Monday, August 11, 2014

SGE Chairman: China Should Become First Class International Gold Market
...Xu points out that in 2013 Chinese mines produced 428 tonnes of gold and China net imported 1540 tonnes, adding up to nearly 2000 tonnes. This is exactly in line with the amount of total supply (/demand) at the SGE that year: 2197 tonnes. The 229 tonnes gap has been filled by scrap supply. With this statement Xu confirms that SGE withdrawals equal wholesale demand. (read this for a full analysis of the Chinese gold market).
Here is the disconnect:  in 2009, China surprised markets by announcing they had accumulated 1054 metric tons of gold in their reserves, an increase from 600 tons reported in 2003 by the State Administration of Foreign Exchange (SAFE).

Since then, China has been mum about gold purchases.  Heady speculation is they are not announcing their gold purchase program to keep a lid on prices (buying at lower prices is advantageous).  Estimates range from 5000 - 6000 tons, and recent data suggests China's gold reserves could be even higher.

The next pertinent question is where is the bullion coming from?  The answer is likely from the vaults of the Fed, Bank of England, and IMF.  Other sources include the GLD ETF in London, with HSBC as the custodian.  This is the same HSBC who has been fined for laundering money for drug cartels as well as manipulating the LIBOR, among other markets.

It has been widely acknowledged that China is adding huge tonnage every year to their gold reserves.  But 1540 tons in 2013?
And more in 2014?  The Chinese are hoarding a lot faster than their 50-year plan suggests.

Russia and China are signing bilateral trade agreements with each other, in addition to other trading partners.  They are making an overt, concerted effort toward de-dollarization.  One of the pillars of that strategy is to back their respective currencies--the ruble and the yuan--with gold.

This massive shift in wealth from western economies to the East is as clear as day to those with eyes wide open.  The rest of America sleep walks through life still believing in American exceptionalism, even as US influence abroad is plummeting along the same trajectory as the dollar's store of value.

Why should Americans care?  What are the consequences of the USDollar losing its reserve currency status?  Say hello to $10/gallon gas...or higher.

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