Is it possible for China to beat America in gold reserves?

The Gold Anti-Trust Action Committee’s basic assertion for the past 9 ½ years is that there is a Gold Cartel out there suppressing the price of gold. It consists of the US Government, including the Fed and Treasury, various other central banks, and bullion banks like Goldman Sachs and JP Morgan Chase. 

The motives of “the cabal” are to give support to the dollar, keep US interest rates lower than they should be, and to tone down the widely watched US barometer of US financial market health, that being the gold price. After all, whenever the price of gold soars, it congers up talk of too much inflation, a sinking dollar, or a crisis of some sort … all negative for Wall Street and the incumbent administration. 

Therefore, “Shoot the Messenger” is The Gold Cartel’s key mission.

How gold reserves in the United States are compared with that of China? The question is important in the wake of China's fears about the long-term viability of parking most of its reserves in US government bonds after Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan.

It seems to have all started with Robert Rubin. Before he was CEO of Goldman Sachs and then US Treasury Secretary, Robert Rubin worked in London for Goldman Sachs. One of his duties was to oversee their gold trading operations. We know this because the CEO of Kirkland Lake Gold, Brian Hinchcliffe, a staunch GATA supporter, worked in London back then for Goldman Sachs and reported directly to Robert Rubin. 
This was many years ago and interest rates in the US were very high, say from 6 to 12%. Rubin had Goldman Sachs borrow gold from the central banks to fund their basic operations. They could do so at about a 1 % interest rate. This was like FREE money, as long as the price of gold did not rise to any sustained degree for any length of time. It was the concerted, concentrated action of certain BULLION BANKS, which tipped off GATA what was going on

According to a report published in The Standard, Hongkong, the Chinese mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold. The newspaper, quoting official sources, said China is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way." China's fears that America's $700 billion bailout plan may make the US budget deficit balloon to well over US$1 trillion this fiscal year.


The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields. The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion. Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said told the newspaper.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows. 

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed. 

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association, The Standard added. If you ran the China central bank, you'd probably have done the same thing long ago, but then their decisions are based on the trade issue where they are forced to maintain a large dollar reserve. Gold is the only thing they can substitute for dollars (actually bonds) due to its liquidity.