Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Canadian Cannabis Stocks CRASH as Canopy Growth Hits a Dead End - 14th Dec 19
Retail Sector Isn’t Dead, and These 6% Dividend Paying Stocks Prove It - 14th Dec 19
Top 5 Ways to Add Value to Your Home - 14th Dec 19
Beware Gold Stocks Downside - 13th Dec 19
Fed Says No Interest Rate Hikes In 2020. What About Gold? - 13th Dec 19
The ABC’s of Fiat Money - 13th Dec 19
Why Jo Swinson and the Lib Dems LOST Seats General Election 2019 - Sheffiled Hallam Result - 13th Dec 19
UK General Election 2019 BBC Exit Poll Forecast Accuracy Analysis - 12th Dec 19
Technical Analysis Update: Tadawul All Share Index (TASI) - Saudi Arabia ETF (KSA) - 12th Dec 19
Silver Miners Pinpoint the Precious Metals’ Outlook - 12th Dec 19
How Google Has Become the Worlds Biggest Travel Company - 12th Dec 19
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

China’s Global Gold Supply "Game of Stones"

Commodities / Gold and Silver 2015 Jan 17, 2015 - 10:57 AM GMT

By: MoneyMetals

Commodities

China has a 4-way global gold supply domination strategy. And it’s starting to corner the market.

First, China buys physical gold in world markets, fabricates it where necessary into “good delivery” bars – in Switzerland or the Middle East – then ships the bullion, transparently through Hong Kong or Shanghai (or quietly through Beijing and other ports of entry).


Second, it keeps virtually all domestically mined gold “in house.”

Third, China partners with or buys high grade, in-situ gold (and silver) projects around the globe. One of the most well-known recent actions has involved negotiations to partner with Barrick Gold on its massive cost-overrun-plagued Pascua Lama project, which straddles the Chilean-Argentine border.

Most recently, China’s largest gold producer, Zinjin Mining Group, made a strategic investment in Pretium Resources’ high-grade Brucejack gold Project in northwestern British Columbia to the tune of $80 million. This latter investment will facilitate eventual construction of a 2,700 tonne-per-day underground mine.

Fourth, and virtually impossible to quantify with a reasonable level of accuracy, are China’s efforts to purchase “off the books” gold production from what are known as informa or artisanal gold miners in Africa and South America. This gold, which will never show up on an import manifest, nevertheless adds one more acquisition stream to the literal river of bullion flowing directly into the coffers of China’s golden hoard.

U.S. intelligence advisor Jim Rickards, author of The Death of Money, recounts an episode told to him by a friend who is a senior officer of a high-security transporter of physical metals who had brought gold into China at the head of an armored column, guarded by heavily-armed troops.

One of these days, at a time of its choosing, China may reveal just how much gold it does hold, alongside a possible decision to enable a newly gold-backed currency, the Yuan, to make its debut on the world’s financial stage. Such an event would have profound implications for the primacy of the U.S. dollar, as well as America’s ability to continue running printing press deficits, long financed by Chinese purchases of U.S. debt instruments, to the tune of several trillion dollars.

China’s Undisclosed Gold Reserves: "A dagger pointed at the heart of the dollar"

When this event takes place, it will become evident to the world’s financial players that, as Rickards so poignantly remarks, China’s true gold reserves will have become “a dagger pointed at the heart of the dollar.”

Most Westerners fail to appreciate the methodology by which China has traditionally pursued – and often successfully achieved – its geopolitical ends.

China is “surrounding” the global gold supply.
Analogized by this "seki" from the game known as "Go."

China’s strategies are oriented from the perspective of many years or even decades, unlike Western governments, who often judge success or failure based upon quarterly or annual progress reports. They are not likely to be concerned if the Pascua Lama project is not in production 10 years from now. They know that the gold – and silver is in the ground, so it’s just a question of when – not if – they can acquire a substantial amount, adding it to their continually-growing stash.

Some Westerners are familiar with a Japanese board game of strategy called “Go.” Few know that this game actually originated in China more than 2,500 years ago. Though the two player game has fairly simple rules, the number of possible games is several times that of chess. The objective is to outmaneuver the opponent, surrounding the largest area of the board with one’s own stones.

China is “surrounding” the global gold supply.

In the figure above, a situation known as “seki” or “mutual life” has taken place. The player with the black stones – labeled here as the Chinese currency, the Yuan, has positioned in such a way that if its opponent moves first – in this case, the U.S. dollar, he will be captured.

This Go board move offers an excellent analogy for the U.S. dollar competition with the Chinese Yuan. In order to be “dethroned,” the dollar does not have to be eliminated from global currency completion. It may not be necessary for China – using chess terminology – to fully checkmate the dollar. Instead, simply relegating it to “first among equals” might be enough to effectively cripple its historic full-spectrum functionality, because at that point, the Federal Reserve would no longer have the ability to issue unlimited, un-backed, U.S. dollar-denominated debt instruments.

A Game of Stones and Silk

“Surrounding” global gold production is just one aspect of China’s grand strategy for achieving political and economic dominance in Central Asia and beyond. The revitalization of modern-day trade routes, throughout direct spheres of influence, integrated with connections into Europe – once known as The Silk Road – is well underway.

Think of this term as a plural. These “roads” will see Chinese companies investing along their paths in dozens of countries, a significance that is almost impossible to overestimate. Pepe Escobar, the roving correspondent for Asia Times/Hong Kong, describes it this way:

The Yiwu-Madrid route across Eurasia represents the beginning of a set of game-changing developments. It will be an efficient logistics channel of incredible length. It will represent geopolitics with a human touch, knitting together small traders and huge markets across a vast landmass. It’s already a graphic example of Eurasian integration on the go. And most of all, it’s the first building block on China’s ‘New Silk Road,’ conceivably the project of the new century and undoubtedly the greatest trade story in the world for the next decade.

Meanwhile, the systemic issues which drove gold to $1,900 and silver to almost $50 in 2011 – deficit spending, leveraged derivatives expansion, and misallocation of money due to artificially low interest rates – continue to worsen. Divining the exact timing when all these things reach a crisis point is less important (provided you are not too late!) than making sure you have “laid in” some financial protection to help keep you safe from the inevitable fallout’s worst effects.

The progression of China’s Go game strategy – and rising affluence among Asian nations which enables them to buy increasing amounts of gold and silver - are all positive factors supporting higher precious metals prices.

When push finally comes to shove, David Galland of Casey Research seems to have nailed it when he said:

“The dollar is headed toward the sacrificial altar, with a knife made of gold. Sooner or later, the central bankers will have to throw in the towel, and just let gold run.”

Tweet This

When that happens, the only question – other than trying to find some metal to buy – will be “How high is high?” Having enough gold and silver within arms’ reach before then may be one of the best decisions you can make.

David Smith is Senior Analyst for TheMorganReport.com and is a regular contributor to MoneyMetals.com. For the last 15 years, he has investigated precious metals mines and exploration sites all over Argentina, Chile, Mexico, China, Canada, and the U.S. and shared his findings and investment wisdom with readers, radio listeners, and audiences at North American investment conferences.

MoneyMetals.com

© 2015 David Smith - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules