Gold is a proxy for bigger battles

We’ve discussed how the anti-gold cabal of Western bankers used the vast hoards of gold in Western central banks to ruthlessly dominate (and suppress) this market for decades. Now, however, they are running low of gold. You don’t have to be a psychic to be able to guess at the conversations now taking place among these bankers.

“We need to dump more gold to stop it from exploding.”

“Agreed — so how about selling a few hundred tonnes of your gold?”

“Well, I was actually thinking it was your turn to sell...”

No one really knows how much (or how little) gold still remains in the hands of the Manipulators. For example, the US claims to have the world’s largest stockpile of gold. The problem is that for over 50 years it has refused to allow any independent audit of these supposed reserves.

A stockpile of gold is not like some secret, weapons facility, where simply allowing someone to see it could cause some sort of “threat to national security”. If the US hoard of gold actually existed, it is in the nature of Americans to want to show it off to anyone and everyone in the world. The obvious conclusion is that only a tiny fraction of this gold remains (if any, at all).

In fact, the US no longer even describes the supposed hoard of gold at Fort Knox as “gold reserves”, but instead it calls its holdings gold reserves and gold swaps. In other words, we have no idea of how much of this one-time hoard has been “loaned” to bullion-banks who cannot possibly replace that gold, and how much of the gold stored at Fort Knox officially belongs to other governments. All we know is that the truth would be extremely harmful to the Manipulators — which is why the actual amount of US gold still held at Fort Knox which actually belongs to the US is a closely-guarded state secret.

It is precisely at the time that Western sales of gold are rapidly falling toward zero that central banks in Asia, the Middle East, South America, and even Europe have suddenly started buying gold — while ridding themselves of their soon-to-be-worthless US dollars, in the process.

However, among the governments buying gold, two governments stand out — for totally different reasons. As has been widely publicised, China’s gold reserves have been rapidly increasing: the largest/ fastest accumulation of gold by any government in many decades. At least as stunning as this rapid accumulation is the fact that China has done this while buying very little gold on the open market.

Instead, China has been able to ramp up its domestic production, while all the other major gold producers in the world have seen their own production flat or declining. A decade ago, China did not even rank in the top five among global producers, while today it is #1.

China’s strategy is clear. As it continues to position its currency, the renminbi, to replace the US dollar as the global “reserve currency”, it has decided that large reserves of gold are mandatory in executing its plan (a return to a gold standard?). Because China wants to accumulate as much gold as possible, restricting its purchases of gold to its own domestic production allows it to buy vast quantities of gold while exerting little upward pressure on the price.

This also explains why China (along with India) suggested that the IMF sell all its gold (amounting to thousands of tonnes) since that would allow China to buy a vast quantity of gold, without pushing the price higher (directly) — while simultaneously allowing it to rid itself of a significant amount of US dollars.

However, as individual Chinese citizens have suddenly started buying vast quantities of gold, the Chinese government is now beginning to face some domestic competition in accumulating gold — meaning that the gold-buying by the Chinese government will likely soon start to have a greater (positive) impact on the overall gold market.

The “reserve currency” status of the US dollar leads to it being artificially valued far above its actual worth (as derived from the abysmal fundamentals of the US economy), and also saves the US government hundreds of billions of dollars per year — just on the interest payments on the massive US debt. Thus, China’s obvious-but-gradual campaign to replace the US dollar is a significant (if indirect) threat to the US.

With China’s accumulation of large stockpiles of gold being a precursor to designating the renminbi as the new, reserve currency, this means that China’s rapid accumulation of gold is also an indirect threat to the US government. However, as the driving force in suppressing the price of gold, the US is making it much cheaper and easier for China to build up a large gold reserve — essentially working for the Chinese government in its campaign to replace the US dollar.

The other government which stands out for its notable purchases of gold has an agenda vastly different from that of China. Russia has also been buying up large quantities of gold to bolster its reserves. While the Russian government talks about the Russian rouble being one of the currencies which would/ could/ should replace the US dollar, it is highly unlikely that this is what is motivating Russian purchases of gold.

In July alone, the Russian government bought 600,000 ounces of gold — its largest one-month purchase in recent memory. Unlike China, Russia’s purchases are being made on the open market, meaning that its behaviour has a strong-and-direct impact on the price of gold.

What has prompted the Russian government to become the US’s chief antagonist in its campaign to suppress the price of gold?

Could it be the direct role played by the US in the financial implosion and subsequent disintegration of the Soviet Union? Could it be the 20 years of excessive gloating by the US government over the Soviet downfall?

Could it be the intense campaign by the US to buy off former Soviet Republics, turn them against Russia politically and militarily — and then load them up with US missiles which are all pointed at Russia?

Suffice it to say that Russia is likely motivated by all of the above considerations, to such an extent that many commentators have suggested that we have already seen the start of a second, “Cold War”. However, while the first Cold War was characterised by a massive stockpile of “weapons of mass destruction” by the US and Russia — as well as various “proxy wars” conducted by both these governments, a second Cold War would/ will almost certainly be an economic contest.

Russia has already painfully learned the lesson that all the military might in the world is of little use, when it was supported by nothing but an economic “house of cards”. The US (as demonstrated by its own actions) has obviously learned nothing from the Soviet meltdown — since it appears to be on the verge of duplicating the Soviet collapse.

The writer is editor of bullionbullscanada.com and can be reached at j.nielson@shaw.com 
This is a condensed version of an article that appeared on http://www.bullionbullscanada.com/index.php?
option=com_content&view=article&id=2035%3Agold-wars-part-ii-the-empire-strikes-back&catid=48%3Agold-commentary&Itemid=131
Reprinted with permission of the author.