International Forecaster Weekly

China Bought More Gold

They’re buying it for a reason and the reason isn’t to lose money. It’s stability, it’s diversified reserves, it’s a way to “back” their currency.

Bob Rinear | January 9, 2019

The following few paragraphs are from Bloomberg:  After a hiatus of more than two years, China is adding to its gold reserves again.

The People’s Bank of China increased holdings to 59.56 million ounces by the end of December, or about 1,853 metric tons, from 59.24 million ounces previously, according to data on the central bank’s website. They had been unchanged since about 130,000 ounces were added in October 2016.

The world’s biggest producer and consumer boosted holdings of bullion in a month marked by mounting concerns that China’s trade dispute with the U.S. is threatening economic growth. Spot gold had its strongest month in almost two years as those fears spurred gyrations in equities and the dollar and boosted demand for the precious metal as a haven.

Speculation that the Federal Reserve may pause its interest rate hikes has given further strength to gold’s rally into the new year and assets in bullion-backed exchange-traded funds are at a seven-month high. Spot gold was trading 0.5 percent higher at $1,291.83 an ounce.

It’s a bullish sign for gold,” Matthew Turner, a commodities strategist at Macquarie Group Ltd. in London, said by phone. “The reasons could be diversification, a wish to get away from the dollar, but it’s hard to be certain because we just don’t know enough about what their motivations are.”

The Asian nation has previously spent long periods without revealing increases in gold holdings. When the central bank announced a 57 percent jump in reserves to 53.3 million ounces in July 2015, it was the first update in six years.

I think the interesting part of that little excerpt is when Turner says “it’s hard to be certain because we just don’t know enough about what their motivations are.”

Well, I don’t think he’s been paying attention. Remember way way back when I said that the Chinese were fighting to get the Yuan into the SDR basket? Remember I said they’d use gold to “back” their currency, so that the IMF would feel comfy letting them in the club? Well, that’s what they did, they started to amass gold in monumental levels.

So that begs the question, why is China still absorbing tons of gold each year? They’re already IN the SDR basket. Are they stupid? Don’t they understand that according to Wall Street, that gold is just a dumb rock? What gives?

No the Chinese aren’t stupid. In fact, they’re quite smart actually. But again, because the Main stream media never tells you any real news about what’s going on in the world, no one knows that China is expanding economically across Asia and into Africa.

This from Australian Parliament: The ‘One Belt, One Road’ (OBOR) initiative is a Chinese economic and strategic agenda by which the two ends of Eurasia, as well as Africa and Oceania, are being more closely tied along two routes–one overland and one maritime. Supporters suggest that the initiative permits new infrastructure and economic aid to be provided to needy economies. Critics claim that it facilitates Chinese economic and strategic domination of the countries along these routes. OBOR provides a global context for China’s growing economic links with Australia.

Quietly and without fanfare, China is indeed making deals, building infrastructure, taking over ports, and basically getting itself set up to “do really well” for itself. They have already announced that they want to use the Shanghai exchange and their Yuan, for the purchase of oil. That’s “big stuff” right there, because as you know, Oil has been priced in Dollars only, for decades.

There are things that go on around the world, that truly make you scratch your head. For instance, if China’s buying tons of gold and Russia’s buying tons of gold and Poland is buying and Hungary is buying, why hasn’t the price of gold gone up?

I will freely admit that I’m not positive I have the answer, but the one that I believe in is that gold has been artificially depressed so that 1) it doesn’t compete with the US dollar as a global reserve and 2) so nations can amass it. In other words, in the “global reset” that we all know has to come, each nation needs to have “X” amount of gold on hand to do a loose “backing” of their particular currency that isn’t “faith based”, it’s based on an asset.

So, it’s my belief that as these nations came together with the World bank and IMF and the US, a “deal” was made wherein the US would help suppress gold, and nations could amass gold, and they’d keep the price relatively stable for as long as they could. Think about it, if you have nation states buying TONS of this metal, metal that’s pretty rare, each time someone buys a million ounces, supply and demand suggests it has to rise.

Yet despite China, Russia, India, Hungary, Poland and others buying “tons” of it, the price has gone nowhere for the last 7 years. That’s simply not possible unless it’s being suppressed.

This was a cable from the US embassy in China, that was released via Wikileaks in 2009:

According to China's National Foreign Exchanges Administration China's gold reserves have recently increased. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries toward reserving more gold."

We gold bugs have always known that the US was instrumental in “capping” gold and yes, for the very reason of not wanting nations to try and use it as a reserve. But as I said, when China wanted into the SDR basket of currencies, it was made clear with a wink and a nod that they’d need something to help back it up. Gold was that something.

Now here’s the point to all of this. IF gold was destined to go lower, would nation states still be amassing it at these sort of volumes? How stupid would that be, to buy gold at say 1200 an ounce, only to see it go to 500 and wipe out more than half of your money. Now on the other hand, let’s suppose what happens IF or WHEN the suppression either ends or cannot be sustained. I think all those nations would be quite happy to see the price of gold explode higher.

They’re buying it for a reason and the reason isn’t to lose money. It’s stability, it’s diversified reserves, it’s a way to “back” their currency. Call me silly, but I have to believe that one day there comes a point where 90% of the world doesn’t want gold suppressed any longer. What happens then? I don’t know, but I like to have some around to find out. (smile emoji!)