China's Demand For Gold Has Trapped The West's Central Banks

Greeting ATS...

Recently I have seen a number of threads started on the subject of gold, or the subject of gold coming up in discussion. I have also noticed an alarming trend whereby members, especially American's, tend to sneer at the eastern obsession with the soft yellow metal. I have seen numerous arrogant statements about America's domination vis a vis the almighty petro-dollar and it's unshakeable place in the world economy. Well don't you believe it for a second...gold, or more precisely the lack of it...will guarantee the downfall of the US dollar.

So...I have decided to put together a thread to show you all just how precarious a situation the US economy is in. I want to state for all of you at this point that I have no interest in seeing the US economy burn, as some of you have accused me of...however I cannot simply turn a blind eye to the very real possibility that this is exactly what is going to happen should things continue on the path they are presently on....and let's face it...nothing in US fiscal policy is going to change.

Let's start with the premise that gold, unlike fiat currency, cannot be devalued in terms of inflation. Gold is the only asset that has no liability attached.

We also need to agree on the fact that ALL fiat currencies have a limited shelf life, due to the irresistable temptation on the part of fiscally irresponsible governments to print a nations debts away.

There is little understanding among the middle class about the true ramifications of a fiat currency collapse and the effects that it will have. Most people do not even know what a fiat currency is. A fiat currency is essentially an invented money system whereby there is no actual commodity, nothing of real value, backing the system. The whole power of the fiat currency comes from popular support and faith in the government and their regulation of the printing and production of new money. History and practice has shown fiat currency to be unsound. The current state of the economy shows it still to be unsound. There are a wealth of problems associated with its use as an economic base.

Source

So....on to the gold, and eventually...it's importance.

Who has the most?

The United States owns 8,133.5 tonnes followed by Germany with 3,391.3.

SOURCE

As some of you may be aware...recent rampant money printing by the FED spooked the Germans, so they decided to repatriate the 300 tons that the FED was holding for them...ahhh, but not so fast.

U.S. Dollar Collapse: Where is Germany’s Gold?

The financial world was shocked this month by a demand from Germany’s Bundesbank to repatriate a large portion of its gold reserves held abroad. By 2020, Germany wants 50% of its total gold reserves back in Frankfurt – including 300 tons from the Federal Reserve. The Bundesbank’s announcement comes just three months after the Fed refused to submit to an audit of its holdings on Germany’s behalf.

Either way, Germany appears to be waking up to a reality for which central banks around the world have been preparing: the dollar is no longer the world’s safe-haven asset and the US government is no longer a trustworthy banker for foreign nations. It looks like their fears are well-grounded, given the Fed’s seeming inability to return what is legally Germany’s gold in a timely manner. Germany is a developed and powerful nation with the second largest gold reserves in the world. If they can’t rely on Washington to keep its promises, who can?

SOURCE

So at this point...were I an American, I would be wondering why the US can't give Germany it's 300 tons of gold back? Isn't the US the largest holder of gold in the world?

So how much gold has Germany gotten back so far you ask...

And a mere 5 tonnes of that came from the US

SOURCE

Isn't the US in possesion of more than 8000 tons of gold...?? Maybe not.



Fort Knox

So what’s inside?

Well, it depends on who you ask.

The government will tell you that almost 5,000 metric tons of gold, or roughly 3% of all the gold ever refined throughout human history, is safely sealed inside the vault.

Or is it??

Amazingly, though, the last audit of Fort Knox occurred in 1953, right after President Eisenhower’s inauguration. Except no outside experts were permitted, and only about 5% of the gold was tested. So there’s been no full audit in over 60 years!

SOURCE

So...no audit in 60 years....that doesn't sound good.

Were any of you aware that in 1968, Germany had also requested gold held in trust by the US be returned, only to find out that the gold was not... to put it kindly...the purity standard that it should have been?

Here we would be remiss to not point out that the reason why the German people and the Bundesbank have every reason to be skeptical is that as Zero Hedge reported exclusively in November 2012, before the Buba's shocking repatriation announcement and was the reason for the escalation in lack of faith between central banks, it was the Fed and the Bank of England who in 1968 knowingly sent Germany "bad delivery" gold. Which is why we have a feeling that the pace of gold transportation will certainly not accelerate until such time as the German people much more vocally demand an immediate transit of all their gold held at the New York Fed: after all, it's there right - surely the Bundesbank can be trusted to melt the gold (if any exists of course) into London Good Delivery or whatever format it wants.

SOURCE

So to sum it up...there are very real concerns that the US no longer has any gold...or very tiny quantities of gold.

Now...on to CHINA

I want to share an article that I came across today on Zero Hedge in regards to China's gold holdings...and the source for the tile of this thread.

In my opinion, this podcast offers the best clarity I've heard to-date in explaining:

what the true measurement of annual Chinese bullion demand actually is (hint: it's even bigger than you imagine)
what the implications of China's gold voraciousness will be
why Western central banks had to smash the price of gold last April
why Chinese demand exploded at these lower prices, putting the Fed and other Western central banks into a trap (kill the banks or kill their currencies)
why the Fed is desperate to keep the price low for as long as possible (and why this suppression will fail)
why the Eastern attitude towards gold will trump the West's

Zero Hedge article....HERE

Here is the podcast...



It is 55 mins long but well worth the time if you want the above questions answered.

Thoughts ATS??

I have also noticed an alarming trend whereby members, especially American's, tend to sneer at the eastern obsession with the soft yellow metal. I have seen numerous arrogant statements about America's domination vis a vis the almighty petro-dollar and it's unshakeable place in the world economy. Well don't you believe it for a second…gold, or more precisely the lack of it…will guarantee the downfall of the US dollar.

Amazing isn't it? Some of those sneers are not ignorant but promoting that very same paper. You'll get them here, too.

The "you can't eat gold" crowd.

Just my two cents but they only took all the gold from the people way back before WWII and put it into fort knox vault in the first place so that they could steal it. Much easier to steel it from a centralized location.

Otherwise, tell me why you suppose it was taken from the pockets of John Q Public in the first place?

reply to post by deadcalm


As we see the downward spiral of the dollar you would think anyone who was half aware would be stocking up on physical asset's (especially gold.) Unfortunately the arrogance or sheer blindness of most US citizens is astounding, hence all the ridiculous statements we see in these threads like "you can't eat gold or it's just metal."

I've pretty much given up telling people to buy these assets. They'll realize sooner or later (probably sooner) that relying on the MSM talking heads and government lies about these subjects was a bad idea.

Kudos to you though for continuing to speak these things. Some may even wake up and listen.

Otherwise, tell me why you suppose it was taken from the pockets of John Q Public in the first place?

reply to post by intrptr


The simple answer...the Great Depression.

They did this for the following reasons:

1. To prevent hoarding.

2. To devalue the dollar during the Great Depression.

3. The government set the gold price at $35/oz and pegged it to the dollar.

Source

By pegging the dollar to the price of gold, they managed to do 2 things...devalue the dollar, and thereby stabilize demand for US exports. This tactic worked quite well until...

In 1971, President Richard Nixon officially took the United States off the gold standard.

What has happened since we left the gold standard? Inflation has run rampant – a dollar today can buy only one-sixth of what it could buy in 1971.

Between the end of World War II and 1967, when America began edging away from the gold standard, annual inflation averaged less than 2 percent. But between 1967 and 2009, inflation more than doubled to average almost 4.5 percent.

Your money doesn’t go as far as it used to.

Source

So...to sum it up...they moved away from the gold standard so they could inflate the money supply...which is why the US dollar has lost 90% + of it's purchasing power....a policy that continues to this day...and the reason why the US dollar is so weak.

Or to put it plainly...it's why it's in it's death throes right now.

Bassago
reply to post by deadcalm

 

As we see the downward spiral of the dollar you would think anyone who was half aware would be stocking up on physical asset's (especially gold.)

Can you elaborate a bit on this? Are you suggesting physically buying gold and stashing it in a safe? Or are you just talking about buying stocks and putting faith in the institutions that caused the crash in the first place? In the event of a major crash how do you know that gold is gonna help you...do whatever..buy stuff?

Honest question, I really dont know how this stuff works. I was recently asked to invest in gold by a frriend but it seemed like some kind of pyramid scam...

They'll realize sooner or later (probably sooner) that relying on the MSM talking heads and government lies about these subjects was a bad idea.

reply to post by Bassago


Agreed. They only sneer because they don't realize how important it is...or what it means. The signs are all there that China is hoarding gold at an astonishing rate...if you listen to the podcast, they estimate that China has packed away more than 9000 tons since 2008. A staggering amount of gold by any standards.

The fact that the Fed and the central banks have been manipulating the price of gold to keep it artificially low has only played into China's hands. At this point....no matter what else happens...the US dollars days are numbered as the reserve currency...and so is their position as the largest consumer economy in the world. So is their position as a superpower.

As of late 2016 by my estimation...China will have the largest economy in the world...not the US....and it is still in decline.

Another good indicator is US GDP in relation to financial services...

Other financial markets exhibited similarly explosive growth. Trading in U.S. equity (stock) markets grew from $136.0 billion or 13.1 percent of U.S. GDP in 1970, to $1.671 trillion or 28.8 percent of U.S. GDP in 1990. In 2000, trading in U.S. equity markets was $14.222 trillion, or 144.9 percent of GDP. Most of the growth in stock trading has been directly attributed to the introduction and spread of program trading. (HFT)

Source

So given that almost 30% of US GDP is in financials....a banking meltdown would wipe out the US dollar overnight and turn the US into a 2nd world country or worse....literally overnight.

I wake up sweating at night thinking about it. I pray that I'm wrong...but reason tells me I am not.

Thanks for contributing.

Can you elaborate a bit on this?

reply to post by Tucket


Certainly. Do not under any circumstances buy gold certificates. If you can afford to, put some money down and buy PHYSICAL gold. Keep it in a safe. A good one. Tell nobody you have it. If you can't do that...buy silver...lots of silver....and do the same with it. If you are going to buy stocks...buy commodities stocks...agriculture, mining, cotton....things like that. Think things that people can't live without...literally.

In any scenario where the dollar crashes...both metals are going to VASTLY increase in price.

It is my personal hedge to save some of the wealth I have spent my entire life working for....your fiat currency will be virtually worthless.

Or to put it another way...not worth the paper it's printed on.

I wonder if the OP could locate all the mined gold in existence?

Because it isn't in China

I wonder if the OP could locate all the mined gold in existence?

reply to post by TritonTaranis


In point of fact...I cannot.

But I can tell you where it isn't.... in the USA.

Ignore this information at your peril.

Tucket

Bassago
reply to post by deadcalm

 

As we see the downward spiral of the dollar you would think anyone who was half aware would be stocking up on physical asset's (especially gold.)

Can you elaborate a bit on this? Are you suggesting physically buying gold and stashing it in a safe? Or are you just talking about buying stocks and putting faith in the institutions that caused the crash in the first place? In the event of a major crash how do you know that gold is gonna help you...do whatever..buy stuff?

Honest question, I really dont know how this stuff works. I was recently asked to invest in gold by a frriend but it seemed like some kind of pyramid scam...

get physical posession of gold not paper and make sure to check when buying as there are alot of unscrupulous people out there .. store in secure location and never brag on having it.

reply to post by Tucket

Are you suggesting physically buying gold and stashing it in a safe?

You should have a certain percent of your wealth invested in tangible assets. Tangible as in something you can hold in your hand.

Imagine owning paper firearms and paper chickens. In olden days people wore their gold about them in the form of chains. It was always on their person and when they shopped they bent a link or two off the chain and paid for goods that way.

That of course won't work in todays economy. But if the money ever crashes people will resort to real money as in silver and gold. No paper, diamonds or stamps will carry any value as much as gold. You will use it to buy stuff you don't have at say, a farmers market. They will thrive if the worst case scenario ever happens.

So you want some of your money stored in house as reserve for a rainy day. Some say 10 15 percent Others will tell you different. It needs to be stored in readily identifiable form. US silver coins (sometimes called "junk" silver) and small stamped increments of gold. Maybe an ounce in one gram increments in a money belt, that kind of thing.

reply to post by deadcalm


Thanks for that rundown, I totally agree with that, mostly.

reply to post by Tucket

Can you elaborate a bit on this? Are you suggesting physically buying gold and stashing it in a safe? Or are you just talking about buying stocks and putting faith in the institutions that caused the crash in the first place? In the event of a major crash how do you know that gold is gonna help you...do whatever..buy stuff?

Looks like others have answered but I'll add my agreement to them. Have some percentage of your savings in physical gold or silver. Only you can determine that amount but I'm sticking with a major percentage.

Stock investment is for the gamblers, play for big stakes but be prepared for huge losses as well. Especially now.

It might be true that you won't be able to buy stuff immediately during a SHTF scenario with gold or silver but maybe you will. It's a certainty that as things progress afterwards gold will have the ability. Unless of course thousands of years of human history and the value of gold doesn't hold up but that's doubtful. Impossible for me to believe anyway.

And it gets worse the more you look into it.

Sprott researchers looked back though US trade data and found that the US has been consistently exporting large amounts of gold, and that ‘the amount of gold the US has been exporting is above and beyond what the US should be capable of exporting… ‘In December 2012 the US exported over $4 billion worth of gold and imported around $1.5 billion worth of gold, representing a net export of $2.5 billion or almost 50 tonnes.’ Tracing the data back Sprott discovered a similar pattern of net gold exports going back 21 years.

And the gold they sent to Germany was only 1/2 the promised shipment. It was also not the gold bars that Germany sent over. The gold was melted down and recast. With stories about Federal Reserve sending out Tungsten Bars covered in gold, you have to ask yourself why would they do that if they had the level of gold they are supposed to.

‘In December 2012 the US exported over $4 billion worth of gold and imported around $1.5 billion worth of gold, representing a net export of $2.5 billion or almost 50 tonnes.’ Tracing the data back Sprott discovered a similar pattern of net gold exports going back 21 years.

Supply surprise

It is Sprott’s view that the sale of this amount of gold explains why gold prices have not gone much higher given the higher levels of demand so evident in the global economy. In short the supply of gold to satisfy this demand has to be coming from somewhere or the price would be shooting up. The study points out…

The Fed has been liquidating gold for a long time. So, what gold have they been exporting and what is actually left in the vaults. And them not allowing an audit? That is pretty damning of itself inmo.

‘India and China have emerged as strong buyers, consuming over half of the mine supply in recent years. Central banks have switched from being sellers of gold to being net buyers, with their gold purchases in 2012 increasing by 17 per cent to almost 535 tonnes. Exchange traded products around the world have continued to add to their gold hoards, as have institutions and private investors.

Running out?

But after 21 years of selling, how much gold would the Fed have left? You cannot sell your gold indefinitely. The Sprott study hazards an estimate:

‘The inclusion of the private investor on the demand side would in fact skew the ‘gap’ of 4,500 tonnes higher to a figure that would lie somewhere between 4,500 tonnes and 11,200 tonnes, which represents the gross exports out of the US. The only US seller that would be capable of supplying such an astonishing amount of gold is the US Government, with a reported gold holding of 8,300 tonnes.’

On that reckoning then the US Federal Reserve has sold somewhere between half and all of its gold! And if the Fed really is close to the bottom then there will come a point when it can no longer keep the gold price down.

Source

I think the governments know what is going on and haven't pushed the issue because once it breaks wide across the globe, the economies will tank severly. No one will trust a central bank again. I think they are trying to figure a way out of the mess they got now. However, if Russia or China wants to force the issue, I think we could see the US economy go down in flames overnight. That is the last thing I want to see since I would have to live through the disaster with my family. I just can't come up with any reason the Federal Reserve has done what they have, unless they don't have the gold any longer.

It is Sprott’s view that the sale of this amount of gold explains why gold prices have not gone much higher given the higher levels of demand so evident in the global economy. In short the supply of gold to satisfy this demand has to be coming from somewhere or the price would be shooting up. The study points out…

reply to post by spirit_horse


First...thanks for adding to the thread....I was trying not to overly complicate an already lengthy post.

The above quote is extremely important. Consider that last year China bought what amounts to the entire world output of gold, in addition to the 500 tons China produces itself.

The fact that demand is so high...and prices have remained depressed is a sure sign of massive manipulation on the part of the Fed and the 6 major banks in the US ie...they are selling off their gold to maintain low prices...there is simply no other explanation for the continuing low prices of gold on the market. Whatever gold they do have left has been rehypothecated to the nth degree.

China knows this beyond a shadow of a doubt....and they are taking full advantage of the fact. I've done business with the Chinese and they always say one thing and mean another. They hold their cards very close to the chest, so to speak. China sees itself as a rising world power...one that doesn't get the respect from the west that it thinks it deserves.

And if the Fed really is close to the bottom then there will come a point when it can no longer keep the gold price down.

If you listen to the podcast I posted...they have come to the same conclusion. This game isn't going to go on much longer. It can't.

No one will trust a central bank again.

Indeed they won't...they don't now...which means that countries like China, India and Russia will demand that any future reserve currency be backed by....you guessed it....GOLD.

I think they are trying to figure a way out of the mess they got now.

There is no way out save one that I can think of....war. I can see them considering it given that it was WW2 that finally dragged the US out of the Great Depression. That's what keeps me up at night.

I just can't come up with any reason the Federal Reserve has done what they have, unless they don't have the gold any longer.

Neither can I...nor can anyone else that I know....I have discussed this subject with a number of very informed money managers...much smarter men than I, and they agree with my assesment.

That is the last thing I want to see since I would have to live through the disaster with my family.

Forewarned is forearmed my friend....do what you can to prepare as best you can. Many fiat currencies have come and gone, as have governments....and we are still here. It will be a complete change of perspective for the average American. Perhaps when the dust settles...we will have a much more wholesome idea of the things that really matter.

Only time will tell.

Best of luck to you and thanks again for contributing.

Right now it wil hurt China and Russia if the US economy tanked due to any bad news about any revelations of the amount of gold stored in the US. What has changed is that the US has enormous supplies of energy. We are also a major food exporter. I believe in any shtf scenario, energy and food will be important. Other countries may be working on replacing the US dollar as the reserve currency but hopefully this will serve as a wake up to the American public so that they stop voting for politicians who only promise ever greater spending as a means to improve the economy. Going into greater debt is not a solution by itself. Expanding economic growth is especially when your debt shrinks. I did hear recently the US budget deficit is rapidly shrinking so this is good news.

I had also read China and Russia wanted to supplement their currencies as reserve currencies but that what the US is doing with energy is a game changer. Our current American politicians do not get it. Educate the public and hopefully new politicians will get it. Losing reserve currency status will cause gas and food prices to be much higher. Gas was only $1.40 or so just 5 years ago. Our currency has gone downhill.

reply to post by deadcalm


i do get what are pointing out and i do agree that a collapse of the dollar is inevitable....

but...you scoff at the idea when people say you cant eat gold etc.....well i ask you this...if the dollar collapses and so does our way of life and lets say for arguments sake that you could trade gold at the local farmers market for food.(assuming that the desperate s have not forcibly ransacked everywhere there is food) how long would it be for say someone like myself who grows ample amounts of food to trade all of your gold for food ? and more to the point what makes you think in a situation where there is a collapse and 99% of the people just want food and water to survive gold will get you out of trouble....?

granted if it just a partial collapse some kind of a normal business could survive and then yes the gold would be worth trading but for the life of me i cannot get my head around hoarding gold i would much rather being able to feed myself and my family then getting out and about with my gold trying to find someone who will trade me a loaf of bread for a chunk of gold....and again this is assuming we have a major collapse,there will be no fuel for your vehicle unless you have stashed away large amounts so you are limited to how far you can travel not to mention you would have to be dodging the hungry hoards with your vehicle and or your gold

seems to me there are far too many people relying on our current system and way of life and a collapse would just be anarchy for the masses,so yes i fall into the category of rather having food than gold

I have no idea where I read this, some time ago, that Saudi Arabia has always made sure that its payments for oil sent to the USA are always in solid gold, so, perhaps that's where most of America gold is? The Indian nation has always been fond of gold, they always bought above market price when it was only $33 per troy ounce (happy days!) Turks love the stuff too.

The true value of gold is based on fooling , Fools into believing its value is higher then it really is.

Gold price collapse is more likely to happen. What happens then?

I think it's all going to depend on where you are, what stage of the collapse/recovery we are in, and how exactly the collapse happens and what are the political ramifications, how bad things actually get, etc... you see, the situation will not be the same everywhere. And the usefulness of gold could change in a heartbeat depending on so many different factors like who happens to come across your path, whether or not we are invaded by another nation...or our own government could confiscate gold again. Or a good amount of gold could put you in a position to befriend the local warlord and you could live the "high life" compared to others based on your ability to keep on "discovering" little bits of gold here and there...or he could put a bullet in your head for what you've got on you, never knowing or caring if you've got more somewhere.

Being that there are so many variables, I'm mostly putting it in God's hands, and doing minimal "prepping". Through experience I've learned that God always takes care of me, so that's where I put my chips. Trying to plan is nearly pointless. If I had access to some kind of money, maybe I would have some kind of "ultimate survival bunker" with gold reserves and all, but that is not the hand I've been dealt. So I will just do what I can, with what I have, where I am, just like I always have.

If the good Lord decides to take me home then his will shall be done. I've mostly enjoyed the ride and I'm thankful for the time I've had here and all the people I've met and interacted with. Other than the basic day to day stuff and heat of the moment decisions, I've never really seen the point in trying to control my life or my future... God has always put me where he wanted me no matter what it is i wanted or thought i wanted.

I'm just like a windup robot randomly wandering the Earth, with God's hand occasionally guiding me and preventing me from going into harms way. The best part is I just get to focus wholly on enjoying and learning about what life has to offer while most others around me are always worrying about one thing or another. I just don't feel that life was meant to be lived that way. Of course I still have to Try to survive and keep a certain standard of living, but the point is I don't Worry about whether or not I'll "make it".

It always turned out he knew better anyway. Like my friend once complained, The higher being always puts the smack down! The only difference is I have come to realize that it's a good thing.

To sum it up, my thoughts and feelings will be as follows: So long and thanks for all the fish!