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What the Chinese said
We always have to remember that the Chinese are
inscrutable. The Chinese government is very careful not to say
any more than is necessary on anything. It’s also very
useful to have people, supposedly close to government makes statements that may
appear to be government policy. Many of the statements come from
people helping to lay a smokescreen for the true picture, or to get a
reaction, like tossing a stone into a bush to see what flies out.
Before we give the quote we have to tell you this quote is not from a
top official but from a central bank researcher. Because of his
closeness to the People’s Bank of China, it may be assumed he is
telling us facts that are common knowledge at the bank. On the
other hand the quote is explosive, not backed up by fact, runs counter to
common sense and against the information we have. It’s
natural to then say, “Maybe he knows something we don’t
know”. So whether you accept this as fact, or not, is your
decision.
Here is the quote, “Sales by overseas central banks could see
a sharp fall in gold prices”. [The Financial News reported
Wednesday], citing Zou Pingzuo,
a central bank researcher. He continued, “Investors
should be careful about investing in gold. Gold prices
could fall sharply because of intensive gold sales by the United States and
other overseas central banks.”
Are the U.S. and other central banks selling gold?
We are of the opinion that the World Gold Council is a competent body
and that they do gather accurate information on ‘Official’ gold
sales worldwide. We also note that leasing is not selling just as
swapping is not actually selling. The figures published by the
WGC tell us that the gold selling has stopped and that central banks,
including China, are buyers.
Yes, when gold is leased or swapped, the gold leaves the owners
control, but unless the overriding agreement is broken the gold should return
to the owner’s control. It’s there that the main
questions lie. And it’s there that the statement may
gain credibility.
Many are convinced that leased gold or swapped gold is a cover for
what in reality is a sale. As a result many believe that the
central bank holdings of gold are far less than published. If
such obligations do attach to the gold owned by a nation, then at best, it is
‘at risk’ and this should be clarified. The risk of
the gold not being returned does attach to that gold, because it lies under
the control of an entity or person outside that bank. That
certainly weakens ownership control as we all know.
Why isn’t the Federal Reserve happy to prove its gold holdings
in an audit?
Senator Ron Paul has wanted an Audit of the Fed for
a long time for, as he said, “the audit should determine not only the
simple presence of gold in the U.S. government's vaults at Fort Knox,
Kentucky, and elsewhere but also "whether any of it has been
obligated.”
Senator Paul is fully aware of the Federal Reserve's
involvement in gold swaps with foreign banks, an admission made by Fed
Governor Kevin M. Warsh a year ago in his battle
with GATA's litigation against the Fed under the Freedom of Information
Act. It was there that Governor Warsh
insisted that the Fed's gold swap arrangements must remain
secret. What was the Treasury’s response to the
Senator? “Representatives from the Treasury Department and
U.S. Mint did not respond to requests for comment on Paul's proposal."
Shouldn’t the Treasury, the Fed and public institutions in
general be transparent? You would think so, but then the
perceptions we have of government, the Fed and the gold reserves, may be
radically altered and confidence damaged. After all, it was only
after the Gold Standard was dropped that it was discovered that the U.K.
could not cover all the banknotes they had issued [based on
gold].
What stands out starkly is that if the Federal
Reserve does have the gold they say it has, then an audit will reveal this
and ensure confidence is bolstered in the central bank’s reserves at
all levels of the monetary world. So why would a central bank not audit
its holdings regularly to shore up any waning confidence? After
all, as the nation’s purse holder, they should assure the public that
their reserves are what they say they are.
Julian D. W. Phillips
Gold/Silver Forecaster – Global Watch
GoldForecaster.com
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