China's official gold reserves total is still phony -- and so is most everybody else's

Section:

7:41p ET Friday, July 17, 2015

Dear Friend of GATA and Gold:

Most people in the gold business seem disappointed with China's announcement today of its gold reserve total, which, as Sharps Pixley CEO Ross Norman told The Wall Street Journal, was only about half of what the market expected, since it was the first updating of gold reserves by the People's Bank of China in six years:

http://www.wsj.com/articles/china-discloses-its-gold-holdings-1437144149

But this expectation was probably always unrealistic, for as Zero Hedge writes --

http://www.zerohedge.com/news/2015-07-17/china-increases-gold-holdings-5...

-- China's announcement today was also an admission that its gold reserve figures have been misleading. Indeed, the announcement was almost certainly hugely misleading, China's true gold reserves likely being far larger.

That is, for six years, right through yesterday, China asserted that its official gold reserves were 1.054 tonnes, but today China reported its official reserves as 1,658 tonnes, an increase of 604 tonnes or 57 percent --

http://www.reuters.com/article/2015/07/17/china-gold-reserves-idUSL4N0ZX...

-- and of course that much additional metal was not obtained in the last 24 hours.

Zero Hedge writes: "China has finally admitted that its official gold numbers were fabricated (alongside all other official data released from the communist country), as it is impossible that the People's Bank of China could have bought 600 tons of gold in the open market in June when the price of the yellow metal actually dropped by 2 percent."

But China has not "finally" admitted anything, as these are the same circumstances that prevailed when China updated its reserve report in 2009. For from 2003 to 2009 China maintained that its gold reserves were just 454 tonnes. Then one day in April 2009 the reserves report jumped 146 tonnes to 600 tonnes:

http://www.gata.org/node/7380

China didn't get that additional gold overnight either.

... Dispatch continues below ...



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Even so, China's gold reserves reporting may be no more dishonest than the reporting of Western central banks, which long have demanded that the International Monetary Fund allow them to conceal leased and swapped gold from their reserve reports -- allow them to count as reserves gold that has left their vaults or has multiple claims to ownership, lest truthful reserve data reveal and undermine their surreptitious interventions in the currency and gold markets. The secret March 1999 report of the IMF's staff disclosed that the IMF complied with these demands to facilitate the dishonesty:

http://www.gata.org/node/12016

China's reporting also may be no less dishonest than the reporting of gold reserves by countries that think they're being honest. For any country that vaults its gold, as many do, at the Federal Reserve Bank of New York or the Bank of England, the nerve centers of gold price suppression, may not really have what it thinks it has on any particular day.

Saudi Arabia pulled a similar trick in 2010. In June that year the World Gold Council reported that Saudi Arabia's gold reserves had increased by 126 percent, from 143 to 323 tonnes, since 2008. That Saudi Arabia, the oil-exporting superpower, seemed to be turning oil into gold for its foreign-exchange reserves caused a bit of a sensation.

But a few weeks later the governor of the Saudi Arabia Monetary Authority, Muhammad al Jasser, insisted to news reporters that Saudi Arabia had not purchased the gold cited in that report by the World Gold Council but rather had possessed that additional gold all along, holding it in what he called "other accounts" but not reporting it:

http://www.gata.org/node/9094

Ah, yes, good old "other accounts" -- the true accounts of gold reserves, which for all great powers are state secrets. For as your secretary/treasurer long has noted, for any great power the true amount, location, and disposition of gold reserves are secrets far more sensitive than the amount, location, and disposition of nuclear weapons.

For nuclear weapons are not likely ever to be used, and nations can defend themselves well enough with just a few of them, since a nation that can deliver just a few is close to immune from attack from another nation. No nation is prepared to lose even a few cities by starting a nuclear exchange. In military strategy this is called "minimum deterrence."

But gold, the ultimate national weapon in financial markets, can be effective against a national enemy only in bulk. For as Assistant Undersecretary of State Thomas O. Enders told Secretary of State Henry Kissinger in a private meeting at the State Department in April 1974, gold is the great "reserve-creating instrument" and whoever has the most gold controls its price and makes the rules of the international financial system:

http://www.gata.org/node/13310

That is, the nuclear "missile gap" of old is survivable; the "gold gap" of today may not be.

So where does this leave ordinary gold investors?

Judging from today's market action, giving up. And though central banks probably are buying whatever ordinary gold investors are selling, that doesn't necessarily make those ordinary investors stupid for selling, since the central bank timetable for revaluing gold upward to a level more sustainable for the long-term price suppression scheme has not yet been ferreted out by GATA, Wikileaks, or the Financial Times (just kidding about the FT, which would never tell the truth about the gold market) and since it's a pretty good bet that gold could sink to $4 per pound, becoming cheaper than hamburger, and monetary mining company shares could go to zero without prompting the slightest curiosity from gold mining executives and the World Gold Council.

But then the big issue here has never been merely gold but rather the destruction of free markets by unlimited government -- that is, totalitarianism. Fighting that tends to incur capital losses.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

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