There appears to be a multi country effort to (re)build gold backed currencies, and there's every chance they will succeed, certainly even in the face of crypto currencies - the robustness and security levels of current computing facilities means hoarding physical gold is likely seen by most, and certainly by nations, as more secure and acceptable to the public psyche. <end personal prattle> ---- http://www.zerohedge.com/news/2016-04-16/china-embraces-gold-advance-post-do... China Embraces Gold In Advance Of Post-Dollar Era Tyler Durden's picture Submitted by Tyler Durden on 04/16/2016 20:50 -0400 Submitted by Koos Jansen via AllChinaReview.com, http://www.allchinareview.com/china-embracing-gold-in-advance-of-post-dollar... To challenge the US dollar hegemony and increase its power in the global realm of finance, China has a potent gold strategy. Whilst the State Council is preparing itself for the inevitable decay of the current international monetary system, it has firmly embraced gold in its economy. With a staggering pace the government has developed the Chinese domestic gold market, stimulated private gold accumulation and increased its official gold reserves in order to ensure financial stability and support the internationalisation of the renminbi. “The outbreak of the crisis and its spillover to the entire world reflect the inherent vulnerabilities and systemic risks in the existing international monetary system…. The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run…” Quote from Governor of the PBOC Zhou Xiaochuan 2009. In the present zeitgeist we find ourselves on the verge of a shift in the global monetary order. The shocks through the financial complex in 2008 that reaffirmed the innate fragility of the US dollar as the world reserve currency have sparked China to become a vocal proponent of de-Americanization, although its end goal is communicated less clearly. Being the second largest economy of the world but relatively in arrears regarding physical gold reserves, China has a strong motive to surreptitiously work on its gold program until completion. For, if it would be candid in its gold ambitions, the price would significantly run higher, potentially disturbing financial markets and narrowing its window of opportunity to prepare for the next phase. State Council Rapidly Developed Domestic Gold Market And Stimulated Private Hoarding China has been infatuated with gold for thousands of years. In the mainland, gold mining and use can be traced back to at least 4,000 years ago, and the metal has always represented economic strength and was regarded as the emperors’ symbol of power. Although the Communist Party of China captured the monopoly in gold trade and heavily restricted private gold possession since 1949, in lockstep with the gradual liberalisation and the ascend of the Chinese economy the state started to develop the domestic gold market in the late seventies, which accelerated in 2002. A new page was turned when the Gold Armed Police started operating in 1979, not coincidentally a few years after the US detached its dollar, the world reserve currency, from gold. This army division was initially assigned to gold mining exploration and has done so quite fruitfully. Since 1979, Chinese domestic mining output has grown 2,137 % from an annual 20 tonnes to an estimated 467 tonnes in 2015. In 1982, the first steps were taken in reviving China’s gold retail channels. For the first time since 1949 people were allowed to buy jewelry and the China Gold Coin Incorporation started issuing Panda coins. The Peoples Bank Of China (PBOC) continued to be the primary gold dealer that fixed the price and controlled all supply flows. The real reform of the Chinese gold market was implemented on 30 October 2002 by the launch of the Shanghai Gold Exchange, erected to serve the full liberalisation of the domestic gold market. From that date the fixing of the gold price in China was transmitted from the PBOC to the free market. In 2004, the State Council approved gold as an investment for individuals and the PBOC slowly repelled control over supply flows. The Chinese gold market fiercely rose from its ashes. By 2007 the market was functioning as intended when nearly all gold supply and demand was flowing through the SGE system6. A year later, in 2008, the Shanghai Futures Exchange launched a gold futures contract supplementing existing derivatives at the SGE. The Shanghai Gold Exchange (SGE), which is a subsidiary of the PBOC, is the very core of the Chinese physical gold market. Its infrastructure provides a single liquid exchange overseen by the state, granting all participants a trusty venue that can be efficiently developed and monitored. The mechanics of the Chinese market incentivise nearly all supply and demand to connect within the SGE system. As a consequence, by the amount of gold withdrawn from the vaults of the SGE – data that was published up until December 2015 in the Chinese Market Data Weekly Reports – we could gauge Chinese wholesale gold demand. After the crisis in 2008, it became apparent in the higher echelons of the Chinese government that the development of the gold market and private accumulation had to accelerate to protect the Chinese economy from looming turmoil. Through state owned banks and media wires the citizenry were stimulated to diversify savings into physical gold. Currently, at Chinese banks, numerous gold saving programs can be entered into, or individuals can open an SGE account and purchase gold directly in the wholesale market. “Individual investment demand is an important component of China’s gold reserve system, …. Practice shows that gold possession by citizens is an effective supplement to official reserves and is essential for our national financial security.” Quote by the President of the China Gold Association 2012. When the gold price came down sharply in April 2013, Chinese gold demand literally exploded as in a once in a lifetime event. In between 22 and 26 April, 117 tonnes of physical gold were withdrawn from the vaults of the SGE. gold_graph China has been a gigantic gold buyer ever since. Withdrawals from the vaults of the SGE in 2015 accounted for 2,596 tonnes (90 % of global annual mine output), up from a mere 16 tonnes in 2002. SGE withdrawal data correlates with elevated gold import by China. Whilst clearly enjoying their bargain purchases, China has established a trend of increasingly obfuscating the true size of its gold demand. Not long ago several reports were released in the mainland that disclosed total gold demand to be the equivalent to SGE withdrawals. Since 2012 these reports have been hidden from public eyes and in January 2016 the SGE ceased publishing withdrawal data10. Although annual SGE withdrawals have exceeded 2,100 tonnes since 2013, what is generally publicised as gold demand is roughly half of this, merely the demand at jewelry shops and banks that excludes direct purchases from individual and institutional clients at the SGE. As a result, the global consensus is that Chinese gold demand is approximately 1,000 tonnes a year though in reality it’s twice this volume. PBOC Accumulating Gold To Support Renminbi Internationalisation To free itself from US dollar supremacy and force the sequent monetary system, China’s goal is to internationalise the renminbi. For achieving its target, gold is identified as the key. It is the absolute monetary asset to support the renminbi, the dollars’ Achilles heel and a hedge during monetary stress. Next to the swift progression in the Chinese private gold market we can observe the PBOC is covertly buying gold and has launched the Shanghai International Gold Exchange to prepare renminbi internationalisation. “For China the strategic mission of gold lies in the support of renminbi internationalization, and so let China become a world economic power…. Gold is both a very honest asset and forms the very material basis for modern fiat currencies…. Gold is the world’s only monetary asset that has no counter party risk, and is the only cross-nation, cross-language … and cross-culture globally recognized monetary asset. That is why in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US.” Quote by the President of the China Gold Association 2014. Not surprisingly, China’s strategy is everything but linear. Let us analyse the State Council’s most recent actions with respect to gold and the internationalisation of the renminbi. In addition to gold accumulation, the State Council has aimed to kick start renminbi internationalisation by having it included into the International Monetary Fund’s (IMF) basket of currencies, the Special Drawing Rights (SDR), in 2015. For acceptance, the IMF required openness of China’s international reserves, of which the PBOC hadn’t updated its gold reserves since 2009. Here we found the PBOC stretched between opposing forces; it obviously preferred to hoard gold in concealment not to disturb financial markets, while at the same time it was requested to open its books. In July 2015 the PBOC decided to revise its official gold reserves by 604 tonnes to 1,658 tonnes, which was probably not the whole truth but served both means, as markets barely reacted to the increment – the gold price has not increased since then – and the IMF has granted annexation of the renminbi into the SDR. -How much gold does the PBOC truly hold-? Before we make an estimate we must first address the question, how and where does the PBOC buy gold? --Some analysts assume the PBOC buys gold in the domestic market at the SGE. According to my research this is not true. My sources in the bullion industry tell me first hand that the PBOC buys gold in the international OTC market using Chinese banks as proxies. And this intelligence fits into the wider analysis, as there are many reasons why the PBOC would not buy gold through the SGE.-- A rough estimate suggests the PBOC holds nearly 4,000 tonnes in gold reserves, more than twice the amount they officially disclose. In a quest for any clues we must visit the heart of the gold wholesale market. Data by the London Bullion Market Association points out there have been approximately 1,700 tonnes of monetary gold exported from London between 2011 and 2015. China’s central bank is the foremost suspect for these purchases, given its size and motives, and the tonnage exported from London is consistent with other sources that state the PBOC has bought roughly 500 tonnes a years since 2009. All clues together point to the PBOC holding roughly 4,000 tonnes currently. Although this remains speculation. --More of China’s gold strategy was revealed by the recent launch of the Shanghai International Gold Exchange (SGEI) that offers gold trading in renminbi for clients worldwide, in an attempt by China to strengthen the internationalisation of the renminbi.-- In itself the SGEI clearly underlines China’s gold ambitions16, but the punch line was added with the launch of the Silk Road Gold Fund in 201517. Led by the SGE(I), the $16 billion fund will boost the gold industry along the Silk Road and in turn “will facilitate gold purchases for the central banks of member states to increase their holdings of the precious metal”, according to the Chinese state press agency Xinhua18. Not only is China trying to persuade all mining and consumption of gold along the Silk Road economic project to be settled through the SGEI in renminbi, additionally the Chinese promote gold as an essential component of central banks’ international reserves going forward. --We must conclude that the State Council views gold as part of the coming international monetary system.-- Why else does it quickly develop the domestic gold market to be embedded in financial markets, surreptitiously accumulate vast gold reserves and establish a framework to boost gold business on the Eurasian continent around the SGEI? -In my view, China contributes significant value to its gold strategy in the shadow of the apparent failure of the current fiat monetary system. And if true, China’s central bank having nearly 4,000 tonnes of gold is well on its way to introduce the next phase.- Links from the comments: ----------- http://independenttrader.org/why-china-hides-their-gold-reserves.html 22.07.2015 Why China hides their gold reserves? Recommend this article: Comments: 1 » China’s main goal is to internationalise yuan (CNY) and add it to the currency basket of the International Monetary Fund. To succeed China needed to update both of their currency and gold reserves. Last update in 2009 put Chinese reserves at 1054 tons. Speculations about how much gold is held by the People’s Bank of China (PBC) seem to have no end. The newest update was quite a shock. It was stated that reserves amount to 1658 t and not to 3500 t as it was commonly perceived. Allegedly reserves were growing only by 100 t per year during last six years. Publication was pushed by the IMF, but in my opinion the official numbers are understated by a huge margin. Recently in one of my interviews I highlighted that it is more than possible that number given by authorities will be smaller than the true reserves but even I was surprised with 1600 t levels. Why Chinese did not publish their true level of reserves? a) The IMF negotiations. It has been several years since China and IMF are discussing adding the yuan to the currency basket. Special Drawing Rights (SDR) is a portfolio of dollar, euro, pound and yen. For years Americans having the right to veto blocked any negotiations and changes. It may be that in exchange for somewhat cosmetic change of the Chinese gold reserves the US government agreed to smoothly include second Asian currency to SDR. Still the US dollar is the biggest loser here and consequently the US. Around October the news may break that CNY after 5 long years of talks will be officially added to the currency basket. b) Currency reserves Substantial majority of Chinese currency reserves worth 3.7 trillion USD is held in short-term US government bonds. Informing the markets that government reserves equal 5000 t rather than 1050 t would raise question not only about the source of this plentiful stash of gold but also who doesn’t have it anymore. This second part is very important here. This uncertainty could push the price of this precious metal up and distort delicate balance in the foreign exchange markets. Chinese have big stake here equal to 98,4% of their currency reserves. c) Importing at Black Friday’s prices… to be continued Regarding gold reserves of the Peoples Republic, Roland Wand – chairman of Chinese World Gold Council branch – said that “gold amounts to 1,6% of Chinese reserves, while the ideal situation would 5%. If China announce today that 5% of currency reserves are in gold the result would be huge climb of global demand and the price of gold. This is not in the best interest of our citizens”. Last but not least, government actively encourage its citizens to invest their savings in gold. What are the goals of China?
From 20 years Chinese economy is the leader of fast growth. According to PPP China is the number one economy in the world. While in many aspects international arena still treats them as developing country.
Chinese policy will eye several goals in near future: a) Internationalisation of yuan to change its stance from being transactional currency to reserve one. Thanks to that China will paint more trustworthy picture of itself on the global stage. b) Preparing ground for solid currency (loosely bound to gold) with simultaneous transformation of economy – from centrally planned to free market. c) Owning substantial currency reserves guarding against results of bursting speculative bubbles (stocks, real estate) in the local market. d) Diversification of dollar reserves into various assets e) Developing of alternative (not-western) market. New silk road and AAIB. f) Dethronement of the US as the global hegemony. Let’s now see how much gold PBC really has. a) Production. Source: Koos Janses, BullionStar.com
From 2009 to 2014 gold yearly production increased from 315 t to 450 t. Most of the mines are owned by the state and there is a ban for gold exports.
Since the announcement of official reserves in 2009, approximately 2200 t of gold had been produced. Share of this amount went through Shanghai Gold Exchange (SGE) to individual consumers. What was left probably resides in PBC’s vaults. Ratio is not yet known. b) Official imports Gold is imported to China through SGE and then to the market. Last six years SGE noted the sell of 7000 t of bullion. It is safe to say that majority ended up in Chinese hands as it is traditional medium of amassing wealth. Substantial share was snatched by various funds wholly owned by the state. c) Unofficial imports All gold passing from country A to B is recorded. Exception from the rule is gold coins bought by central banks and government agencies. As long as the gold is in coin form there is no available information about its volumes and flows from one country to another. China is able to import big volumes of aurum through government agencies and have this imports hidden from official reports. Similar situations were described by Jim Rickards in the second part of his book: “One of the high level G4S directors (global logistics company) shared that he himself transported gold to China through mountain massif. Transport was guarded by People’s Liberation Army supported by armored vehicles. Gold was in 400 oz “good delivery” ingots used by central banks”. It is very hard to estimate volume of China’s government reserves. One thing is for sure that 1660 t is too small of a number. According to different calculations Chinese already accumulated from 4-8 thousand tons. Some estimates talk about reserves being over 10 thousand tons but personally I think it is exaggeration.
From Chinese officials and also from central bank’s side we may have heard rumors that government is able to import around 500-600 tons of gold while still having stable gold market. Recent Dutsche Bank report seem to confirm this data. In general it is very unlikely that reserves are below 4.5 thousand tons.
Summary The big problem of central bank reports is their lack of accountability. The bank can say one thing but average investor has no chances to verify it. The US claims sine ‘50s that they have 8500 tons of gold. There was no audit since then. Germany claims 3000 tons but majority is abroad. This makes it hard to distinguish whether they have the gold or its ‘paper promise of return’. China is no different. Central bank still holds only 1660 tons even if another 3000 tons are held by funds controlled by the very bank itself. Formally everything is square. China’s gold lets them play a very successful game with the US. Recently Uncle Sam had to accept the change to SDR basket. Next time it may be other area of Chinese interest which will be focused, time will show. On global scale this game is played not only for profit but rather for control. Control is the biggest prize here. --------- http://www.thenewamerican.com/economy/item/18455-imf-may-move-from-dc-to-bei... [Enormous number of links in this article, so just quoting the first paragraph without the hyperlinks; enjoy] " Wednesday, 11 June 2014 IMF May Move From D.C. to Beijing, Chief Says Written by Alex Newman IMF May Move From D.C. to Beijing, Chief Says Days after attending shadowy meetings with top globalists and a member of the Chinese Communist Party Central Committee, International Monetary Fund boss Christine Lagarde (shown) shocked the world by saying IMF headquarters could someday move from Washington, D.C., to Beijing. The spectacular statement, which came after her attendance at the infamous Bilderberg summit and the Rothschild-organized “Inclusive Capitalism” conference, came amid an ongoing establishment effort to prepare the world for major economic and political changes in the coming years. " --------- Contary to the facile observations of "gold analysts" partial to playing up "East vs West," "BRICs vs. PRICS." type memes, the Lloyds and China LLC have been deep in conversation - through both pre & post Mao eras. Just like with Russia, the entire "Chinese Revolutionary" movement was a construction of WallSt/ThreadneedleSt; there have been no changes in ownership since that early phase - just shift in tactics ( https://storify.com/SuaveBel/from-giants-to-pygmies ). The so-called NWO has selected Sinoland as the next repository for their planetary ambitions. Since Deng Xiaoping, the leadership has been given a mandate - not exactly from "Heaven," but most certainly to do "God's Work." And thus, carefully schooled in adopting the most current western financial techniques, in order that they accumulate the necessary heft in the financial arena for this changeover to happen. They have also been intensely schooled in the limits to their autonomy of action - the current downturn in the economy being engineered with precision to demonstrate the perils of too much 'independent deviationism.' There is a degreee of rebelliousness to all of this - the Xi regime is composed of many layers of wily insiders, including some who are true Sino-nationalists, aware of who's been messing with them for the past century. That's what makes things interesting, watching what goes down in the Middle Kingdom. And totally screws up the "analysis" of faraway western-based writers who script their stories to silly comicbook scenarios like BRICS and "death of the dollar." Price suppression in gold and silver has been dictated by the policies of those in control of China's financial fortunes for the past 5 years - in conjunction with their agents of influence in western markets. When they decide its time to change direction, so to will the POS/POG. Until then, beware the revisionist dogma of consensus trance "gold experts" peddling the stories which the puppetmasters use to cover up their schemings.