03 July 2015

Shanghai Gold Exchange Has 46.2 Tonnes of Gold Withdrawn - What Will China Do

There were 46.2 tonnes of gold withdrawn from the Shanghai gold exchange in the week ending June 26th.

Since 2009 there have been a total of 9,076 tonnes of gold withdrawn from Shanghai.

I have also included two slides from a recent presentation by Zhang Bingnan, the Chairman of the China Gold Association.

In them he talks about China gold reserves reaching 9816.3 tonnes at the end of 2014, the second largest in the world.  That is interesting because it sounds as though he is talking about China's official reserves, which are not transparent yet, although there are some expectations of an official update later this year.   He *might* be misusing the term reserves here to mean all the gold in the nation, but that does not seem quite right. 

And if these are in fact the official reserves, to whom would the Chinese be second?  The US would have less than this number, and the only entity I can think of that would have more would be to lump the European community together.    If anyone knows if he clarified that point in his discussion at the LBMA I would like to know.

Below that are two charts from a talk titled The World Needs New Reserve Currency from the perspective of global liquidity by Yao Yudong of the People’s Bank of China.

In them he discusses the potential role of gold and the renminbi in international liquidity and as a new form of world reserve currency.

Playing this kind of sea change is not the usual Wall Street task of getting tips from privileged cronies, and asymmetrical information in the equity markets, and playing against the rubes with the artificially manufactured market inefficiencies in which insiders excel.

What will China do?  And what will others do in response?

From a practical standpoint it is not possible to forecast how and when any changes may come, and exactly what form they may take.   This is a generational change in the character of international relationships and values. 

What is happening now has been happening since at least 1999.   If by this time a pundit or an analyst do not understand this, then they understand nothing.  And this is how it is with some.

In this sort of change, almost everyone will be taken by surprise when the time comes.  It is just that some will be in a better position for it than others.

But it is in human nature perhaps, that most will cling to what is transitory and base, while trampling what is of lasting value in the dust.  There are few things that we can surely know:  change will come, and in the end, neither money nor gold nor any vestige of earthly power and position will remain.    Only faith, hope, and love will endure, and the greatest of these is love.

Related:  COMEX:  Trading From Physical to Paper