The world has been glued to the news coming from the gold geeks over the last few years with regard to China's insane appetite for the shiny yellow rock. Well, maybe not the world but the smart ones are watching China's massive gold purchases with great and uneasy interest. The last time China announced their official gold reserves was in 2009 and China "claimed" to hold 1054 tonnes of gold compared to United States holdings of 8133 tonnes. We can say with great certainty that Chinese gold reserves has increased to massive levels since 2009. But how massive? And why? Those are the million dollar questions.
With the great wall of secrecy surrounding all things China we have to speculate but this speculation is backed up with hard data. China may be able to lie to its citizens and the world but they inevitably leave behind data that acts as a breadcrumb trail to the truth. We know that conservative numbers indicate that China may have as much as 6000 tonnes of gold in reserve at this time. This would make them the 2nd largest gold holding nation on Earth behind the United States and there is massive speculation that America's gold reserves are depleted. Gold has been depleted by Central Banks to keep the price of the dollar stable. The scam is simple, and we were screaming about this last year, you sell massive gold futures contracts (waterfall attack) driving the price of gold down.
China may seem on the surface as suffering from a massive case of denial with regard to the declining dollar. Yea, yea we have heard this line before...the dollar is dying, blah, blah, blah but did you know the data supports this assertion? The IMF has went so far as to publish a paper basically stating that the U.S. Dollar is holding the world hostage as the USD is the ONLY reserve currency on the planet with any juice. China knows this and while China holds 1.3 trillion in USD debt they are prepping for the eventual destruction of the Greenback.
One indication would be for China to start dumping USD assets. This has not happened in any great quantity, a few billion here a few billion there. So what gives? China is not ready to dump the USD, as of yet. China will continue to increase their gold reserves as a hedge against rapid inflation once the dollar dies and China is indicating that they are about to commence major currency reforms with the Yuan. More liberal policies with the Yuan would open up the great possibility that the redback would be a viable alternative to the USD as an official world reserve currency .
China, being the largest foreign investor in the USD, is understandably worried about the toxic political landscape in America. Our political divisions could be the catalyst for a major worldwide financial crisis; not a war, or huge natural disaster but petty political divisions could sink the world economy. China has been publicly bitching about this since the financial crisis began. They cannot abandon the USD for obvious reasons but they can position the Yuan as a viable alternative.
Many speculate that China is accumulating massive amounts of gold for the purpose of currency backing. This may be the case but lets look at more devious reasons for the purchases.
In 2009 China reported 1054 tonnes of gold in reserve. This would equate to 33886887 troy ounces of gold. In today's market value of, lets say, $1250 an ounce this would equate to $42,358,608,750 USD in gold. Now we watch the price of gold sky rocket immediately after the financial crisis and it eventually tanked around mid 2012. At this point China kicked their gold purchases into overdrive.
The drop in gold prices was a result of a massive gold price fixing scheme by the central banks and gold fixers in London. This is not speculation this is currently being investigated and a few large European banks have already paid massive fines because of it.
Was China in on the scam? I seriously doubt it but it is a possibility. Now lets look at the speculative amount of gold holdings in China compared to market value at its current rate of around $1250 USD at 6000 tonnes, this would equate to $241,130,602,500 in USD worth of gold. Now here comes more speculation but backed up by history and the belief that China and the Western world are in the middle of a quiet financial war.
Is History repeating itself?
In 1932 the US Gold Reserves equaled 204.5 million ounces at $20.67 dollars an ounce. After the implementation of the Gold Reserve Act making private gold holdings illegal the U.S gold reserves shot up to 227.9 million ounces and FDR changed the price of gold to $35 dollars an ounce. This devalued the dollar by 41%, seeing that the U.S. was held to a gold standard at the time. While this seems to be small fries compared to the massive numbers we see today China may be setting the table to implement the same controls when the USD finally crashes to earth.
Image if China announces their own version of Gold Reserve Act during the next financial crisis. China has been curiously encouraging their citizens to accumulate gold over the last 4 to 5 years. We can estimate if China implements gold ownership controls China's reserves may shoot up to around 8000 to 9000 tonnes in short order!! China is clearly, by their own reserves at the moment, trying to squeeze into gold price setting which is controlled by the West. At this point in time China is sending signals that it may release more gold reserve numbers soon but we can assume they will low-ball the numbers.
If China were to officially announce they hold 6000 tonnes of gold other major gold holding nations would almost certainly demand their gold from U.S. treasuries. Germany has been demanding 300 tonnes of their gold from Reserve Bank in New York for over a year but the U.S. is clearly balking at honoring Germany's request. So as the chorus grows louder from nations demanding the return of their physical gold. China may pile on and increase the fervor by announcing huge reserves. If China suspects that the U.S. reserves are gone then China may find itself at the head of the world's golden table a few shorts months after their announcement.
If China was to announce that they are now the 2nd largest gold holding nation on the planet they will soon be sitting at the table of the gold price fixers. When they achieve that goal of influencing gold prices then gold confiscation by China becomes plausible. Now China will move on to step two of FDR's plan, increase the price of gold.
Steps China would take to achieve victory in the Great Financial War.
- China announces they hold 6000 tonnes of gold. This would result in a massive panic by foreign nations. They would undoubtedly demand their physical gold from American vaults, and they would mean it, this time.
- This would force, if the rumors are true, America to admit that they have depleted their reserves through massive abuse of the gold lease program in an attempt to keep the price low propping up the USD.
- This would set off a massive gold buying panic driving prices upward to around $2500 an ounce, just to start.
- The next financial crisis begins
- China implements gold confiscation and increases their holdings to a modest 8000 tonnes or 257205976 troy announces of gold overnight.
- At $2500 an ounce at market value China's gold holdings are now worth $643,014,940,000
- With the FED insolvent after their massive QE programs the IMF would attempt to bail out the FED.
- China takes control of gold price fixing and sets gold prices at $4000 an ounce
- At the end of the first year of China's gold confiscation program China has accumulated 9000 tonnes of gold or 289,356,719 troy ounces now worth $1,157,426,876,000 in 2014 USD. China has successfully hedged themselves out of the collapse of the USD and have absorbed the over 1 trillion in USD asset losses.
- China bails out the IMF and the FED by setting the Yuan as being temporally backed by China's combined with the IMF's gold reserves. The IMF's gold reserves stand at 1500 tonnes down from 2814 tonnes after it was discovered that the U.S. holdings were depleted.
- The Chinese Yuan becomes the official world reserve currency with a temporary gold backing plan set to taper for a decade. The amount of gold to a Yuan would drop thus deflating the Yuan making it viable for credit.
- China would eventually drop their gold standard finally making gold a worthless relic while the Yuan reigns supreme.
Does this sound so far-fetched? Notice that China achieves momentary, and to an extent sovereign, victory over other nations without firing ONE SINGLE SHOT. In the model above China simply uses the negative momentum of the corrupt western financial system against itself much like a Judo artist uses the momentum of his or her opponent in the form of leverage.
If I had to speculate to the point of consulting governments with regard to a plausible Chinese takeover of the world's financial system I would choose the model above because its symmetry is very Asian in nature. It seems to be the artistic route one would expect from a powerful nation who may or may not wish to go to big boy war with bullets and missiles.