Authored by GoldFix, ZH Preview

The answer to the title of this piece and the question raised implicitly by Ross Norman in his Metals Daily post titled Taking a Reverse View On Gold; rehosted by ZeroHedge may be straightforward if not rhetorical:

China is being discrete in its purchases because they still have much more to buy. They are being clever (surreptitiously or otherwise) to keep prices low as they acquire the bullion. Unfortunately, this simple answer only causes more problems in the form of follow-up questions.

For this piece we ask and attempt to answer the following:

• What if China is wrong and arrogant?
• Is The West ignorant of China’s actions?
• Is the West exhibiting hubris in blithely ignoring China’s buying?
• Is The West complicit in China’s slow accumulation?

What if China is Wrong?

For starters we ask: What if the direction China is heading is just idiotic and wrong? China has miscalculated before—most notably in silver—and paid for it.

China's Unfinished Business With Silver

The Chinese silver standard, a monetary system that had stood the test of time for nearly 350 years, faced an abrupt and dramatic end in the early 20th century. This demise was largely influenced by external factors that significantly impacted China's monetary landscape.

The return of the British Empire to the gold standard1 ( yet another way to counter China’s continued hoarding of Silver to the UK’s detriment while the US also bought it) and the US Great Depression2, among other factors, contributed to the decline of the silver standard in China. As global economic dynamics shifted, China was forced to adapt to new monetary systems. Read full story

If China is anything, it is a nation that learns from history. So, wrong or not, we assume they fully know what they are getting into and move on. They could be wrong. They’ve been wrong before, even if they were made to be wrong by other nations intervening to save themselves.

They could also know the risk and just be arrogant or be hellbent on cultural revenge. Who knows. But we accept the risk ourselves and move on. China could be wrong. But so can the West.

But from this premise, other questions emerge—uncomfortable, persistent, and unresolved. We now turn to the West.

Chief among them: Is the West ignorant, confident, or complicit in all this Chinese gold-buying that Ross points out and GoldFix has catalogued in this space for well over two years running?

We start with ignorance.

Is it Western Ignorance? Yes.

Ross presents a strong case for ignorance. Western holdings of gold have declined sharply since the 1960s. Few citizens are aware of this shift.

In the 1960's gold was about 5% of total global financial assets - by the 1980's it was just under 3% - and today it is still less than 1% ... which suggest the world at large has still not caught on about the powerful role it has to play in wealth preservation.

So yes. In that sense, yes—we are most definitely ignorant.

Next up is Western Confidence/Hubris. This one is pretty simple also, as it mirrors the risk of China being wrong.

Is it Neo-Keynesian Hubris? Yes.

“History shows again and again how nature points out the folly of man”

- Donald Roeser

Then there is confidence. Most in Western finance believe that gold, being inert and passive (famously called a pet-rock once), cannot compete with innovation. The Western post-Renaissance belief in progress assures us that cleverness will always outmatch commodities. This belief borders on arrogance. So yes—confidence, even hubris, is present. But that cuts both ways and has been part of the East/West ideological divide for centuries. We, like China know what we are getting into, even if some of us do not.

Thus, this Hubris risk is the flipside of China’s own risk of being blind to their own fallibility first answered up top. This leaves us with a less easily answerable, more conspiratorial, but growing in probability question.

With every dollar Gold rallies and every ounce of it that ships to Shanghai question it becoems harder and harder to ignore this. And we must ask: Is the West complicit in China’s accumulation of Gold; And if they are, why? Something shady is going on here

Could the West Be Complicit? A Vote for Yes.

It is harder to know if they are in on it. Here, we move in the dark. No matter how sharp Ross’s crowd is—or ours—we don’t see what the few at the top see. But if we know, they know more. It’s their job to see the big risks and act. So we must think they do.

Continues here Saturday 3pm ET