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Is China Already The World's Largest 'Owner' As Opposed To 'Holder' Of Gold?

Tyler Durden's picture




 

Submitted by John Browne via Euro Pacific Capital,

For decades many of us in the hard money world have speculated that cloak and dagger activity by large financial interests has played a large role in determining performance in the gold market. The focus of this alleged manipulation is believed to be in the London market, and has been widely referred to as "The London Fix." However those who have blown the whistle have been dismissed as alarmists, gold bugs, conspiracy theorists or worse. But recent revelations should bring us closer to the truth.

On March 11, 2014, the Wall Street Journal reported that AIS Capital Management had filed a class action suit, against a number of large banks including, Barclay's PLC, Deutsche Bank, HSBC, and many others, alleging that the banks conspired to manipulate the price of gold for their own gain. This suit comes on the heels of official investigations in the UK and in Germany.

Like the London Inter Bank Offered [interest] Rate (LIBOR), the London Gold price forms a benchmark for the spot price for major gold metal transactions throughout the world. The LIBOR scandal rocked the financial world. But Germany's senior financial regulator declared possible gold manipulation as "worse than LIBOR". These words appeared to give new meaning to the word 'fix'. To get at the truth, it helps to try to follow the international flows of gold, to see who is buying, who is selling, and where the gaps may appear.

Major gold trading has long been shrouded in mystery. Despite returns required by the IMF, trading in the Far East is difficult to trace accurately. In 2009, China's central bank disclosed that its gold holdings had increased by 75 percent from 600 to 1,054 tonnes, or metric tons. According to Wikipedia, this made China the world's sixth largest holder.

Gold Field Mineral Services (GFMS) estimates the world's total gold production for 2013 was 2,982 tonnes. With an annual production of some 428 tonnes, according to Forbes Asia, China is the world's largest producer. But, like Russia, China exports no gold. If China's last three years annual assumed production is aggregated, China's 2009 declared holdings of 1054 tonnes should have increased since by some 1,284 tonnes, for a total of some 2,338 tonnes. This would make China one of the world's largest holders. But the story does not end there. China imports massive amounts mainly via Hong Kong and Shanghai.

According to Forbes Asia, the China Gold Association showed that China's gold consumption increased by 41 percent over 2012 to 1,176 tonnes in 2013. (China does not publish official numbers so discrepancies range in the hundreds of tonnes) Adding these imports to China's domestic production of 428 tonnes indicates that China accumulated at least 1,604 tonnes last year.  India's imports, as reported by Bloomberg, were 978 tonnes last year. Therefore, China and India together accumulated 2,582 tonnes or over 86 percent of total worldwide production of 2,982 tonnes.

Furthermore, combining China's aggregate domestic production and apparent imports indicates that she has now over 3,514 tonnes. Assuming the U.S. still owns all the gold held by the Fed, this would make China the world's second largest national owner.

In addition to China and India, Indonesia, Saudi Arabia and Thailand increased their gold holdings in 2013. As gold is a widely recognized representation of wealth, this represents a massive transfer of 'real' wealth from West to East.

Clearly, the massive Eastern demand for physical gold has made it much more difficult for Western central banks' mission to lower the market price of gold. That is unless Western central banks have been leasing out gold secretly to market buyers, who have been 'encouraged' politically, like Germany, not to take physical delivery?

When, at the beginning of 2013, Germany asked for the repatriation of just 300 tonnes of its holdings of 3,396 tonnes, the Fed asked for a five-year delayed delivery. By year's end, the Fed had sent Germany only 5 tonnes.

Although privately owned, partly by bankers, the Fed is audited only partially. Could it be that a large portion of the Fed's published gold holdings of 8,133.5 tonnes is now actually the property of other nations, like Germany?

Is China already the world's largest 'owner' as opposed to 'holder' of gold? If so, China, with a mature financial center in Hong Kong, already is further along the path than most have predicted towards challenging the vital reserve currency status and international credibility of the U.S. dollar.

Clearly the recent price rise in gold owes something to inflation fears, repressed interest rates and to the Ukrainian situation. In the meantime, a growing awareness of a possible serious and increasing shortage of physical gold and a decline in the power of western central banks to suppress the price, point to a resumption of the fundamental bull market in gold, despite a possible increase in fears of recession.

 

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Mon, 04/14/2014 - 21:39 | 4659179 DoChenRollingBearing
DoChenRollingBearing's picture

The Central Bank of DoChenRollingBearing wants to be the largest owner of gold.

Mon, 04/14/2014 - 21:49 | 4659213 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Hmm, I believe there is an error in the article:

"Although privately owned, partly by bankers, the Fed is audited only partially. Could it be that a large portion of the Fed's published gold holdings of 8,133.5 tonnes is now actually the property of other nations, like Germany?"

Most of the gold held by the Fed (FRBNY) is foreign gold, only about 400 tonnes of that is US gold.  

Most of the US gold is at Ft Knox.  +/- 8100 tonnes ("total US national gold", much of it 90% coin melt from the 1933 confiscation).

The tonnage stored by the FRBNY is a similar amount by coincidence.

Mon, 04/14/2014 - 21:52 | 4659221 linniepar
linniepar's picture

We the people will never see "our" gold.

Mon, 04/14/2014 - 21:58 | 4659240 kliguy38
kliguy38's picture

gold is the money of kings.... not muppets ...so of course you'll never see "your" gold. if you want to own gold you have to POSSESS it and protect it YOURSELF...the goldsmiths learned all of this centuries ago......gold is the money of kings

Mon, 04/14/2014 - 22:04 | 4659254 InjectTheVenom
InjectTheVenom's picture

Yaaawwwwwn . . . . . wake me up at gold $3K

Mon, 04/14/2014 - 22:32 | 4659325 Manthong
Manthong's picture

crud..

like the chinks or rooskies will accept FRN paper/digital crap.,,

Hmm.. I had to through several maneuvers to get this posted,,,

OK, my fault,, not te PTB....

 

Mon, 04/14/2014 - 22:48 | 4659405 Serfs Up
Serfs Up's picture

Isnt' this "news" a day late and a kilo short?

McLeod broke this weeks ago, only with data and sources provided.

...still....if you like your news stale and fact free, this is excellent diet news.

Mon, 04/14/2014 - 23:22 | 4659503 Indian_Goldsmith
Indian_Goldsmith's picture

You should come check out my gold vault. No country in the world can even come close to holding as much gold as the Indians do. Remember that. And indians never sell their gold.

If you consider what the RBI holds,  even patriotic Indians LOL at the "stated" holdings of the RBI. All hogwash...

 

/come to india

Tue, 04/15/2014 - 07:35 | 4659945 Pinto Currency
Pinto Currency's picture

 

The NY Fed says it holds7,000 tonnes of mostly foreign gold.

The US gold is held by Treasury and it is stored in Denver, Ft. Knox and at West Point.

Tue, 04/15/2014 - 09:07 | 4660259 espirit
espirit's picture

The U.S. MAY get to keep the gold given it by the Vatican for spreading the long arm of Christianity, if it has not yet been squandered.

Tue, 04/15/2014 - 03:48 | 4659795 toothpicker
toothpicker's picture

$3K is snooze time

Tue, 04/15/2014 - 07:32 | 4659939 Bill of Rights
Bill of Rights's picture

How nice of you to put a value on it for us...I consider mine priceless.

Tue, 04/15/2014 - 00:58 | 4659647 mt paul
mt paul's picture

the muppet king ....

Tue, 04/15/2014 - 05:30 | 4659856 negative rates
negative rates's picture

Gold is fer spendin, not saving.

Mon, 04/14/2014 - 22:23 | 4659308 ThaBigPerm
ThaBigPerm's picture

If most of what is supposed to be in Ft. Knox is alleged to be gold from the '33 confiscation, we're screwed.  Executive Order 6102 required that gold to be turned over to the Federal Reserve in exchange for Federal Reserve Notes, not Ft. Knox (or the US Gov)

Mon, 04/14/2014 - 22:39 | 4659343 DoChenRollingBearing
DoChenRollingBearing's picture

And the Fed turned over the gold to the Treasury.  The Fed got, in return, some kind of non-redeemable, non-transferrable Gold Certificates, worth about nothing IMO.  The Fed values that non-existent gold (for them anyway) at $42.22 / oz.  That $42.22 is what you "see" on the Fed Balance Sheet (each weekend at Barrons for example).

A link:

http://www.newyorkfed.org/aboutthefed/goldvault.html

A useful pdf:

http://www.newyorkfed.org/banking/fed_brochure.pdf

There is another FRBNY brochure around that is better, but in my cursory search I did not locate it.  That one I could not find just now has LOTS of nice gold-porn pictures!

 

Tue, 04/15/2014 - 05:32 | 4659857 negative rates
negative rates's picture

But the moment the certificates are worth something, your argument goes to nothing.

Mon, 04/14/2014 - 22:43 | 4659384 Latitude25
Latitude25's picture

Ron Paul interviews the FED and they admit they have no gold.  It was turned over to the treasury.  They only have gold certificates.

https://www.youtube.com/watch?v=qtq0JqUCdTI

Mon, 04/14/2014 - 22:47 | 4659400 DoChenRollingBearing
DoChenRollingBearing's picture

Last I heard they had custody of about 400 tonnes of US gold.  Most of the rest of the US gold is at Ft Knox.

Most of the rest of the FRBNY's gold, in custody (not owned by the FRBNY), is foreign gold. Yes re Certificates, although I know very little about them.  Thanks for the link!

Mon, 04/14/2014 - 22:51 | 4659410 cynicalskeptic
cynicalskeptic's picture

But what if Treasury doesn't have what it is supposed to have?  Lots of rumors about Ft.Knox being looted and gold replaced with tungsten cored bars..... Rockefeller's secretary committing suicide after reports on Gold being moved out.....

and even if Ft. Knox wasn't emptied then, who's to say that the gold that the US supposedly owns hasn't been sold 50 times over?

 

Could it be that the US doesn't have what it claims, and given that Germany clearly does not have in its possession what it 'owns', that China is actually the largest holder of gold?

Mon, 04/14/2014 - 22:59 | 4659431 Latitude25
Latitude25's picture

Not that I believe there is any gold in Ft Knox but until proven one way or another we don't know for sure.  The repatriation of Germany's gold was a political move forced by the German public wanting accountablility.  Buba is not really interested that much in gold repatriation.  They are in agreemment with the US holding their gold so that it is ready to be used in swaps easily.  So basically what I'm saying and what others have said is that Buba doesn't really care if they only got 5 tons in a year.

Tue, 04/15/2014 - 00:52 | 4659642 Kirk2NCC1701
Kirk2NCC1701's picture

TYLER, Jim Rickards keeps going on about all the gold that the US Gov has. 

Can ZH get him to discuss on what hard data he bases this on?  Or is he merely regurgitating the official party line, to which he signed the NDA with the Gov, when he did his Currency Wars sim games with them at DOD's Advanced Physics Lab some years ago?

p.s. Will we ever get ZH Radio online?

Tue, 04/15/2014 - 04:43 | 4659832 Cacete de Ouro
Cacete de Ouro's picture

From the US Treasury bar lists, most of the Fort Knox and Denver gold is coin melt and of irregular size and weight.

In fact much of the US Treasury's stated holdings at the FRBNY are coin melt also.

Tue, 04/15/2014 - 00:28 | 4659611 Harrison
Harrison's picture

I don't know about gold, but they sure do have a lot of tungsten!

Mon, 04/14/2014 - 21:40 | 4659183 greatbeard
greatbeard's picture

>> a decline in the power of western central banks to suppress the price

Somehow I hand't noticed that.  What about the current price of gold makes you think the central banks are losing the ability to control the price?  Is it because the price hasn't gone to zero (yet)?

Mon, 04/14/2014 - 21:43 | 4659193 frank650
frank650's picture

I find it interesting that banks are subject to massive regulations and scrutiny of their books while central banks "shroud" their trading in gold with mystery.

Mon, 04/14/2014 - 21:44 | 4659196 maskone909
maskone909's picture

I guess thats the deal behinde the bundy ranch thing. They want to confiscate all our land and put it up as collateral to our creditors because the dollar is toast. Burnt moldy toast.

Mon, 04/14/2014 - 22:34 | 4659352 Debeachesand Je...
Debeachesand Jerseyshores's picture

They also want the water rights to that land......

Mon, 04/14/2014 - 21:45 | 4659201 Hulk
Hulk's picture

I have lost over 4,000 tons canoeing in the James River. So if you Bitchez see shiny shit in the James river, just a spit away from Ike Godsey's place, leave that shit alone !!!

Mon, 04/14/2014 - 21:56 | 4659230 kchrisc
kchrisc's picture

"Is China Already The World's Largest 'Owner' As Opposed To 'Holder' Of Gold?"

I would imagine that the answer is the same as to whether a bear shits in the woods.

Tue, 04/15/2014 - 01:02 | 4659653 mt paul
mt paul's picture

China

don't boat ...

Tue, 04/15/2014 - 01:14 | 4659669 StychoKiller
StychoKiller's picture

If not China, then it's India!

Tue, 04/15/2014 - 09:08 | 4660268 Drachma
Drachma's picture

Does that bear use an American or European rabbit to wipe its ass?

Mon, 04/14/2014 - 22:17 | 4659292 Acidtest Dummy
Acidtest Dummy's picture

They should definitely make double sure that their boat isn't tippy.

Mon, 04/14/2014 - 22:21 | 4659294 bilbert
bilbert's picture

"Is China already the world's largest 'owner' as opposed to 'holder' of gold?"

Methinks it is better phrased: "largest 'owner' as opposed to 'theoretical holder' of gold?"

I believe a few of the larger "Paper Boys" will actually become 'owners', when reality makes an "unexpected appearance".....

B

Mon, 04/14/2014 - 22:28 | 4659296 Latitude25
Latitude25's picture

I believe that Koos Jansen's publication of 2013 SGE gold withdrawls is a more accurate reflection of Chinese gold consumption at around 2200 tons for 2013.

http://www.ingoldwetrust.ch/

Also if you believe any numbers coming out of the Indian government you get a false picture because they don't include massive smuggling.  

http://www.ingoldwetrust.ch/jayant-bhandari-indians-are-desperate-for-go...

My calculation of world gold consumption based on this data is closer to 4765 tons for world demand in 2013 which exceeds global mining by quite a bit.  The city of London was the largest goldmine in the world for 2013.

Mon, 04/14/2014 - 22:52 | 4659374 NDXTrader
NDXTrader's picture

If you think the "published" number is the actual amount of gold the US owns then you sir are a fool. They keep the number low to perpetuate the fiat meme. While peddling fiat and keynesism to the rest of us TPTB know what real wealth is - or do you think JPMorgan just stacked paper?

Mon, 04/14/2014 - 23:43 | 4659539 tony bonn
tony bonn's picture

"...Furthermore, combining China's aggregate domestic production and apparent imports indicates that she has now over 3,514 tonnes..."

let's just say this author is a day late and an ounce short.....he is a complete waste of time on china's gold holdings.... willie, with far more reliable sourcces, puts the number 5-6 times higher.

the usa has no gold left - zero without the hedge. the numbers reported on the fed's and treasury's balance sheets are ious - lies.

he who owns the gold makes the rules. the usa is swirling down the out house hole.

Tue, 04/15/2014 - 01:00 | 4659649 The wheels on t...
The wheels on the bus are going to fall off's picture

There is no doubt in my mind that Gold will play a larger role in the economy in the next few years. The reforms at the G20 to allow the BRICS have more voting power will happen in 2015, with or without the approval of the US.

Once the BRICS are the majoirty voter, then the reserve and financial system will change with some sort of backing of commodities (to suit their strengths)

All you have to do is understand what the East is doing (acquiring tangible assets) while the West plays roulette with virtual and social media stocks on Wall Street.

China isnt really letting up on their imports of Gold, so the longer the Ponzi goes on, the more likely China will be the largest gold holder and producer (if they are not already)

One alternative view about the US and their lack of deliver to the Germany, is whether or not the US knows that Gold is likely to play a larger role in the future, therefore fuck the EU and if Germany wants it gold then come and get it.....What is Germany actually going to do about it? Posession is 9/10ths of the law....

There is a rumour that the UK/US have stolen the Saudi's gold already and its likely they have stole the Ukraines gold.....

Just throwing shit out there, but its something that no one seems to be considering in any post i read about

Tue, 04/15/2014 - 02:28 | 4659745 Kina
Kina's picture

But near the center of the earth the USA has much gold in deep storage 

Tue, 04/15/2014 - 03:43 | 4659791 CHX
CHX's picture

The conclusion is missleading, as it should be asked, "Is China now the largest HOLDER of Gold, and the US the largest (L)OWN-er ?"

Tue, 04/15/2014 - 05:57 | 4659871 Azannoth
Azannoth's picture

If the Central Banks every really did lose control over the price of Gold, ie. AU at 5000$ or $10000+ we would very quickly see a "Political Solution" to the gold-price problem ie. Prohibition/Confiscation, there is no Country for Old Serfs any more, either you're with the program or your an enemy of the state.

Tue, 04/15/2014 - 06:57 | 4659898 Bernoulli
Bernoulli's picture

Wouldn't that jack up the price even more?

Tue, 04/15/2014 - 06:56 | 4659897 Calculus99
Calculus99's picture

Like a broken record, every month I buy a few more Brittanias.

If you're  British those  are the only ones to get as they're legal tender, just like a  £1 coin, which makes them tax-free. All the others, Kruggerrands, Maples, Pandas etc are not tax-exempt. Although quite how the taxman would know you own physcial I don't know...    

Tue, 04/15/2014 - 07:31 | 4659936 Fix-ItSilly
Fix-ItSilly's picture

Show us you can count like an adult, not a child.

These gold articles quoting stats of half a story need to end.  China and Russia are closed societies run by crony leadership - what gold they produce and vault is unknown.  As is a chunk of their imports.

To quote unverifiable stats, without providing a modicum of justification, is the basis of good propaganda.

So give us the US, Europe, Indonesia, Japan, etc. importation and mining figures. Juxtapose and show that your numbers for ownership match production and have quality.

Again, show us you can count like an adult, not a child - with verifiable, supported insight.  Stop being like Ted Butler.

Tue, 04/15/2014 - 08:03 | 4659997 Notsobadwlad
Notsobadwlad's picture

Besides the minor use of gold in electronics, the main practical use of gold is as a perfect reflector of IR radiation. Make with that what you will ... or maybe China just wants the gold because they believe the propaganda that it has intrinsic value as a superior paperweight.

... or maybe as yellow jewelry.

Tue, 04/15/2014 - 08:07 | 4660007 BigInJapan
BigInJapan's picture

The Japanese bulked up on physical gold during their bubble. I was witness to the Japanese firesale on gold, the last few years I lived there and took full advantge of it. I've always had a more balanced opinion of my holdings though - I fully expect the Chinese and the Indians to shit the bed on gold once we have a true market crash - the ones who hold and come out the other side of that mess will be able to look back and laugh.

Tue, 04/15/2014 - 09:27 | 4660355 Shadrake
Shadrake's picture

Tyler: the Federal Reserve doesn't own any gold at all. FDR seized all privately held gold in 1933, including the Federal Reserve's holdings. US official holdings are held physically under the control of the US Army at Ft Knox and financially on the Treasury Department's balance sheet. The Fed has no claim against any fixed physical weight of gold on its balance sheet.

Tue, 04/15/2014 - 10:10 | 4660636 Youri Carma
Youri Carma's picture

"The focus of this alleged manipulation is believed to be in the London market, and has been widely referred to as "The London Fix.""

Why still say "alleged" when it's fully admitted?

Gold Fix Drawing Scrutiny Amid Knowledge Tied to Eruption
25 November 2013, by Liam Vaughan, Nicholas Larkin and Suzi Ring (Bloomberg)
http://www.bloomberg.com/news/print/2013-11-26/gold-fix-drawing-scrutiny...

Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919.

Gold Target Cut by Morgan Stanley Seeing ‘More Pain to Come’
22 January 2014, by Glenys Sim (Bloomberg)
http://www.bloomberg.com/news/print/2014-01-22/gold-target-cut-by-morgan...

London Fixing

Banks are considering an overhaul of London’s century-old gold benchmark, according to a person with knowledge of the process, as Deutsche Bank AG last week said it will withdraw from fixings as it scales back its commodities business. The method has faced scrutiny in recent months, with regulators in London, Bonn and Washington investigating how prices are set.

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