The Geopolitics of Gold
The comments below are an edited and abridged synopsis of an article by Alasdair Macleod
China is moving on, enlarging its middle class, which will benefit from a stronger yuan, much as the German and Japanese economies did between 1970 and 2000. Having dominated economic developments until now, the export trade is becoming less important. With this dependency lessening, the argument in favour of a coup de grace against the US dollar by China revealing its true gold position is increasing.
We can be confident that China has at least 20,000 tonnes of gold off-balance sheet. For China to openly declare its gold position always was the final option in the financial war waged against it by the US. Unwittingly, by diverting demand from paper gold to physical bullion, Basel III may have brought forward that day by default.
In the introduction to this article, Macleod asks: Why did China delegate to the Peoples Bank of China a free run between 1983 and 2002 to acquire gold and silver on behalf of the state before permitting the Chinese to buy any? Why did the state then run an advertising campaign encouraging the population to buy gold? Why did the state invest heavily in gold mining to the extent that China has become the largest gold mining nation by a country mile? Why has the state retained a monopoly on all gold and silver refining? Why does the state retain control over the vaulting system for bullion? Why does the state retain control over the Shanghai Gold Exchange monopoly through the PBOC and not permit the establishment of rival exchanges? Why does the state permit the import of gold and gold doré but bans all gold exports? And: Why does the state appear to have set out to take control of the global market for physical bullion?
Also discussed: Estimates of monetary gold in 1983 and China’s strategy to 2002; the American stance on gold; and is the dollar set for a mighty fall.