Tag Archives: renminbi

Where Is The IMF’s Gold?

In mid-2009, the IMF announced that it was going to sell a portion of its gold.  It ended up selling 403 tonnes of its then-reported 3218 tonnes of gold.  Back then the original announcement made it sound like the IMF was trying to push down the price of gold with a big sale announcement, as the price of gold went parabolic after the 2008 de facto collapse of the financial system.   The excuse for the gold sale was to “shore up” IMF finances.  However, historically, the IMF has sold off portions of its gold holdings as a policy to reduce gold’s role in the global fiat currency system.

At the time, India and China jointly delivered a research paper which suggested that, if the IMF were interested, the two countries would be interested in buying all of the IMF’s gold. The IMF limited its sale to the 403 tonnes:   200 tonnes to India, 2 tonnes to Mauritius and 10 tonnes to Sri Lanka.  By  December 2010 the IMF concluded the sale of the balance of the gold without ever disclosing the buyers.

The IMF’s gold comes primarily from the member countries, who pledge gold to the IMF as part of the cost of their “quota” assigned to become a member country.  25% of a country’s “quota” were to be paid in gold.  The IMF states that its gold is held in various depositories, like the NY Fed, around the world.  The truth is that most of the gold “pledged” to the IMF has likely been leased out by the custodial Central Banks.

Curiously, over the IMF’s 71 year history, it sold its gold intermittently.  Each time the demand by Central Banks to buy that gold has far exceeded the amount of gold offered.  This is an important point to note because it drives home the point that gold is significantly undervalued and that real Central Bank demand emerges when large quantities (100’s of tonnes) of gold are offered for sale.

In the latest episode of the Shadow of Truth, we discuss the interesting shift occurring in the IMF’s SDR structure and what it means for the U.S. dollar as a reserve currency.  We also discuss why the price of gold will likely begin to move much higher as we move from summer into autumn – we also discuss why GLD is a total fraud:

The Ongoing Global Financial Markets Collapse

Video courtesy of Eric Dubin’s The News Doctors

Remember the economic catch phrase, “when the U.S. sneezes, the world catches a cold?” The idea being that the U.S. is the economic engine of the world and if the U.S. economy tanks, the global economy tanks.   The current “vogue” in the financial media is to blame the incipient  melt-down in global stock markets on China’s move to devalue its currency.

But nothing could be further from the real truth.  China’s devaluation process may well be the proverbial “straw breaking the camel’s back.” However the real causation of the global economic meltdown is a result of the world’s fiat-currency-based Central Banking system losing the ability to control the natural market forces which are acting to destroy the financial market bubbles and economic excesses that have been allowed to breed since the dollar became the global reserve currency.

The reasons that the U.S. stock market looks like it may be starting to collapse are both simple and complicated.  Craig “Turd Ferguson” Hemke of the TF Metals Report and I discussed some of the real factors which have conflated to “prick” the global financial/economic bubble:  stocks, bonds, real estate, derivatives, paper currencies – anything connected catastrophically to the global paper fiat currency “Frankenstein” that was born with the Bretton Woods Agreement in 1947.

You can listen to our conversation here:   TF Metals Report or by clicking below:

This graph is part of our conversation in which we discuss why the sell-off in the U.S. stock and credit markets may be attributable to  an unwinding of the yen/yuan carry trade – Untitledwhich no one on Wall Street/CNBC/Bloomberg/etc has mentioned:

Note that the yen has appreciated significantly more than the dollar vs. the yuan since China’s currency deval began.  How come no one on Wall Street is discussing this?

My latest issue of the Short Seller’s Journal will be released Sunday evening.  You can subscribe by clicking here:  Short Seller’s Journal   This week will feature a section which outlines a strategy and the pros/cons for using put options to replicated shorting a stock.

Are Yuan Speculators Moving Out of Yuan And Into Gold?

Jay Taylor – LINK – sent me this analysis of China’s devaluation by John Lee, Executive Chairman of Prophecy Development Corp.  Prophecy raised over $100 million to acquire a large silver mining project in Bolivia and coal projects in Mongolio.  He spends a substantial amount of time in China.

One of the “no-brainer” carry trades over the past couple years has been to short, or “borrow,” dollars and yen a very little cost and invest the proceeds in yuan.  The yuan had been going up in value vs. the dollar since 2006.  But China’s move to begin devaluing the yuan is prompting speculators to unwind the is fiat currency “arbitrage” carry trade en mass.

John goes through the various possibilities of why the Yuan was devalued and concludes it stemmed from massive capital outflows and foreign exchange reserves which are down by $400 billion during the first half of this year.  A large amount of that has moved to Hong Kong, Taiwan and Singapore. He is suggesting that this flow is moving toward gold as owners of large chunks of capital are tiring of dollars and euros.

China and India are two of the world’s largest gold consumers. Naturally, gold prices should have gone down when the RMB was devalued, given the reduced Chinese purchasing power for gold. Quite to the contrary however, gold prices went up during five straight trading days following the RMB devaluation.

The reason? Are RMB speculators possibly moving out of RMB into gold? This could be entirely plausible as RMB investors were likely seeking an alternative to the US dollar and the euro in the first place. Commodity currencies remained unattractive given the slowdown in the world’s economy.

The gold market is small, with annual gold production amounting to approximately US$160 billion, and total above ground gold stocks amounting to approximately $8 trillion, in all shapes and forms. Even the slightest increase in physical demand for gold can have a profound impact on the price of gold.

You can read the rest of this analysis here:  RMB Devaluation, China’s Foreign Reserve And The Price Of Gold

The Daily Coin Interviews Alasdair Macleod

I don’t know when, I don’t know how but somehow there has got to be a link I think to give the renminbi a level of credibity in cross-border trade which places it above the dollar. I think gold is the obvious link for this. – Alasdair Macleod

Rory Hall  of The Daily Coin just posted a must-hear interview with Alasdair Macleod.  Topics include the recent news that HSBC is closing all seven of its “retail” gold vaults in London (it is keeping the GLD vault open), the new London gold fix, the curious “RMB, New World Currency” billboard that went up to next to China’s busiest airport and the Shanghai Cooperation Organization:

I have been reading Alasdair’s work for several years and consider him to be one of the most insightful financial market analysts – particularly with regard to his analysis of the precious metals market.

Note:   In two weeks The Shadow of Truth will be hosting a roundtable discussion with Alasdair Macleod, Turd Ferguson, Rory Hall and myself. We plan on discussing the Shanghai Cooperation Organization (SCO) in depth. Understandably, the mass financial and political media has completely avoided reporting on the SCO. Remarkably, the alternative media blogosphere has largely ignored the topic. But the SCO is going to be a global game-changer. We will be discussing how and why.

China Plans Yuan-Denominated Gold Fix

China, also the top producer of gold, feels its market weight should entitle it to be a price-setter for bullion and it is asserting itself at a time when the established benchmark, the century-old London fix, is under scrutiny because of alleged price-manipulation.  (LINK)

I have suggested for over eight years that the eventual financial “reset” will involve China rolling up out a gold-backed currency. As the world’s largest importer/exporter, China would be in position to dictate a requirement that countries trading with China would be required to China’s new currency for trade settlement. This would establish China’s gold-backed yuan as the de facto global reserve currency.

Any country which issues a currency not backed by gold would see the value of its currency plummet. On the assumption that China would require a full audit of any country converting its currency into the new yuan, the U.S. would be forced to open the Fed’s gold vault for Chinese inspection. I think we all know how this exercise will end…

I thus believe that China’s plan to launch a yuan-denominated gold fix is the next step in the direction of a longer term grand plan to eventually launch this new gold-backed currency. And perhaps that explains this billboard, the photo of which was taken by Simon Black (James) of The Sovereign Man website:

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It’s almost as if China is taunting the U.S. with that billboard – especially given the use of gold coin instead of an “O” in the phrase “the world currency.” I’m sure China is well aware of the fact that the U.S. has at most a fraction of the 8100 tonnes of gold it reports on the Treasury balance sheet.

I think we all know that the dollar will eventually collapse. China’s introduction of a gold-backed yuan as the world’s reserve currency would be the catalyst that would trigger the collapse of the dollar and completely strip the U.S. of its global superpower status.