
Vin's picture

I seem to remember reading that the Intnl Bankers' cabal once did the same thing with silver.  Since, at that time, the Brits ruled India, they sold off India's silver which backed their currency and the currency of many other nations. 

Pushing silver prices down, they created global panic and ruined some nations.  All the while they filled their own coffers with as much silver as they could at the battered-down price.

Now, they've sold off taxpayers' gold supplies around the world and probably have scooped up untold tons of it for themselves in the process.  Using fake Federal Reserve Notes no less.  It's been an amazing scam for these banking families.

Why does no nation ever kill these families??

Sat, 04/05/2014 - 19:15 | 4628885 rosiescenario
rosiescenario's picture

....they are needed to finance wars and campaigns....

Sat, 04/05/2014 - 19:18 | 4628892 cynicalskeptic
cynicalskeptic's picture

The Chinese have VERY long memories.  

They remember the British who were losing silver by the tonne to pay for tea, porcelain and silk from China - while the Chinese wanted nothign from them.  The balance of trade deficit would drain England's silver in no time if things continued.  The British found a way to get their silver back - selling opium from India to the Chinese.  The fought and won two wars to FORCE China to allow opium shipments.

They remember that after WWII none of the treasure looted by Japan from China (and Korea and Malaysia and elsewhere) was ever returned.  Rumors of Yamashita's treasure - tonnes of gold and silver stashed in the Phillippines and grabbed by Marcos and the US - did not go unnoticed.  Much of that treasure supposedly went into US 'black ops' - buying and bribing politicians all around the world as part of the CIA's efforts to secure world dominance for the US.

China feels - rightfully - that they've been robbed, repeatedly, by the Western Barbarians.  The West may have dominated the world for the past few hundred years but China sees itself as the real and lasting center of culture in the world.  They plan on regaining their position of dominance - and gettign even with the Barabarians who treated them so badly.  So far they've played the game well - they got the West to GIVE them an industrial base in exchange for cheap labor - while in effect gutting the West's own industrial base.   China then took the earnigns from making crap for the West and invested in long term energy contracts and tangible assets - Australian and South American mines, African farmland and far more.

Long term, who come out on top?  A bankrupt US with a declining middle class being bled dry who can use only military force to maintain a collapsing empire or China who has a growing middle class and growing economy?   China can sell what it produces to its own population in the long term.  Can the US even afford to buy ANYTHING from others in the long run?

Wed, 04/09/2014 - 00:05 | 4638182 MeelionDollerBogus
MeelionDollerBogus's picture

Same reason the human species hasn't eliminated HIV: the virus has evolved faster than the host and is a hard-to-hit target. It knows how to manipulate whatever immune system is actually there, members of society, government, police & banking, and invert basic functions so that the body attacks itself first and hard in any attempt to eradicate the infection. One day that may change: infinite victory for the viral infection has not been carved in stone.

Sat, 04/05/2014 - 15:52 | 4628472 alfred b.
alfred b.'s picture


A tale of 2 sayings:   "As good as gold" will gain in popularity while the other "You can bank on it" is heading out the window!


Sat, 04/05/2014 - 15:54 | 4628475 hwwesq3
hwwesq3's picture

What all this comes down to is a proof that the "supply/demand curve" of beginning economics courses is pure hooey.  But then, isn't ALL of "Economics" just a fairy tale waiting to be disproven, every instant, by the real world?

Sat, 04/05/2014 - 16:20 | 4628515 Save_America1st
Save_America1st's picture

knock, knock, knock....hellooooooo????  Anybody home????  Wake the fuck up America!!!  Helloooooo???  Get phyzz silver and gold now while it's still on sale and available.  Helloooo???  No answer.  They're all still zombified, in a fog, worrying about whether pot is legal or what gays are mad about or trying to figure out who's a racist or how fat Kim Kardashian's fucking nasty ass is today or tomorrow or when the next version of the iDiot phone is coming out that they have to spend several hundred dollars on a fucking credit card for. 

Not planning for the inevitable collapse and the fact that their world (as idiotic as their own little personal worlds are these days) is soon to collapse and they will have nothing to show for it and no way to survive after the SHTF because they were too dumbed down by all the bullshit going on that basically mentally handicaps the majority of the sheeple.


Sat, 04/05/2014 - 17:12 | 4628605 mumbo_jumbo
mumbo_jumbo's picture

LOL, i can't help but laugh because if there really is a "collapse" all the gold in the world isn't gonna help you much,

the only precious metal that will help you then is led, and lots of it......oh and water.

Sat, 04/05/2014 - 17:37 | 4628654 logicalman
logicalman's picture

The 'preciousness' of metal varies by how you intend to use it, how important it is that you have the ability to use it, and how much you have.

By the way, I think you meant 'lead' and water isn't a metal.

Sat, 04/05/2014 - 17:29 | 4628639 RevRex
RevRex's picture

Foolish folks are "LEAD" er....ummm   led to believe that the collapse will happen overnight....

Wed, 04/09/2014 - 00:00 | 4638174 MeelionDollerBogus
MeelionDollerBogus's picture

Most collapses do happen overnight so to expect it in the right conditions is not foolish at all.

What's foolish is to incompletely measure the preceding conditions then bet everything on which particular night it will happen.

Sat, 04/05/2014 - 17:36 | 4628650 bullybear
bullybear's picture

So let me get this straight - China is cornering the global market in gold as an eventual support mechanism for their currency. Is that about right?  They are also entering into an Asian/Rusian axis as a hedge for more important inputs - food and energy. And who thinks the US will just roll over - or bend over as the case may be? I don't. WE have many cards to play - from war to an economic/monetary alliance with major Euro countires. Not to mention simply banning (as they have done before) private US gold holdings. What then happens to he demand for/price of all of China's gold? 

Sat, 04/05/2014 - 17:38 | 4628658 logicalman
logicalman's picture

I think throwing nukes at a problem is a bad idea.

Call me funny.


Sat, 04/05/2014 - 17:59 | 4628686 angel_of_joy
angel_of_joy's picture

You buy Chinese stuff. You need it because you cannot make it yourself.

The Chinese don't buy American stuff. They don't need anything that America still makes (which is not much, lately).

Who needs who ? 

Sat, 04/05/2014 - 18:44 | 4628788 Al Huxley
Al Huxley's picture

I was operating under the assumption that they desperately need our Treasury paper, which is why this is such a great symbiotic arrangement.

Sat, 04/05/2014 - 21:45 | 4629154 jez
jez's picture

You could refuse to let 'em have any Teslas.

Sat, 04/05/2014 - 18:08 | 4628697 bardot63
bardot63's picture

What you have, bullybear, is a US national leader who is a spineless, stupid, inept, fraudulent, treacherous, lying piece of pondscum who will happily, gladly leave US heroes to die on the battlefield as proven in Libya.   You don't need Russia, or China, to take down the USA.  Your elected president and the congress you elected is already on schedule with the planned takedown and destruction of this nation.  You might want to do some reading.

Sat, 04/05/2014 - 18:23 | 4628716 Snidley Whipsnae
Snidley Whipsnae's picture

"Not to mention simply banning (as they have done before) private US gold holdings. What then happens to he demand for/price of all of China's gold?"

The US is not the world economy. The US is 5% of the world's population consuming 25% of the worlds output... and that 25% is dropping.

If you understand Halford Mackinder's 'world island' (wiki it) you will see that the world island does not need the US... Nothing that is needed by the world island must be imported... from anywhere or anyone.

Many historians believe that both WWs were fought, in large part, to prevent any single country from control of the world island.

Certainly the US could become isolationist and has done so. But, that will not matter to the countries that are part of the world island if they cooperate in trade... a very big if.


Sat, 04/05/2014 - 19:27 | 4628911 cynicalskeptic
cynicalskeptic's picture

The rest of the world is wondering why they shoudl keep extending credit to spendthrift Americans.....

If you're working hard and living a subsistence lifestyle, why should you lend money to your lazy brother in law who's financing an opulent lifestyle with debt?  He threatens to beat you up if you DON'T lend him more but truth is he's gotten fat and lazy and isn't in very good shape anymore.   A couple of your friends - also tired of lending him money that never gets repaid - are also tired of his threats and proposed that you all get together and meet him in a dark alley after one of his drinking binges........

That time may be coming for the US.   A lot of the world is fed up with its bullying and claims of moral superiority (pure hypocrisy in the eyes of many)

Sat, 04/05/2014 - 19:30 | 4628921 logicalman
logicalman's picture

If the US went completely isolationist, the rest of the world would be a better place.


Sat, 04/05/2014 - 18:56 | 4628828 August
August's picture

>>>WE have many cards to play - from war to an economic/monetary alliance with major Euro countires.

All tremble before the might of the Group of Seven Most Insolvent Nations! 

If you're counting nukes or central banks, they do pack a serious punch; otherwise, not so much.  Europe is essentially a dead and irrelevant culture, with the USA not too far behind.

Sun, 04/06/2014 - 09:21 | 4629671 Iam_Silverman
Iam_Silverman's picture

Excellent use of the semicolon.  Sir, my hat is off to you!

Sat, 04/05/2014 - 19:18 | 4628894 rosiescenario
rosiescenario's picture

"WE have many cards to pla."


....keep in mind our "leaders" have not shown they are playing with a full deck....

Sun, 04/06/2014 - 00:43 | 4629367 xxxxx
xxxxx's picture

Any attempt at banning US Gold sales would be futile. It would simply play into the hands of the Chinese. China is keeping the price of Gold low to accumulate more cheaper, They do not want the price to rise that:s why they acquire Gold from all domestic mine output and by other means.

Tue, 04/08/2014 - 23:56 | 4638165 MeelionDollerBogus
MeelionDollerBogus's picture

" who thinks the US will just roll over - or bend over as the case may be?"

I do.

I'm old enough to see what happened and conclude they rolled over 20 years ago and you just haven't noticed yet.

Sat, 04/05/2014 - 22:21 | 4629208 bullybear
bullybear's picture

In many regards our leaders are inept, yes. Despite this, they are skillful at self-preservation. I bet on these skills be on display if China, et al get too feisty. China/Russia's only mistake to make is preempting our own suicide with something foolish.Then again, pehaps the lauded Chinese patience is overstated. 

Sun, 04/06/2014 - 00:51 | 4629373 stopthejunk1
stopthejunk1's picture

The price of gold does not matter.

The people who think it does, including the Chinese, are being taken for a ride.

In order for the stated and implied "analysis" in this article to be accurate, we'd have to assume that for some unknown and inexplicable reason, western bankers are acting in concert to destroy the economies and currencies of all western nations.

That is clearly preposterous.

It would be far better for the Chinese if they spent their money on consumer goods, rather than hoarding gold.  What are they going to do with it?

None of this should be surprising, however.  Humanity is still very superstitious, irrational, emotional.  And this keeps most people from being able to understand what's going on in the world.

Did no one ever consider that the West may be suppressing the price of gold specifically to get China to behave as it is behaving?  And how could China's actions regarding gold actually help the West and perpetuate the status quo?  I'm not going to give you the answers.  You have to figure it out for yourself.  Or you can just accept the analysis above instead, and actually believe that the same people that architected the current economic system have suddenly lost their way and no longer know what they're doing.  Yeah, ok.  Occam, call your office.

Sun, 04/06/2014 - 00:58 | 4629375 xxxxx
xxxxx's picture

The price of Gold does not matter only who has the most.

He who has the Gold makes the rules.

Sun, 04/06/2014 - 08:56 | 4629638 bullybear
bullybear's picture

"He who has the gold..." was relevant when gold was currency. Now it has been marginalized to commodity status - one with virtually no instrinsic value (at least not anywhere near todays prices). Gold has value only so long as there is a market for it. Don't underestimate the lengths western governments might go to in an economic war vs. a China/Russian axis.

Tue, 04/08/2014 - 23:55 | 4638158 MeelionDollerBogus
MeelionDollerBogus's picture

Gold is still currency so it's still relevant. You may not use currency but that doesn't matter: the central banks do. You are nothing to them, an ant. Ants don't use dollars either but we don't say "ooh, dollars are useless, ants don't use them!" You are irrelevant.

Sun, 04/06/2014 - 03:04 | 4629441 are we there yet
are we there yet's picture

China deeply needs to have 'FACE' for their national image. If one day they announce they are the worlds largest gold holder their prestige and 'FACE' are increased in the best way possible from their point of view.

Sun, 04/06/2014 - 05:37 | 4629499 Snidley Whipsnae
Snidley Whipsnae's picture

"In order for the stated and implied "analysis" in this article to be accurate, we'd have to assume that for some unknown and inexplicable reason, western bankers are acting in concert to destroy the economies and currencies of all western nations."

No, we do not have to assume your reasoning...

All we need assume is that bankers are working to maximize their short term profits and their bonuses. I believe that we can safely assume that much.

Sun, 04/06/2014 - 08:41 | 4629622 bustdrs
bustdrs's picture

"In order for the stated and implied "analysis" in this article to be accurate, we'd have to assume that for some unknown and inexplicable reason, western bankers are acting in concert to destroy the economies and currencies of all western nations.

That is clearly preposterous."

Nah, just lost control as nature dictates may happen when you stick to one very bad set of self serving policies past they're used by date.

Guess you're a boomer, eh? Worked well so far, agreed. Well done. So lock it up.

Tue, 04/08/2014 - 23:53 | 4638154 MeelionDollerBogus
MeelionDollerBogus's picture

I don't waste my money on non-durable consumer goods, can't suggest a good reason the Chinese ought to do such a stupid thing. Durable tangibles, skills to use them, raw materials, energy, medicine. Those are the things to purchase & hold, to use as needed.

"unknown and inexplicable reason, western bankers are acting in concert to destroy the economies and currencies of all western nations."

It's not "unknown and inexplicable" it's a poor definition & application of "west". Many of those bankers aren't "West", they are labeled so incorrect, and many bankers are in fact determined globalists who are loyal to zero people, zero corporations, zero nations. They will move away from the most repression predicted for a near time window to another that seems least repressive for the same time window. They'll keep moving.

That explains perfectly the move of gold to the East: the East isn't as repressive on-trend for what's coming compared to the West that looks like it's about to pull a 4th Reich move. The apparent story is that US-backed Neonazis are behind the Ukraine protests that precipitated Putin's annexation of Crimea.

I can't confirm without being there & knowing Ukrainian & Russian.


Sun, 04/06/2014 - 03:43 | 4629448 Practical Cogitator
Practical Cogitator's picture

If you take the Goldcorp estimate of total gold mined in the world since the beginning of time, i.e., 174,100 tonnes, and then divide that by 2013 mine production, i.e., 2,969 tonnes, you get 58.64 years.  Now, obviously the world has been mining gold for quite a bit longer than that.

After reading "Gold Warriors - America's Secret Recovery of Yamashita's Gold" by Sterling and Peggy Seagrave [2003], I'm no longer convinced the traditional Goldcorp-styled estimate of above-ground gold [174,100 metric tons] holds water.   

Annual gold mine production is currently running at roughly 2,700 metric tons - according to the USGS for 2012, about 87 million Troy ounces.  Multiply 2,700 tons by say 200 years [back to 1814]  and you get 540,000 tons.    If you go all the way back to say 1492 and assume 2,700 tons has been take from Mother Earth each year, that would be 522 years @ 2,700 tons/year = 1,409,400 metric tons in existence today.   

So, it seems to me IMHO that the total above-ground supply of gold in the world commonsensically has to be roughly 3 times Goldcorp's 174,100 estimate, or 540,000 tonnes.  And perhaps even 8 times Goldcorp's estimate, or 1,409,400 tonnes. 

85 multi-billionaires in the world are currently worth more than the bottom half of the world's 7 Billion people on the world's socio-economic scale - and it's certain they won't be talking much about how much gold they've salted away or where it's hidden.  Ditto the small players like you and me.  So, its a safe bet the total inventory of gold in the world is somewhere north of 174,100 tons, probably at least a half million metric tons, maybe even up to 8 times Goldcorp's 174,100 estimate.

It is a known fact that roughly 172 hiding places were constructed in the Philippines by Hirohito's younger brother Prince Chichibu - part of the well-explored Japanese "Operation Golden Lily."  Marcos uncovered a few stashes, and apparently the CIA has had its tabs on much of the rest ever since General MacArthur negotiated a Peace Treaty with Japan which let them off the hook for all their war crimes with barely a whimper - supposedly to gain access to the massive wealth stored in the form of hundreds of thousands of metric tons of so-called Japanese "Black Gold".  Add that to the Nazi gold collected by the Americans after WW II for the so-called "Black Eagle Trust" - also allegedly managed by the CIA to fight the Cold War - and we're talking a huge chunk of the missing world inventory. 

Someone or perhaps a handful of very rich, very powerful men could flood the gold market if they wanted to.  Or tip the scales with huge amounts of gold should we ever go back to a sane gold standard again.  Imagine the power they possess to influence the world's richest countries.

Sun, 04/06/2014 - 07:22 | 4629554 Snidley Whipsnae
Snidley Whipsnae's picture

"If you take the Goldcorp estimate of total gold mined in the world since the beginning of time, i.e., 174,100 tonnes, and then divide that by 2013 mine production, i.e., 2,969 tonnes, you get 58.64 years.  Now, obviously the world has been mining gold for quite a bit longer than that."

You are assuming that 'mine production' is constant or growing each year. Long periods of history saw no mining or greatly reduced mining.

And, the modern methods of gold mining were unknown and unavailable to the ancients. They couldn't extract a gram of gold from a zillion tons of dirt/rock.

Remember what happened to the European economy when Spain flooded Europe with looted South American gold and silver? Depression ensued, preceeded by the collapse of gold and silver prices. But, once the influx of S American gold and silver were dispersed throughout Europe and much of it came to rest in stronger hands the economy resumed as before... meaning that the bankers had most of the PMs.

Once again kings were pleading with bankers for loans to fight wars.

If 500,000 tons of gold exist above ground what difference does it make if the vast majority of the gold is held by govs, individuals, temples, etc, that are unwilling to part with it for any amount of fiat? 

One of the reasons that China (and most of Asia and the Mid East) seem 'foreign' to the West is that they have seen many fiats come and go... and, the Asians have learned (already knew) what Keynes was saying... 'save in the good years so that the starvation won't happen in the bad years'. Keynes simply borrowed 'his' policy from the Pharoahs that stored excess grain in good years to avoid starvation in the lean years. It's common sense and needs no fancy math to justify it. If a Chinaman makes two bucks a day he saves sixty or eighty cents. Over five thousand years this adds up to a hell of a lot of silver, which is what the Chinese saved for much of their history. Don't you find it interesting that the Chinese didn't dump a lot of silver on the world market when the fiat price spiked up? Chinese would rather keep the silver buried in their yard or where ever rather than trade it for fiat. Unlike America, China is not a consumer society... but they may become one.

There is an old saying... "if all the wealth in the world were divided equally among the world's population, within a few years the formerly rich would be rich once again." Iows, the suddenly new wealthy would piss away their wealth on whatever... just as they do today... in consumer societies.

It really matters little how much gold exists above ground as long as the vast majority of it is in strong hands... like stable governments that strive to keep their populations relatively happy and not starving and with intelligent, old families that understand 'generational wealth' and it's great advantages. There are very old families in China that have been saving in PMs for a very long time... and, these PMs are probably not included in recent estimates of China's total gold/PM holdings. Generational wealth means when a crisis emerges the family exits with their wealth and returns when the shooting stops... to reclaim their property. Generational wealth means that when a gov unfriendly to citizen ownership of gold comes to power the family gold is buried for 50 years or how ever long that gov remains in power. Smart families do exist.

Simple picture: China is trading labor for gold. Russia would like to trade natural resources for gold. The US dollar has no place in this picture if the dollar is disconnected from oil. It's really that simple. 

All governments want to print fiat, trade it for real products or commodities, and then debase the fiat after it's in the hands of their trading partners. Few get away with it.

For the US dollar to remain the major reserve currency the US will have to prevent China from acheiving military superiority. Military superiority depends on economic superiority. The Chinese really, really understand that patience is a virtue... Time is on Chinas side if they limit their mistakes. US military superiority depends on an economy strong enough to continue funding it. China knows it. China will continue to attempt to weaken the US economy with the help of US pols and bankers, interested only in the short term and their profits/kickbacks/bonuses... While in Viet Nam bankers are facing firing squads for what US bankers get away with. I would not be surprised if some Chinese bankers are put before firing squads... a few is all that are necessary for the rest to get the message.

I don't happen to believe in the 'Yamashita Gold' story and I appreciate a good yarn as much as the next person. Anyway, imo it matters little if the story is true or false.

Sun, 04/06/2014 - 18:30 | 4630629 Boxed Merlot
Boxed Merlot's picture

China will continue to attempt to weaken the US economy with the help of US pols...


i.e.,Feinstein and her male participle, Pelosi and her "Hands Off Obamacare" neice, Brooklyn Born Boxer and the soon to be again other "What Difference Does it Make?" Clinton. (among others).

"Would you like your evening to be spent in the hands of a specialist in Fannie or Freddie Skills?" (Standard voice mail recording on the Barney Frank home phone as recorded and archived by NSA)



Sun, 04/06/2014 - 09:31 | 4629681 Iam_Silverman
Iam_Silverman's picture

OK.  I understand the basis of this article.  Now I need clarification.  If I buy PM's to hedge against massive inflation or a structural financial collapse - how do I convert it back into a useful asset at that time?  Post collapse, if I need a tank of gasoline or diesel fuel, would I take a few ASE's to the filling station with me to barter with?  Would I have to go to my LCS and convert the PM's back into "currency" to purchase goods and services?

I am not trying to be facetious here - it seems like we are really only being given one side of the equation, and that's to stock up on PM's.  Somebody please postulate scenarios where I then take the stockpiled PM's and put them to work in a post-collapse world.

I guess that if the Chinese displace all of the Pakistani's and Indians here at the 7-11's, they would demand PM's in exchange for fuel and coffee, but other than that I am at a loss.

Tue, 04/08/2014 - 23:42 | 4638133 MeelionDollerBogus
MeelionDollerBogus's picture

Think like a local fiat currency: you would hold that local fiat currency to use where you know it will be accepted. Therefore for metals you'd need to find or establish the areas, types of people and/or geography or some other critical reason, why those metals would be accepted with little difficulty.

Some differential may exist between areas, some total absolute value will also come into play if there's a need for money (seems likely) and no desire for what we've had up to now (fiat paper) in the last 3 generations (remembering that before this era people happily used metal as money).

Your question is a good one but I suspect the reason it's good is because you have to answer it for yourself & no one else's answer will be quite as useful as your own.

Perhaps if enough of us truly question this we'll figure out the average-best in a given estimated locale and/or time period to come.

Sun, 04/06/2014 - 15:14 | 4630251 Herdee
Herdee's picture

U.S. military superiority is simply the easy way for China and Russia to bankrupt the empire.It depletes society of everything needed.Just keep the U.S. on the current path of self-destruction.Kind of like a military alcoholic.The Dollar as the world's reserve currency is slowly being eroded.As nations trade between themselves in their own currencies or any currency besides the U.S. Dollar system the growing debt of the empire becomes harder to finance.This takes time to erode the Dollar recycling.But right now I believe the U.S. Dollar system is down to what,60% of transactions?Desperation is evident now in order to try to use SWIFT as a financial weapon.The Yuan will continue to erode the Dollar just like the Euro is doing.Japan actually does the same thing and pretends to be a friend.Gold is the ultimate hedge against corrupt money printing that the U.S. uses to support a war machine.As time goes buy it's still called confidence.Inflation equals money printing and any rise in interest rates means gold will climb along with skyrocketing government deficits.There are still about 30 more Detroits in the U.S. that are in the same shape,that need more debt.Most Chinese,Indians,Russians,South Americans or the majority of the earths population have little faith in the Yankee Dollar when they see and watch what Washington politicians are doing to America.Does anyone in America actually think that the majority of the world has any confidence in moron politicians?Did I forget the most important item that will hit the U.S. in hundreds of years?Yes,it's the 34 States that will change The Constitution!She'll be a real blockbuster!

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