Xinhua, China’s official press
agency on Sunday ran an op-ed article which kicked off as follows:
“As U.S.
politicians of both political parties are still shuffling back and forth
between the White House and the Capitol Hill without striking a viable deal to
bring normality to the body politic they brag about, it is perhaps a good time
for the befuddled world to start considering building a de-Americanized world.”
China does have a broad strategy
to prepare for this event. She is encouraging the creation of an international
market in her own currency through the twin centres of Hong Kong and London,
side-lining New York, and she is actively promoting through the Shanghai Cooperation Organisation (SCO) non-dollar
trade settlement across the whole of Asia. She has also been covertly building
her gold reserves while overtly encouraging her citizens to accumulate gold as
well.
There can be little doubt from
these actions that China is preparing herself for the demise of the dollar, at
least as the world’s reserve currency. Central to insuring herself and her
citizens against this outcome is gold. China has invested heavily in domestic
mine production and is now the largest producer at an estimated 440 tonnes
annually, and she is also looking to buy up gold mines elsewhere. Little or none
of the domestically mined gold is seen in the market, so it is a reasonable
assumption the Government is quietly accumulating all her own production
without it becoming publicly available.
Recorded demand for gold from
China’s private sector has escalated to the point where their demand now
accounts for significantly more than the rest of the world’s mine production.
The Shanghai Gold Exchange is the mainland monopoly for physical delivery, and
Hong Kong acts as a separate interacting hub. Between them in the first eight
months of 2013 they have delivered 1,730 tonnes into private hands, or an
annualised rate of 2,600 tonnes.
The world ex-China mines an
estimated 2,260 tonnes, leaving a supply deficit for not only the rest of gold-hungry
South-east Asia and India, but the rest of the world as well. It is this fact
that gives meat to the suspicion that Western central bank monetary gold is
being supplied keep the price down, because ETF sales and diminishing supplies
of non-Asian scrap have been wholly insufficient to satisfy this surge in
demand.
So why is the Chinese Government
so keen on gold? The answer most likely involves geo-politics. And here it is
worth noting that through the SCO, China and Russia with the support of most of
the countries in between them are building an economic bloc with a common
feature: gold. It is noticeable that while the West’s financial system has been
bad-mouthing gold, all the members of the SCO, including most of its
prospective members, have been accumulating it. The result is a strong vein of
gold throughout Asia while the West has left itself dangerously exposed.
The West selling its stocks of gold has become
the biggest strategic gamble in financial history. We are committing ourselves entirely
to fiat currencies, which our central banks are now having to issue in
accelerating quantities. In the process China and Russia have been handed
ultimate economic power on a plate.
