This Is Exactly How China Plans To Send The Price Of Gold Skyrocketing

In case anyone was wondering what the Chinese government is up to, this is exactly how China plans to send price of gold skyrocketing.

China Continues Its Massive Accumulation Of Gold

Stephen Leeb: “At the moment, a stack of about 25 recently published books teeters on the floor next to my desk. They’re all about China: its rise, its economy, its plans for the Silk Road. And not one of them talks about gold. This happens to be very good news for me, since I’m proposing to write a book about China and gold, and prospective publishers want to know I haven’t been beaten to the punch.

But more relevant to gold’s prospects, it also shows how craftily the Chinese mask their ambitions, in line with Sun Tzu’s “The Art of War” and more recently Deng Xiaoping. Echoing Sun Tzu, Deng said China must “observe developments soberly, maintain our position, meet challenges calmly, hide our capacities and bide our time…never claim leadership.”

China has been carefully concealing its appetite for gold so that it can continue to accumulate it in large quantities without prematurely impacting its price. This has led putatively authoritative sources like the World Gold Council and GFMS, a division of Reuters, to dramatically underestimate China’s gold activities. Since 2013, China has been accumulating gold at a clip of more than 2,000 tonnes a year. That translates into 11,000 tonnes by the end of 2017 – and doesn’t even take into account that monetary gold can be imported into China in any quantity without being reported. In fact, China could easily be buying monetary gold from foreign miners directly, perhaps even paying a small premium. A particular mine would be just a bit more profitable than expected, and no one would be the wiser.

And so it goes. Whether you are talking about North Korea, the amassing of gold, or a new monetary system, China’s leaders are unrivaled experts at keeping things close to their chest as they bide their time.

So how let’s look at a more accurate picture. For starters, China’s in-ground gold reserves are estimated at about 2,000 tonnes. Last year China mined approximately 23 percent of its reserves, or 455 tonnes, an extraordinary number that made China, for the eighth year in a row, the world’s largest gold producer. And when I say extraordinary, I mean it: It’s the largest percentage of reserves of any metal or commodity mined by any country in history. Last year, all other gold-producing countries together mined less than 5 percent of their reserves.

While China is rich in many resources and a leading supplier of critical resources to many countries including the U.S., nothing compares to the intensity of its gold mining. Even silver, a monetary cousin of gold and a vital industrial metal, is mined far less aggressively, with approximately 9 percent of reserves mined last year, leaving China in third place.

Keep in mind that mining such a large percentage of your resources means you’re almost surely losing money. No gold company in its right mind comes close to mining the proportion of reserves that China does. Barrick, for example, with the industry’s largest reserve base, mined about 7 percent of its reserves last year, clearly the maximum this exceptionally managed company felt it could mine without cannibalizing future growth. Mining more than three times as much – the equivalent of what China was doing – probably would have ruined the company because of huge capital expenditures and massive increases in costs.

Clearly China is seeking to suck up every ounce of gold it can. And if it’s willing to mine its own gold at a rate that makes no short-term economic sense, it would be utterly implausible to think it’s not also accumulating all that it can from abroad, at a lower cost, from miners that – unlike China – don’t know just how valuable their gold will become.