The flight of central banks to gold “would suggest the geopolitical backdrop is one of mistrust, doubt and uncertainty” after the US and its allies froze Russia’s dollar reserves, said Adrian Ash, head of research at BullionVault, a gold marketplace.
It has long been suggested that The Federal Reserve, in tandem with other central and commercial banks have suppressed the price of gold to preserve the current dollar-based system. TMF picked up on this five/six year ago
The incentive to do so is quite clear, since nothing less than the very survival of the present global regime is at stake. As a recent report by QB Asset Management asserts, banks “short gold futures because they have incentive to sustain the current monetary system and maintain control over credit distribution.”
A 2009 diplomatic cable from the U.S. Embassy in Beijing to the U.S. State Department – recently made public by WikiLeaks – summarized Chinese media as follows:
The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency.
The USA and Europe have shot themselves in the foot with this policy, allowing banks/countries to hover up gold at bargain basement prices – I got some as well
I just wonder if Putin will use oil and gold to attack the Western financial system even further. It could turn out to be WW3 played out in the financial sector. I’m buying some more when the holiday is over. I’d rather have it than hold a currency (£ in my case) that is going down in value by up to 20% pa!
As the Chinese curse goes “May you live in interesting times”
Interestingly, neither the EU nor the US has sanctions in place to prevent Russia from trading in gold.
Russia and China are the two largest producers in the world (https://www.gold.org/goldhub/data/gold-production-by-country), but China is philosophically the heart of the Asian idea that gold “IS” money. With the likelihood that US bonds will continue to lose value over a predictable portion of the economic cycle, it is equally predictable that they would reduce those holdings and replace them with something which retains value, At this point in time, the US dollar (as well as the Euro) is subject to inflationary pressures - and Russia is starving for both “hard currencies” to trade to Iran and Korea for weapons.
While Russia, no doubt, is accumulating gold, I suspect that China is actively replacing its US bonds with the yellow stuff and, if forced, has probably accumulated enough to influence the price (either higher or lower, as suits them).
Part of my portfolio is structured to take advantage of sudden upward pressure in gold.
I don’t know about gold as money.
I have however checked and found that a 100 dollar bill in 1920 would buy what 14 100 dollar bills would buy today.
So, if I had a thin stack of 10 100 dollar bills in 1920, I could buy a decent but not fancy car. Now, for 14,000 dollars, I
could buy a decent but not fancy used car. (The latter would last longer, drive better and be less to operate.)
The difference is, if I drive down an pay for a car with 140 $100 dollar bills, I am
liable to have the money confiscated by the government.
The same goes for international trade. If wanted to buy a tanker full of oil, I could have my electronic bits deposited in a neutral bank and then draw a letter of credit on it. Safe, easy. Difficult to steal.
Or I could ship gold to the
depot and take delivery on my ship. A panamax tanker holds about 500,000 barrels of oil, or roughly 40 million dollars worth of oil. I would need to ship roughly 1
ton of gold. Physically. This is a lot more effort and risk than an electronics fund transfer.
UNLESS!
You have reason to believe that a formidable player would confiscate (read steal) your money for some reason. At that point, a 1 ton shipment might not
be such a big thing.
Also note. I could be wrong because I have no practical reason to investigate thoroughly, there is a law that prevents the
casual carrying of $10,000 in currency, but not $10,000 in valuable goods. (Gold) As such, if one wanted to trade in cash, then due to the restrictions on currency and the
low value of currency, gold begins to look useful.
Q,
You are thinking along the lines of what you or I would do with even a 1kg bar of gold - a pretty interesting paperweight. What I’m referring to is how nations seem to handle their gold reserves today - kept in central vaults possibly not even within their (possibly at the Fed in NYC or in in Ft. Knox). If China wanted to spend some of its gold in, say Vietnam, they might simply sign over that amount and hold it on behalf of Vietnam in Chinese vaults. Sort of like Pacific islanders kept track of who owned large stone disks.
Who was the first blogger to report there was no gold in the gold vaults? He or she was brilliant no other blogger in history has swayed more people with zero evidence.
It took the complete efforts of the FED to make the Y2K thing look like a crisis. Granted no blogger has scaled to those heights yet.
We have had UFOs coming and going particularly focused on the USA for some reason. But no gold in the gold vault is the ultimate lets spread lies and have fun getting everyone to believe.
Even the anti vaxers need the no gold in the gold vaults lie. Even the crypto guys need no gold in the gold vault.
