Wikileaks Discloses The Reason(s) Behind China’s Shadow Gold Buying Spree

September 4th, 2011

FAKE NEWS for the Zionist agenda

Zero Hedge
Sunday, September 4, 2011

Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar’s reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst.

We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China’s perspective is that “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. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.” Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold…

From Wikileaks:

3. CHINA’S GOLD RESERVES

“China increases its gold reserves in order to kill two birds with one stone”

“The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): “According to China’s National Foreign Exchanges Administration China ‘s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. 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. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.”

Perhaps now is a good time to remind readers what will happen if and when America’s always behind the curve mutual and pension fund managers finally comprehend that they are massively underinvested in the one best performing asset class.

From The Driver for Gold You’re Not Watching (via Casey Research)

You already know the basic reasons for owning gold – currency protection, inflation hedge, store of value, calamity insurance – many of which are becoming clichés even in mainstream articles. Throw in the supply and demand imbalance, and you’ve got the basic arguments for why one should hold gold for the foreseeable future.

All of these factors remain very bullish, in spite of gold’s 450% rise over the past 10 years. No, it’s not too late to buy, especially if you don’t own a meaningful amount; and yes, I’m convinced the price is headed much higher, regardless of the corrections we’ll inevitably see. Each of the aforementioned catalysts will force gold’s price higher and higher in the years ahead, especially the currency issues.

But there’s another driver of the price that escapes many gold watchers and certainly the mainstream media. And I’m convinced that once this sleeping giant wakes, it could ignite the gold market like nothing we’ve ever seen.

The fund management industry handles the bulk of the world’s wealth. These institutions include insurance companies, hedge funds, mutual funds, sovereign wealth funds, etc. But the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.

Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion).

We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying.

So, what about pension funds?

According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.

Shayne is head of global research at the Teacher Retirement System of Texas. He bases his estimate on the fact that commodities represent about 3% of the total assets in the average pension fund. And of that 3%, about 5% is devoted to gold. It is, by any account, a negligible portion of a fund’s asset allocation.

Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases.

How much is that? The assets of GLD total $55.2 billion, so this amount of money is 1.7 times bigger than the largest gold ETF. SLV, the largest silver ETF, has net assets of $9.3 billion, a mere one-tenth of that extra allocation.

The market cap of the entire sector of gold stocks (producers only) is about $234 billion. The gold industry would see a 40% increase in new money to the sector. Its market cap would double if pension institutions allocated just 1.2% of their assets to it.

But what if currency issues spiral out of control? What if bonds wither and die? What if real estate takes ten years to recover? What if inflation becomes a rabid dog like it has every other time in history when governments have diluted their currency to this degree? If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.

And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you and me and Joe Sixpack and Jiao Sixpack, and we’re looking in the rear view mirror at $100 trillion.

I don’t know if pension funds will devote that much money to this sector or not. What I do know is that sovereign debt risks are far from over, the U.S. dollar and other currencies will lose considerably more value against gold, interest rates will most certainly rise in the years ahead, and inflation is just getting started. These forces are in place and building, and if there’s a paradigm shift in how these managers view gold, look out!

I thought of titling this piece, “Why $5,000 Gold May Be Too Low.” Because once fund managers enter the gold market in mass, this tiny sector will light on fire with blazing speed.

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Comment Rules

31 Responses to “Wikileaks Discloses The Reason(s) Behind China’s Shadow Gold Buying Spree”

You can bet on one thing, the country with the biggest Army will end up with the gold and tell the people what the new paper money is going to look like.
- it will be one hell of a fight and will make for some excellent war movies in the very distant future.
  Such a silly world we live in. Turns out we really never do mature as men.
  I wonder what the world would be like today if women would have been in charge lol.
  countrys would still hate eachother over jeaolousy issues but all we would do is bitch at eachother.
  The government would still massiveley overspend but it would be on equally useless items.
- Yes.
  
  The new currency will be called a PHONEY…
  
  Each Phoney will be worth 3 old US dollars and have Bill Clinton’s picture on it. Along with Hillary and Monica of course.
  
  It will be as phoney as a $3 dollar bill.
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I have read a few articles on this topic and am still somewhat confused to say the least.
My understandings right now could allready be wrong so corrections please.
The way i understand the simple terms is that the U.S dollar is the current International Reserve Currency.
One of the reasons that the U.s dollar has worked is that it is backed by gold. the fort knox gold.
This would be why china is upping it’s gold reserves.
I believe the chinese would like to see the chinese yuan become the new international reserve currency.
Or.. the NWO will introduce through the big banks a new global currency.
I fail to see anywhere where it suggests that gold and silver will be used by the population as a purchasing currency.
If the world reserve currency changes to anything BUT the U.S dollar then i believe Americans are screwed.
your employers pay you in u.s dollars not in gold.
- Hey Flight,
  
  You miss just a few points. Our US Dollar is NOT backed by Gold…it’s extremely important to understand that. If the Dollar was, indeed, backed by the gold we own, then there would be no problems. The Fed has, through QE, pumped so many dollars into the world economy that that the Dollar is constantly losing value. If you look at the charts, the Dollar has been losing value for decades. Also, if you think about it, the EURO was an attempt by the globalists to implement the one world currency. Remember, they are attempting to set up the European Union (check), the American Union (very close) and the Asian Union. The implementation of the EURO was a beta test, if you will. So far so good in their eyes. Now, on to China:
  
  They recognize that what the Fed is doing is TRULY devaluing the dollar. Therefore, the past 10 years or so, they (as a government) have bee hoarding gold and silver. To be honest, there are some that believe they have more gold and silver than any country in the world. The reason is simple. They will tell the world to DUMP THE DOLLAR as the reserve currency and use the YUAN because the yuan IS backed by precious metals. They will be able to claim that the YUAN is, indeed, a faithful and strong currency – backed by their gold/silver reserves; which would be correct. Once they make that play, the Dollar is doomed. Think about this. What if OPEC stops accepting Dollars as payment for oil? What if they say “in order to by our oil, you have to use Gold or YUAN”.
  
  That will be a sad day…and believe me – I think it’s coming. Prepare now.
I have a great idea. Why not melt it all down and make it into a statue, then idolize it? That might work.
- Nooo! Give it to me!
I think by reading this thread people may just be getting it now. That’s encouraging.

Beacon
- an ad comes to mind saying”get out of gold now!!!”
  
  now i can clearly understand why …the government has not been worried, printing more
  
  knowing full well the chinese would make a run on devaluing the dollar and at nearly half the
  
  world,s total value the dollar is very strong in my opinion.anyone talking about how weak the
  
  dollar is will get a smack in the face when the gold tops 2,666 and then plummets. your
  
  money which you have none of will suddenly become valuable again.
  
  but not to be discouraged because the market WILL crash at least once before they
  
  finalize the push to one world government and NAU currency in the next decade
  
  and the america’s is 50 percent of the worlds wealth and could be much more
  
  if taking dominance over other currencies.so if anything encourage buying products
  
  in mexico and salvador and brazil and chile as these places will be the center
  
  of productions and commerce.the end
“Once is happenstance. Twice is coincidence. Three times is enemy action.”
– Auric Goldfinger, in “Goldfinger” by Ian L. Fleming
Anybody can buy groceries with gold…..just exchange 1oz of gold into 31 grams or 62 1/2 grams and get your change in silver or digital currency.

The age of gold and silver is upon us and if you think it going away……you will be sadly and painfully hurt by not owning the precious metals.
- Good word Truthhurts…
  
  Beacon
- wrong
  
  did you read the article?
  - gold is a commodity not a currency
    
    bringing the gold to standard still wouldn’t make it currency
    
    the last thing the globalist want is the whole world owning only silver and gold as
    
    currency.there would be no difference in value of global markets and trading would be
    
    like swap meet, no profit.
    - but if i had to take a guess i would say the chinese are using the americans as
      
      a model to inflate their currency thereby ensuring their value of money
      
      but the only problem with that is a burgeoning population and running out of
      
      of resources.
    - Oh give me a break! One of the definitions of currency is: “Any object with a perceivable value that is redeemable for goods and services.”
      You don’t think I can get a mechanic to fix my car for a few gold coin?
      Or buy groceries? Or buy a car? I can buy ANYTHING if I have GOLD.
      Some places don’t take dollars any more but Gold is and has always been money and thus a currency. Gold is the most reliable money in the world because it has an intrinsic perceivable value. Paper money on the other hand only has a “believable” value. It is worthless in reality. Ask how many people would take gold rather than paper money if asked. So you are completely wrong and presumptious!
I wonder why China is holding most of it’s Gold reserves in countries like the U.S. and European countries. If they really wanted to stir up the hornets nest they would demand delivery of their Gold back! We seen that Chavez recently followed this model and demanded his Gold back and at Golds current value who could blame him for doing so. If I was in his shoes and had TONS of it I sure know I wouldn’t want anyone holding my Gold.

I’ve heard and read a lot of stories on how Russia and China want to dump the U.S. dollar and would like to see another type of currency as the world’s reserve currency. I can only imagine that if the U.S. dollar is no longer the reserve currecny of the world it will mean the death of the U.S. dollar. That day may infact be the start of the dollar crisis, especially if our country loses the printing press because it seems as if that privelege is being seriously abused.

I think the world is on the brink of seeing a new world reserve currency real soon and it seems like Gold Silver will be the winners. Especially if BIG inflation takes a grip on the U.S. and it’s noticed by the general public which it is. People just haven’t lost that much faith in the dollar yet but that day is coming as more and more catalysts are popping up. I mean who wants to lose the ability to print at will, anything and everything will be done to protect the printing press.
- Noting the trade imbalance the U.S. has with China through Chinese stores like Wal-Mart, it’s easy to see why the Chinese are investing and America is spending. The cash and jobs are flowing out of America and into Chinese pockets. If their in a scramble to get every ounce of physical Gold they can they have the cash to do it with.
  
  I wish people would start boycotting Chinese stores like Wal-Mart and stop shopping at any Wal-Mart but I know thats not going to solve the problem completely. GM was once the nations largest employer in the WWII era and now I believe that Wal-Mart is in that current position. If Big Inflation grips this country people will stop buying from them and “Oh how the mighty monopoly will have their FALL from grace.” I can already tell that their are less and less people shopping at these Chinese stores (Wal-Mart) and it makes me happy. I want to see their global empire shrink up to where it resembles A NAKED MAN GETTING DOUSED WITH ICE COLD WATER TO WHERE HIS PENIS AND WAL-MARTS NET INCOME LOOKS LIKE A ROLL OF DIMES!!!!
- They are now dumping their worthless “gold certificates” as they realize that allowing the banksters to hold their gold and lease it out is being abused to depreciate and diminish it’s value by futures-derivative price fixing scammers. China were the first to detect the fraudulent Bush-Clinton tungsten ingots.
Well the only thing pension and insurance gambling casino racketeers have to worry about is (evading, avoiding or reluctantly) paying out their Ponzi obligations to their Ponzi scheme participants in private, counterfeited Federal Reserve Toilet-Paper Ducat denominated lots.

The less the Federal Reserve Corporation’s Toilet Paper is worth, the less their obligations. Monetizing Debt is exactly the same thing as monetizing the obligation of any other fixed contractual obligation. Insurance gambling tickets will become as worthless all other derivatives and bonds.

Only limited resource based stocks will retain any value.

However while the Pension Ponzi operators have it easy because nobody has a “wage replacement value” pension payable to them in an automatically actually inflation adjusted honest Labor Exchange Currency, Insurance Ponzi-Gambling Houses (other than depreciating Real Property) are in BIG TROUBLE since “replacement values” (especially for all imported insurables) are certain to skyrocket into the stratosphere.

Look for huge rises in theft contents and accident insurance-gambling premium-wagers
Say we all buy a bunch of 1oz gold bars. How the hell are is that going to be a tradable currency? Are you gonna chisel off a piece every time you want to purchase anything? This hype is getting ridiculous.
- Who said you have to buy bars? You can even buy denominations smaller than one ounce! Most people buy gold as an insurance/investment product, to be sold long term to a dealer. Silver is what most people would use for money. Got it?
  - Yeah but a $5 gold going ( $180 ) is the size of your pinky.
    
    Thats a small coin to have in your purse.
    - It really will get rather ridiculous. Already a single tiny gold-plated leg from a 1970-80 era EPROM integrated circuit chip is now worth a few dollars. This is like 24 to 40 times what the whole chips originally sold for. An old long-obsolete Intel Pentium Pro 200 mhz CPU (a chip you couldn’t get 50 bucks for a year after it came out) contains about 250 dollars worth (1/8oz) of pure 24k gold.
      
      Scrap cash for gold scammers barely pay desperate or distressed pawn shop sellers a quarter of what the gold is worth, especially for odd items. (most often far less than that)
      
      Saving in gold and silver must be done in certifiably authentic bars or coins, not other objects who’s assay cannot be certified. From a resale perspective it is also important to maintain records of purchases (receipts) to establish provenance for any item of his sort. It is best to sell it privately only as needs for ever-worsening worthless currencies arise.
Silver is probably a better buy.

You cant buy gorceries with Gold bullion.

Say You have $1800 in gold and you want to buy $100 in food.

You would be better off Buying storable food from efoods direct than Gold Bullion.
- Yes, silver IS better for everyday purchases, and it will do well in the long run. But some people have a sizeable amount of money they want to get out of the market, and they can hold that well with gold coins and bars. Gold is not bought for everyday use…it is for protection/investment!
  - Glad to see that you get it. It is really just as simple as you have stated. Gold is going to get awfully expensive and will take silver along with it. The PM market manipulators have been successful so far at keeping prices down but they didn’t anticipate the crash of the world economy. The demand for PMs is rising and will drive the price through the roof. I saw an interview with Rick Harrison from Pawn Stars ( my favorite boob tube show) and he stated that he cannot keep up with the demand for PMs in his store. My PM dealer has told me the same thing. If you have any wealth or disposable income to protect, get into PMs while they are still cheap.
    - Also, JP Morgan is has a serious shortage problem in silver. If everyone would just buy an ounce of silver, we could crash the rotten bastards.
- Storable foods are a good and very method of saving as well. As hyper-inflation accelerates producers of common comestibles will inevitably be priced out of the market and fall into bankruptcy or shut down, simply because they cannot obtain the fair “labor exchange currency” value for their products.
  
  While at first to cut costs they will substitute cheaper offshore-produced imported resources for more expensive domestic ones (WalMart Syndrome) there is an energy/shipping cost limit to such colossally inefficient and environmentally harmful schemes. Later, inevitably rising taxes and duties by desperate governments desperate to maintain ever worsening revenues will finish off that inlet.
  
  Even farmers will fail as the neo-dirty 30′s returns
cool graph, you should show that in perspective to the average elite banker and stock holders