Robert Lambourne: If it's the new master of gold, will China make the rules now?

Considerable attention is suddenly being paid to the integrity of U.S. government gold reserves. GATA has long reported on possible double counting of title or claims to physical gold and that some gold may have departed government vaults via loans or leases or even unreported sales.

One point for GATA supporters to consider, as ever, is the risk that the United States does not hold the gold it is supposed to have in its vaults, including those at Fort Knox. Even if the gold is present, are there multiple claims to it?

-- the respected gold advocate James Turk suggested that claims on physical gold in the U.S. may be as much as a hundred times the metal available. Clearly, the higher the level of claims or shortages of physical gold, the barer the cupboard at Fort Knox will turn out to be.

Thanks to the diligent reporting by gold researcher Jan Nieuwenhuijs, always publicized by GATA, we know there is overwhelming evidence that much more gold has been delivered to China in recent years than is officially acknowledged. Here is a recent update from Nieuwenhuijs on gold shipments to China:

China may even control more than three times as much gold as the official holdings of the United States. If Chinese President Xi Jinping wants to weaponize these gold reserves to damage the U.S., it seems he would have considerable scope to do so.

A GATA dispatch on December 22, 2024, covered the risks that a unilateral gold price reset by China could pose, especially to holders of shares of gold exchange-traded funds:

Court papers about an alleged Chinese spy, John Harold Rogers, who held a senior advisory role at the Federal Reserve, were published recently:

It is alleged that Rogers was passing information to his Chinese handlers from 2013 until as recently as January 30 this year. He is accused of having been paid $450,000 by his handlers for information and is even alleged to have passed them information held on spreadsheets. These could easily provide details on positions held in particular markets, such as gold.

So conceivably the Chinese know a lot about possible multiple claims on U.S. gold, including leases and swaps. Since Rogers is charged with passing information to China since 2013, it seems highly unlikely that this information did not include material about gold. Maybe Rogers didn’t have access to such information, but perhaps he did.

Despite what appear to be chaotic first steps for the Trump administration in international affairs, there is a strong underlying theme of anti-China actions. Issues reported to be of concern in China include Panama, Greenland, Ukraine, Taiwan, Korea, Japan, and possible U.S. tariffs.

The tone and direction from Trump and his assistants are reportedly construed in Chinese political circles as a campaign to rebuff China's efforts to increase its power and influence. In particular certain reports say Xi is furious about a potential double-cross by Russian President Vladimir Putin over the war in Ukraine. A veteran observer of China and especially its economy, Russell Napier, has referred to the Ukraine conflict as China’s proxy war with the U.S.

The economic situation in China itself is also uncomfortable for Xi. China has a major debt problem and its non-financial debt-to-GDP ratio of 294% is worse than that of the USA, 249%. Reports from China indicate that overbuilding of residential and commercial properties is widespread and that this is at the heart of the high debt levels with many banks and property companies.

An economic depression is developing rapidly in China, with reports of youth unemployment above 20%.

Napier has suggested that China needs to devalue its currency, the yuan, and then write off the debts that will never be repaid and stimulate domestic consumption instead of investing more in manufacturing capacity. Given China’s substantial gold reserves, some sort of gold price reset driven by the central government, or a substantial, more gradual increase in the gold price would facilitate debt write-offs.

Several recent reports from within China highlight that there is massive retail demand for gold bullion and jewelry. This video from China Observer makes such claims:

There are additional reports via the ever-excellent Chris Marcus of Arcadia Economics that this strong retail demand is also appearing in India and Korea and that retail gold buying seems to be picking up across Asia.

Hence there appear to be significant risks that China could take actions in the gold market that could force the U.S. to react, whether to a hostile act by China or to a financial restructuring to resolve the debt depression that seems to be deepening there. In this regard China, through espionage, well may have an understanding of any vulnerabilities of U.S. gold holdings.

Hence there appears to be a risk that the U.S. government would have to react to changes imposed on the gold market with little warning by China. This could include a formal introduction of gold into the Chinese monetary system whereby the gold price in yuan would be reset much higher. A period of chaos and uncertainty cannot be ruled out.

Perhaps it would suit China better to co-operate with the U.S. to concoct a measured debt devaluation in both countries, but the Chinese are less likely to agree to this if they regard U.S. actions internationally as hostile. Perhaps Xi’s own position in China is less secure because of the worsening economic depression and so an agreed way forward may be more acceptable to him.

Gold investors need to pay attention not only to developments in U.S.-China relations but also to economic developments in China. Trying to understand the economic and other information coming out of China is challenging, but is probably a nettle to be grasped rather than ignored.

The importance of this is perhaps best illustrated by whether a dramatic sudden move to raise gold prices unilaterally by China would lead to an attempt by the U.S. government to confiscate gold.

A report in this list by Jeff Thomas -- https://www.gata.org/node/22796 -- suggests that if China formally backs the yuan with gold, the U.S. probably would confiscate the gold of Americans. Gold investors may want to evaluate this risk and consider the extent to which gold reserves are unencumbered.

Whatever happens, whoever holds the gold will probably still be making the rules.

Hmmm, the US supposedly has 8,110 tons of Gold. Well known Gold traders state China is under reporting, and has 27, 000 tons of Gold. China is the world’s largest producer of Gold, and could explain why record amounts of Gold are being repatriated to the US in the past months, draining the LBMA holdings.

Got Gold?

China owns 27,000 tons

How many have insides of tungsten. How many are not the purity they are stamped with?

I don’t believe they do have this much.

2 posted on 02/23/2025 7:15:24 PM PST by Secret Agent Man (Gone Galt; not averse to Going Bronson.)

3 posted on 02/23/2025 7:19:24 PM PST by Jonty30 (Groundhogs don't falsify their predictions for grant money, whereas climate scientists do. )

If they have that much gold, somebody is lying about the gold they have because the math doesn’t work.

4 posted on 02/23/2025 7:20:17 PM PST by Jonty30 (Groundhogs don't falsify their predictions for grant money, whereas climate scientists do. )

>> Got Gold?
Hell, no. Nor will I, at $3K per ounce. Gold is nothing but an inflation hedge, and there are plenty more hedges that make more sense than gold.

5 posted on 02/23/2025 7:35:37 PM PST by Nervous Tick (Hope, as a righteous product of properly aligned Faith, IS in fact a strategy.)

You can’t make a diet on gold.

wy69

,,, China lies about everything. It won’t allow publishing of economic data but is quick to announce their findings of new viruses and hints at how dangerous they could be if spread. If every central bank and big institutions are going for gold then their stocks should be subject to testing and confirmation of authenticity. Auditors run the ruler over balance sheets each year so where’s the beef if gold’s going to be a basis for value?

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