Saturday, September 3, 2011

Sat Post #3: Wikileaks on China and Gold

In case you missed it earlier this week, news came out that Wikileaks published their entire US State Department cable database.

As people pour through the massive data dump, the first nuggets (excuse the pun) of information are starting to surface.

And a gem of information has been uncovered in this US Embassy cable. Here is what the US Embassy in China had to say:

    "China increases its gold reserves in order to kill two birds with one stone"

    "The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. 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 towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."
China is ecstatic that the price of Gold is being suppressed by the Americans.  They fully intend to take advantage of it.  As they note, "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 has every intent to grow their reserves at these fire sale prices. And if things play out in the direction they are currently heading, $1900/oz will be considered cheap.

Zero Hedge commented on this today as well and they make the connection that anyone with any foresight can see for themselves. To wit: "What happens when "mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes?"

The result will be nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold.

As we have said before, we do not believe a return to the Gold Standard will be a good thing or that it will happen with full gold backed currency.

What WILL  happen is a worldwide rush into Gold and Silver, which will catapult prices parabolically upward.

Casey Research did an excellent paper back in March 2011 titled, "The Driver for Gold You're Not Watching".

It's well worth you time to check it out.

Click 'comments' below to contribute to this post.
Please read disclaimer at bottom of blog.


  1. Incredible info whisperer, thanks alot. ;-)

  2. How about a currency partially backed by gold? I believe Jim Rickards sees this happening with a gold price at $5000-7000 US per oz.

  3. Europe's Banking System: A Slow-Motion Bank Run in Progress
    "If we compare the three most troubled periphery countries with other euro-zone countries, we find that Cyprus has actually seen the greatest percentage decrease in deposits since the start of 2010. But Germany has also seen total deposits shrink by a bit, and, perhaps alarmingly, even though it is not in the euro-zone, the UK has experienced a very significant fall in total deposits with its MFIs. (Note: UK data is through June 2011.)"

    Gold and Silver to the moon Alice.