"A Scramble For Gold Has Begun"

Tyler Durden's picture

Authored by James Rickards, originally posted at The Telegraph,

For a century, elites have worked to eliminate monetary gold, both physically and ideologically.

This began in 1914, with the UK’s entry into the First World War. The Bank of England wanted to suspend convertibility of bank notes into gold. Keynes counselled wisely that the bank should not do so. Gold was finite, but credit elastic.

By staying on gold, the UK could maintain its credit, and finance the war effort. This transpired. The House of Morgan organised massive credits for the UK, and none for Germany. This finance was crucial, and sustained the UK until the US abandoned neutrality and tipped the military balance against Germany. 

Despite formal convertibility of sterling to gold, the Bank of England successfully discouraged actual conversion.

Gold sovereigns were withdrawn from circulation and turned into 400-ounce bars. This form of bullion limited gold ownership to the wealthy, and confined gold’s presence to vaults. A similar disappearance of gold as a circulating currency occurred in the US. 

The price of gold has jumped in recent years Credit: London Metal Exchange

 

In 1933, US President Franklin Roosevelt issued an executive order making ownership of gold a crime. FDR relied on the Trading with the Enemy Act of 1917 as statutory authority for this edict. Since the US was not at war in 1933, the enemy was presumably the American people. 

In 1971, US President Richard Nixon ended convertibility of US dollars into gold by trading partners of the US. Closing the gold window was said by Nixon to be temporary. Forty-five years later the window is still closed. 

In 1973, the G7 nations, and the IMF demonetised gold. IMF members were no longer required to hold gold reserves. Gold was now just another commodity. The view of the monetary elites was that gold was dead. 

Yet, like Banquo’s ghost, gold insists on its seat at the monetary table. The US holds 8,133 tonnes of gold. The members of the eurozone and ECB hold 10,788 tonnes.  China reports holdings of 1,788 tonnes, but actual holdings are closer to 4,000 tonnes, based on reliable data from Hong Kong exports and Chinese mining.

Russia has 1,447 tonnes, and has been acquiring over 200 tonnes per year. Mexico, Kazakhstan, and Vietnam, among other nations, have added to their gold reserves recently. (Pity the UK, which sold more than half its gold at rock- bottom prices between 1999 and 2002). 

After decades as net sellers of gold, central banks became net buyers in 2010. A scramble for gold has begun. 

What drives gold’s new allure? In some cases, central banks are constructing a hedge against US dollar inflation.

China has $3.2 trillion in reserves, over half of which is denominated in US dollars, mostly US Treasury notes. The dollar has no greater friend than China because its wealth is held in dollars. Still, inflation looms. China cannot dump its Treasury notes; the Treasury market is deep, but not that deep.

If Chinese selling of Treasuries became a threat to US interests, a US president could freeze Chinese accounts with a phone call. 

The Chinese know this. They are stuck with their dollars. They fear, rightly, that the US will inflate its way out of its $19 trillion mountain of debt.

China’s solution is to buy gold. If dollar inflation emerges, China’s Treasury holdings will devalue, but the dollar price of its gold will soar. A large gold reserve is a prudent diversification.  Russia’s motives are geopolitical. Gold is the model 21st century weapon for financial wars.

The US controls dollar payments systems and, with help from European allies, can eject adversaries from the international payments system called Swift. Gold is immune to such assaults. Physical gold in your custody cannot be hacked, erased, or frozen. Moving gold is a simple way for Russia to settle accounts without US interference.

Countries are also acquiring gold in advance of a collapse of the international monetary system. The system has collapsed three times in the past century. Each time, major financial powers came together to write new rules.

This happened at Genoa in 1922, Bretton Woods in 1944, and the Smithsonian Institution in 1971.  The international monetary system has a shelf life of about 30 years.

It has been 30 years since the Louvre Accord (an upgrade to the Smithsonian Agreement). This does not mean the system will collapse tomorrow, but no one should be surprised if it does. When the financial powers next convene to reform the system, there will be no appetite for the dollar’s exorbitant privilege.

The Chinese yuan and Russia ruble are not true reserve currencies. The only feasible benchmarks for a new system are the IMF’s world money, called special drawing rights, and gold. 

Critics claim there is not enough gold to support the financial system. That’s nonsense. There is always enough gold, it’s just a matter of price.

Based on the M1 money supplies of China, the eurozone, and the US, and with 40pc gold backing, the implied non-deflationary price of gold is $10,000 per ounce.

At that price, a stable gold-backed monetary system could be sustained.  When it comes to monetary elites, watch what they do, not what they say.

While elites disparage gold at every opportunity, they are buying it, hoarding it, and preparing for the day when one’s gold determines one’s seat at the table of systemic reform.

It’s past time to claim your seat with an asset allocation to physical gold.

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HedgeAccordingly's picture

Show me where all da good at! To bad we didn't see $1,300 today. Maybe Monday.
http://hedgeaccordingly.com/2016/04/gold-prices-could-hit-3000-an-ounce-...

Uchtdorf's picture

---> Gold will fall below $1200 before rising parabolically

---> Gold is only going up from here

Squid-puppets a-go-go's picture

gold will go down to $700... on Comex.

Shanghai, on the other hand .... strong resistance between $4000-$5000

wee-weed up's picture

When I get gold-buying tips from the shoeshine boy, the maid, and the taxicab driver...

38BWD22's picture

 

 

I have no way of knowing when the price of gold (due to an increase in physical demand) will happen.  "NFI"

But, it will likely happen.  Gold will likely go way up as people, probably suddenly, decide they want the real thing.

*  *  *

I just got the an interesting set of error warnings from ZH's computers, below is a paste of one of them (at least 30 more came along):

  • User warningMySQL server has gone away query: SELECT rtid, rid FROM user_relationship_type_roles_receive ORDER BY rtid, rid in _db_query() (line 170 of/var/www/ZH3/includes/database.mysql.inc).
samsara's picture

I think it will start to take off between 2017 and 2020. Might go down before that though.

I got the same error a couple hours ago

Restorative_Ally's picture

The elite cannot allow gold to be revalued to its true price. Some of the peasants still have jewelry and coins, and we can't let them get rich, so we should expect another executive order banning private ownership of gold. 

For the children, of course.

Slomotrainwreck's picture

It boils down to this. What can I purchase with my 0.023 grams of gold? At that point, currency will have no meaning whatsoever. When goods are sold as a portion of gold, the hegemony will be destroyed.

Rather than "How many pieces of paper can I buy with this gold?" the question will be "How many grams can I get for these pieces of paper?"

Dicey's picture

Get a gold backed account with BitGold and spread out your gold exposure risk globally.

Don't keep all of your gold in your own country so it can all be confiscated by your government in one go. Don't buy into this nonsense that if it isn't in your hand then you don't own it, as CIA man Jim Rickards tells you, which actually just makes it easy for your government to steal it all. Is that why CIA man Jim Rickards tells you to keep all your gold in your own country?

Open a free bitgold account, buy gold by depositing money and pick which vault you want it stored in from numerous vaults around the world. Store your gold in different vaults too. Then pick up a BitGold prepaid Mastercard so you can spend your money in your BitGold account as normal. If your currency collapses you've still got your gold. When the price of gold goes up, as it's doing, so does the value of your BitGold account. You can choose to take receipt of your gold whenever you want to. This is a much safer way to hold your money in an account than a traditional bank where bail-ins (stealing your deposits) has already occurred in several places in the world and will occur everywhere one day. The banks are bankrupt, only rampant criminality by banks and governments is keeping the system going...for now. Protect yourself and your family and get a bitgold account. It's a no brainer.

Restorative_Ally's picture

I wonder if this guy has something to do with bitgold?

Just a hunch.

Four chan's picture

just imagine what it cost to keep it down.

Taylor's picture

Trump Got It Right Again. This Is the Undeniable Proof...

However the mainstream media isn't saying a word about it!

What are they really trying to cover up?

http://bit.ly/23Q9Ess

TheEndIsNear's picture

What happens when the US government directs or otherwise coerces Canada to shut down Turk's BitGold corporation?

BTW, you can't spend your gold with BitGold's Mastercard. You must first convert your gold to fiat at BitGold's exchange rate (plus their commission fees) in order to pre-fund your Mastercard debit account before using it.

Restorative_Ally's picture

You need something the most when it is unavailable. So it will be with gold.

However, gold wont feed you in the most dire circumstances. That's what rice is for.

I see the price of gold in a collapse situation to be relevant only in that it might allow a peasant to get out of debt.

And we know the scheme can't support that.

Katos's picture

Unfortunately for the US,  China has already pegged the Yuan to gold and opened their own Shanghai Gold Exchange,  the wests manipulation of precious metals is over. He who has the gold, makes the rules, and I assure you, China has alot more than 4,000 tons of gold!

BarkingCat's picture

and Russia likely has much more than the number in this article.

They also have huge gold reserves that they have been mining.

 

Now, how many people take the US and ECB number seriously???

Kirk2NCC1701's picture

$5,000?  $10,000?  ROTF, LMAO.  

Having a financial and emotional relationship with gold, is like Tina Turner having a romantic relationship with Ike Turner:  The beatings continued periodically and irregularly, until she decided that she's had enough an left.

At some point, you gotta say/sing: "Enough is enough is enough..."

I bought LOTS of bullion in the 1700+ range, when I came into a pile of cash a few years ago, and parked it in Gold/Silver, because it was "A Store Of Value" and wanted to avoid "Third Party risk", as everyone claimed.  I wanted to protect said Cash in a conservative manner.  Now, 4 years later, having learned that it does NOT preserve wealth, but that it is a highly manipulated Commodity (gee, TD/ZH didn't see this coming in QE1), I'm selling some gold every time it goes >1250, and taking the Capital Loss on my Income Tax.

Tired of snakeoil salesmen and financial Elmer Gantrys trying to sell me their bullshit "get rich quick Newsletters" or investment "Advice/Gimmicks".  I'm into cash, stocks, bonds, RE, and paying down the mortgage.  I might keep a few token coins as a reminder that "ALL MEN ARE LIARS" when it comes to money and gold.

Lockesmith's picture

Will we be seeing "T_T I sold all my gold at 1250 and now it's at 10,000 and my stawks have all defaulted. Help me pls goberment" on cnbc messaging boards in the near future.

Lol.

Bay of Pigs's picture

Youre an idiot when it comes to discussing gold Kirk. Ask people in Greece, Cyprus, Argentina, Venezuela, Brazil, Russia, India and other countries how they feel about holding gold. Expand your pea sized brain about the term "store of value" instead of talking nonsense.

Bendromeda Strain's picture

Buh, buh, but... 4 years is a lifetime. How dare it not go to the moon while I stare at it.  <n00b> Pay attention to what the article actually said. Don't be moved by what they say, watch what they do. The so-called elites dump paper gold, the COTS goes short, yadda yadda - and yet they rarely officially report their personal stackings.

Pro-tip: Kirk, buy your phyz from Ronco - at least they say over and over again for the mentally challenged, "set it and forget it".

Katos's picture

What a moron! Why would you pay capital gains when you  sold gold if you sold it for less than you bought it. And how in the hell would anyone know what you paid for it to begin with. You might have been holding it for a week or for 30 years. It's untraceable,  so who knows?

astroloungers's picture

Sounds like you bought too much and for the wrong reasons. I am sure most of us have tools that are for the most part useless and taking up space until... you need them.

The Saint's picture

Gold Gold the musical fruit

The more you eat the more you......  Oh, wait.....wrong poem

slimycorporatedickhead's picture

It's worth whatever someone is willing to pay for it. If the price of gold went to $100/oz today, would you want to sell or buy? Its always up to you to decide what is under valued or over valued. You know that old saying with investing, always buy at the top and then blame others for your choices.

Still Losing Money's picture

gold is great.  gold is wonderul.  it never goes down. it only goes up.  when its $5, it is the best tiime to buy. when its $1500 it is the best time to buy.....

gold bugs sound like real estate agents and used car salesmen

Paul John Smith's picture

"... we are in the schizzle ..." to quote Snoop Dogg

sapioplex's picture

Sell that book, Jim!

Albertarocks's picture

Even Jim doesn't like that book.  He's selling his entire stock.

ClydeCrashcup's picture

That's just so he can make room for his newest book:
"The Nine Lives of My Pet Rock".

Bendromeda Strain's picture

B&N put it in the window next to your autobiography, "50 Shades of Moron".

Kaiser Sousa's picture

u can always buy Catapiller instead...

"listen to all but follow none..."

there r only 2 forms of real money & Gold is one of them.

and i dont have a book im selling.

nor do the Chinese Russians and the Indian's...

sapioplex's picture

Agree completely.

One detail:  If anyone takes the advice to "follow none", then they're following the person who suggested "following none."

Just a funny paradox. Brains are cool. And quite flawed. They don't like epistimological recursion.

Rant on, Kaiser! :-)

logicalman's picture

In a worst case scenario, the question will be 'do you have any Au/Ag or not?'

Hulk's picture

I wouldn't buy a used car from Rickards...

h rearden's picture

Rickards gives me the same creeps as the church my "friend" dragged me to in high school that up and disappeared or the uncomfortable way my gym teacher made me feel when she always picked me to do demos. "Dont worry... I'll spot ya"

Kirk2NCC1701's picture

He's a lawyer, who consulted for the DOD and CIA.

Need we say more?

Bendromeda Strain's picture

And Jim Sinclair is half Jewish - by golly, you may be onto something!

pFXTim's picture

rickards...oh boy..."super secret spy consultant" who goes around telling everyone he's a "super secret spy consultant"...yeesh.

GoldenGoosed's picture

And we need the dollar lower and yet higher at the same time just to save this scam! Lol
As the list grows long of the dichotomy economy we find ourselves in.....
Guess the hypocrisy breeds it.... Seems to be coming out like baby cows!

tdogg's picture

Wait.  What? 

I thought J Rickards was persona non grata on ZH.

What happened? 

By the by gold bitchez

h rearden's picture

I think he lost cred when he wasnt able to figure out that when theres a buyer there must be a seller. Also Holter had to tell him the feds gold hadnt been audited since the 50's. Two things I would think an "expert" would know.

h rearden's picture

I think he lost cred when he wasnt able to figure out that when theres a buyer there must be a seller. Also Holter had to tell him the feds gold hadnt been audited since the 50's. Two things I would think an "expert" would know.

Bendromeda Strain's picture

A little trip down memory lane - it was kind of a measuring contest over who actually first netsplained the concept of "Stock vs Flow" and "Operation Twist". Rickards got schlonged, but I personally heard him explain the concept to Eric King before I read it here. Just my $.02

Peak Finance's picture

We may have some easy arb trades now due to the chinese gold exchange, buy gold at 3:59 sell gold next day at 9:31 will do some research see how this goes. 

 

logicalman's picture

At what point did you actually own any gold?

Cautiously Pessimistic's picture

China ... only 4k tons?  Seems like I have read that they have considerably more than that.  But, just like our 8k+ tons, who can know for sure, right?  

samsara's picture

I'm glad I thought it was a good idea back in 2004 when Ag was $7and Au was $400.

Couldn't talk anyone into it. Thought I was crazy

AngrySparky's picture

I'm with you... I bought Gold in 2009 at $960/oz Canadian ... tried telling all my friends to invest but everyone thought I was nuts.
I had a friend who was son of a banker tell me to sell in 2011 (said his Dad and friends figured Gold was going to plummet)... well it hit $2000/oz CAD and then fell, I held onto it, so now sitting around $1550 - $1600 CAD/oz and I wish I didn't have to sell... but the economy has tanked so bad where I live? I'm a Journeyman Electrician with 20+ years in construction and I can't even land a job as a parking lot attendant or a landscaper. Well over 100,000 people all clamoring over a job. News has reported incidences of 1000 resumes received for one entry level position.

This economy blows ass.

samsara's picture

Wow.  I hope for the best to ya guy.  I have been in that position,  I Know what you mean, its a horrible position.  Is moving out of the question? 

Wish you all the luck I can.