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Gold At $64,000 – Bloomberg’s ‘China Gold Price’
Gold At $64,000 – Bloomberg’s ‘China Gold Price’
- Bloomberg Intelligence suggest gold-backed yuan see gold at $64,000 per ounce
- “Chinese gold standard would need a rate 50 times bullion’s price”
- As China-U.S. relations deteriorate, gold-backed yuan possible
- Dollar and financial and monetary dominance of U.S. at risk
- U.S. and China war of words continues to escalate
- China rejects U.S. hegemony in Southeast Asia
- Currency war to escalate
If China were to partially back its yuan with gold it would require a gold price of $64,000 per ounce, 50 times gold bullion’s price today, according to a recent article from respected Bloomberg Intelligence.
It seems like an outlandish forecast. However, as tensions between the U.S. and China continue to escalate such a scenario is not actually as implausible as it may first appear.
If China were to back its yuan with gold it would require a price of $64,000 per ounce according to a recent report from Bloomberg.
While Bloomberg give no details as to how they arrive at this figure, our “back of envelope” calculations would confirm that at its current value relative to the dollar the yuan would indeed require gold – priced in dollars – to be priced in the tens of thousands of dollars.
Chinese M1 money supply is roughly 33.64 trillion yuan which at todays exchange rate equates to around $5.4 trillion.
Bloomberg conservatively estimate China’s gold reserves at around 3150 tonnes although many analysts believe the figure to be much higher.
In order to back $5.4 trillion yuan with 3150 tonnes of gold, the gold price would need to be in the region of $48,600 per ounce.
Bloomberg conclude that, at today’s prices, it would be “basically impossible” for China to fully back its yuan with gold. Indeed, at $1,200 per ounce, it would require over 126,000 tonnes to back $5.4 trillion.
Bloomberg states that “there’s no evidence” that China seeks to adopt a traditional gold standard. However, China’s appetite for gold in recent years has been voracious and it is clear that they and the People’s Bank of China (PBOC) place great strategic importance on the precious metal.
The Chinese have been quite overt in recent months in their ambition to establish the yuan as a rival reserve currency and it is likely that they intend gold to play a role in that ambition.
If China were to even partially back its currency with gold it would gain further favour across the world as a reliable reserve currency when viewed against the increasingly debased U.S. dollar. In order to maintain some semblance of credibility the U.S. would likely be forced to follow suit.
For the U.S. to back its gargantuan M1 with its stated, and almost certainly grossly overstated, gold reserves of 8,500 tonnes it would push gold prices to multiples of their current price.
There has been a definite heating of tone in the war of words between the U.S. and China in recent months. Only this morning, the Wall Street Journal reports on how details of 4 million federal employees were hacked in April. While the FBI have not directly accused China, the WSJ suggests that China is the prime suspect.
At the end of last month a Chinese state-controlled newspaper stated that if the U.S. continued to interfere with its activities in the South China Sea, war was “inevitable”. China are clearly not intimidated by the prospect of war with the U.S.
China rejects what it sees as U.S. “meddling” in South East Asia. At last years APEC conference, China’s president Xi had President Obama pointedly placed at the peripheries of the stage for the official photograph. President Putin was by his side. The message was subtle but quite clear – China views the U.S. as a peripheral nation in Southeast Asian affairs whereas Russia is at the centre.
If tensions continue to escalate – and with that the prospect of a “hot war” as recently warned of by many including George Soros – each side will seek to weaken its rival in a variety of ways. In January, Russia’s Prime Minister Medvedev stated that if his country were cut out of the SWIFT system, the “Russian response – economically and otherwise – will know no limits.”
In the event of an escalation in economic warfare it seems obvious that the achilles heal of the U.S. is the dollar and its erstwhile global reserve currency status. Many analysts believe that China would be reluctant to sink the dollar given it would undermine the value of their vast holdings of U.S. Treasuries and foreign exchange reserves.
However, there will be a tipping point where the advantage to be gained by badly impacting the dollar and positioning the yuan as new reserve currency will be greater than the disadvantage suffered by a collapse in the value of the dollar.
The tipping point is closer than many believe.
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Actually it would have to be $1 million an oz. if the US went back to a gold backed currency, that's based on the alleged 8,000 metric tons they hold.
This is exactly why no country in the world is going to return to a gold standard without a global economic collapse occurring first ... they would have to run years worth of current account deficits the size of their GDP to get a reasonable backing, for what advantage exactly? So their government would be forced to be more fiscally conservative? Oh yeah, that's really going to convince a government to do it.
Anyone believing in a return the gold standard by any country that can print its own money and have it accepted as a medium of exchange has an undying belief in the Resurrection of all the dead on Judgment day, is convinced that taxes will not rise, S. Nick, the easter bunny, the tooth fairy, and that gorgeous women do not poop.
Govts are making every effort to take money everywhere they can get it. No they won't allow a gold standard. They'll be confiscating gold.
new gold for old gold..
wonder if they could melt a traceable isotope
into new gold ,and create a 2 tier gold price ..
if a new economic system is brought on line
you can bet , there will be no free ride
for the unwashed masses,gold bug or not ..
Anybody who thinks that the Yuan will ever be backed by gold even 1/1000th of 1 percent... is a fucking idiot.
Do you know something? Or is that just an extremely confident guess, like all the other AHoles
Anyone that prefers bitcoin to gold in hand is a... FUCKING IDIOT!
Este gringo Locotec esta chingado en su cabeza, no?
Anyone who thinks that just because someone has one they naturally do not have the other is also drooling on themselves.
Agreed !! And anybody that thinks that the Earth is a globe is a ....... FUCKING IDIOT !
Then I are a fucking idiot!
At the same time tho, current paper money is backed by nothing except alot of bombs and bullets. Even 1/1000th would be an improvement yeah?
And I have heard much talked about a "global monetary reset", where I suppose could eliminate/reduce the debts of countries.
I am new at all of this but I try and slow it down and common sense. Say you had 1000 dollars in gold at current prices. They might let them print one million dollars. But thats all, you cant print anymore money until you get more gold...Maybe that is why CHina is buying gold mines?
I am just an amatuer making guesses
--- " I am just an amatuer making guesses""
--- " I am just a Chinese central banker making guesses"
Strategically it is always good to have reserves, stockpiles, critical supplies in long term storage, and a broad range of materials or goods or commodities. Life's Essentials, plus industry essentials, wartime essentials, disaster essentials.
Like Steel for Guns & Components for gunpowder, missile propellent, Tungsten or whatever you need to build Submarines.
Working Refineries, Oil Reserves, Natural Gas, Farmland, Lumber, Clean Water.
Gold & Silver for computers, communications, and satellites.
Human Beings have easy access to all of the above via mining and extraction.
You just left out the most important commodity which is not in as much abundance: intelligence
All I wish is that they would quit manipulating the price of gold/silver and let it go up or down on its own, depending on how much is being sold and how much is wanted etc. If nobody wants it, let it go down, but if its popular, then it should go up.
Its really that simple. Nike shoes are worth 1/100th of what it takes to make them, but because they are popular they are the most expensive shoes out there. I may have exagerrated on the 1/100th comment, but I bet I am not far off. Just getting my point across.
What would you propose to do?
I have a proposal ... all commodity futures trading should by default only be allowed to be done by producers and commercial consumers and only in quantities they expect to produce/consume, with physical delivery by default as well (all exceptions on the default only be allowed on a case by case basis). Penalties for failure to deliver should be limited to a X percentage of the original contract (the unlimited upside/downside of futures is only interesting for the steamroller crowd, fuck em).
That would be idiotic and lead to needless volatility. "Oh, I should have filled up yesterday, gas is up a buck today!"
AFAICS the only thing which stabilizes prizes are the futures sold by actual producers and bough by actual consumers, everything else is just a casino and only increases volatility.
Not just a casino, a means with which to rig the markets. They realized that necessity after metals and interest rates skyrocketed around 1980(loss of faith in the dollar). Rates have fallen since despite the US debt skyrocketing. For the last several years, they have actively been confiscating savings via 'below market' rates, rates that could not exist in an un-rigged market. Now, they are talking about eliminating cash. This is to confiscate even more savings to feed the beast.
The Chinese would not necessarily have to 'back' their currency with gold, but because of the lopsided nature of the currency/global trade markets, if they were to bring their gold to the forefront of their economy as some form of 'representation' or 'confidence-inducing' method of encouraging other nations to increase trade with China, the amount of gold would have to exceed (supposed) U.S. gold holdings by a W--I--D--E margin - as in, probably double the amount of gold held by the U.S., or more. That is what awaits to be seen. The only question that remains is, what will be the geopolitical trigger mechanism that 'arms' the weapon?
so sorrie
we no longer except federal reserve notes
what else you got ...
there have been no US dollars for many years now
Gold holdings are completely unnecessary as an incentive to trade with China ... it is only ever going to be an incentive to hold Yuan (denominated bonds).
The incentive to trade with China are their goods, not their currency.
Bloomberg is a joke. Don't waste your precious reading garbage from it.
A real gold-backed currency is a currency which the government will REDEEM for physical metal at the window no questions asked. No country will do that today. The next gold-backed currency of significance will not come from a government with a central bank.
I would expect a country or the IMF may claim a partially 'commodity-backed' currency - soon. With restricted redemptions - that means it's really fiat currency with better advertising.
"I would expect a country or the IMF may claim a partially 'commodity-backed' currency - soon"
Isn't Gold a commodity?
I would rather pay my $1500 CAD bill with an oz of gold than try to carry x # of bushels of wheat/rice/beans or barrels of oil!
Pay with fiat, demand payment in real money.
Gold will have no role as a currency / money until today's currencies are worthless and central banks collapse. Until then it is a commodity just the same as fresh eggs.
newsflash: bloomberg is staffed with dumbfucks
Must be true.
Only dumbfucks sit around calculating some hypothetical price of gold as if there could ever again be a gold backed currency. Gold Bug form of masturbation. Maybe it makes them feel better about taking it in the butt on gold with big losses since $1,800 a few years back.
Watch for the running around waving arms in the air when gold starts going up, especially if it is partially due to the Chinese.
Some will declare it an "assault" on the financial "system" (code word for US dollar dominance).
The fucking hilarity of this article is that the OP somehow thinks China is going to do a "fair and accurate" accounting to a gold backed yuan.
The US won't even audit its' fucking FIAT!
As for 8 tons of gold.......
As for an acceptance of a gold backed yuan, I trust that as much as their pet food and drywall.
It may become the dominate specimen, doesn't mean it isn't a sham.
I own gold, and silver. I think everyone should. This article is pure fantasy. The idea of a Chinese reserve currency is still a joke to me. The Chinese economy would implode with a Chinese reserve currency. Who would buy Chinese made goods with a Chinese reserve currency. Does anybody thinks the Chinese oligarchy is mors altruistic than any other?
The Chinese have just begun to print fiat. By the time they done they'll make the BOJ, the FED and the ECB Keynesians look like Austrians.
Backing the Yuan with gold doesn't automatically mean higher prices; it will be the death knell for the U.S. dollar meaning higher import prices and inflation for them but for the rest of the world the impact will be less. Dollar based debt will diminish meaning inflationary forces around the world but certainly nowhere near the proportional increase in the price of gold - so PM investors would have a large and distinct advantage.
$64,000k is beeing seen as astronomical by commenters, i beg to differ.
Just like compounding interest, the compounding effect of supression of gold price for by "fixing the price" to the dollar at $35 per oz until 1973, than by market manipulation since 1973 years has distorted our view of what it actually should be worth in terms of USD.
the M1+ M2 monetary supply has skyrocketed 120 x since '1959 since this is as old as a reference chart goes
http://www.tradingeconomics.com/united-states/money-supply-m2
if the US government still holds the same 8500 tons. then $35 per oz circa 1959 times 120 growth in fiat supply equals $4,200 per oz.
at this rate if silver were still priced at 1:15 to gold the Am Eagle would melt at $280.
If we could stretch the chart back to the 1933 date of the "turn it in" executive order, (during the great depression no less) we might be able to see a pretty dramatic bump in AU/AG values projected forward to today.
Was the US economy 2x or 4x larger in '59 than '33? I suspect it may have been.
That's $17k gold and $1100 silver per oz.
This does not even factor in the growth of world economies vs. the growth of gold supply.
With the explosion of economies in the third world over the past 60 years, this would further inflate the true value of gold and silver vs. fiat
We have been fleeced by the manipulators of the metals.
Our once great nation of freedom and liberty, and strength for the middle class is GONE.
I Miss America.
My stack's lookin better and better :)
This argument that gold manipulation is somehow greatly suppressing market price of gold and silver is absurd. Even if you buy the argument that gold and silver manipulation is going on, which I think is reasonable, it is not affecting the price in any meaningful way for Joe six pack that wants to buy gold or silver for the coming financial apocalypse. It is affecting it in small ways that make hugely leveraged bets profitable.
What affects price in is supply and demand. Gold enthusiasts may point at huge demand from China, India, or pick your favorite, but if there was truly so much more demand than supply at the current price, the price would go up. If that isn't happening, the the market is not under that impression at the moment.
$64k is laughable. Not just a little funny. Really funny. Unless the U.S. goes into outright hyperinflation that was predicted falsely (or should I say, at the wrong time and for the wrong reason), this forecast isn't worth the bytes of data it consumes. I would t be surprised to see outright deflation in world economies, despite the crazy easy credit policies. This will more than likely bring the price of the metals down, at least until deflation has run its course and they attempt to go Japan on it. Then buy your gold cheap.
swass - your entire rant and ridicule against the idea that supply/demand of physical gold sets the price does not hold much water. You do realize that for every 1oz of physical gold there is around 110oz (and climbing) of paper gold oz that all claim to have ownership of that 1oz of physical. Even a high schooler with a basic sense of economics can see how an endless supply of paper gold can greatly distort the supply/demand curve.
My argument makes the most sense out of any comment so far. More demand and less supply means higher price. I made that abundantly clear. Youre all saying there is far more demand than supply in relation to its price, which is hogwash. If it were true, go take out your life savings in gold and live on easy street. I like gold, but it is a store of wealth not a wealth creator. It is an unproductive asset. Just like cash, except I can't go to target at the moment and buy food with it. You need to invest the capital in something productive to create wealth.
You just wait until inflation climbs and watch the sheeple flock to gold!
I would bet the people in Weimar flocked to gold as well but there prob wasn't much to be had.
LOL "supply and demand" LOL. Riddle me this: when someone goes onto the Comex and places an order with 100:1 leverage, exactly how does that relate to the available "supply" of physical metal? LOL
Agree however that the dollar price of gold can decline sharply from here but it has nothing to do with demand for physical. This is a game of musical chairs, as Chuck Prince reminded "while the music's playing you have to dance". When the music stops there's a mad scramble for the remaining chairs...but the players know most of the chairs are broken (like in 2009). What do they do? They look for money good collateral, everybody's else's paper chairs are suspect. So voila, gold repo soars, flooding the market with brand new "paper gold".
One very important factor that you have left out is the fact that the .gov's have everyone convinced that gold is a barbaric relic.
All of my friends say"what is gold good for? Paper is mopney"!
When all the sheeple wake up to the Fiat Con, gold will be the only currency, and US paper will be like the Zimbabwe dollar $300 billion for a coke.
Just by conning the sheeple into believing Fiat is money has suppressed the gold price huge!
"Just by conning the sheeple into believing Fiat is money has suppressed the gold price huge!"
Right and where do they stash nearly all their retirement? Gov. bonds and Corp. stocks. They need a a big banner that says Mission Accomplished, the sheeple have been fleeced! We are definitely very close to Peak Fiat within the long term time frame.No in is really convinced gold is a barbarous relic. They just don't need it for their daily lives because it is not considered currency in most the world. I can't deposit gold in my bank or get gold out. The government has forced people to use fiat. Most don't care. If I want to buy groceries from the store, I use cash and not gold. They don't accept gold. If I want cash, I need to sell my gold. If lots of people try to sell their gold for cash, as typically happens when the economy tanks and people have no job, the price of gold goes down not up.
They just don't need it for their daily lives because it is not considered currency in most the world.
And why don't they need it? because of the fiat con!
In 1971 when Nixon "temporarily left the gold standard" Why temporarily?
Well because if he announced a permanent closure of the gold window there would have been way more backlash to the idea.
the entire world should have had WW3 right then and there ,everyone against the U-S .gov
Oh how the world would be a different place today!
Most don't care because they are debt slaves or destitute. Even most of the ones with savings are net debtors. Thus, they depend on the inflationary bias built into fiat. They have no concept of real savings, not owing the bank.
Look everyone, I own physical gold and silver, but I am under no false understanding of what gold is and what its purpose is. It seems few people here can distinguish the differences between economics and finance. They are totally different things. Finance has people bidding assets up through greed and selling them out of fear. Gold is no exception to this basic principle. The M0 didn't suddenly contract forcing gold down from 2000 to 1200. People sold it. Greater supply than demand. Doesn't matter if it is paper trading hands or physical.
Price doesn't matter. At 64k an oz., our world will have changed and dramatically worse. Having said that, I am 75% invested in metal and buying every two weeks.
Cracks are beginning to develop in the banking world's grand ponzi scheme. With bond prices falling and yields rising- I think the end of the great QE bull market is upon us. Finally.
I very honestly believe, instead of raising rates (and then only nominally) when the deflationary shitstorm hits- I think it will be time for QE 4. ZIRP has leaked into the housing market so badly- that home prices in my town have almost doubled in one year.
These fuckers have screwed the pooch. There is no way out.
Woof....
Malarkey
The price of gold is not static and its relation to everything else is not static
In ancient times an ounce of gold would buy you a loaf of bread every day for a year.
Today, an ounce of gold will do the same.
Price and value are not the same thing.