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Robert Lambourne: If it's the new master of gold, will China make the rules now?
By Robert Lambourne
Saturday, February 22, 2025
Considerable attention is suddenly being paid to the integrity of U.S. government gold reserves. GATA has long reported on possible double counting of title or claims to physical gold and that some gold may have departed government vaults via loans or leases or even unreported sales.
One point for GATA supporters to consider, as ever, is the risk that the United States does not hold the gold it is supposed to have in its vaults, including those at Fort Knox. Even if the gold is present, are there multiple claims to it?
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In a recent GATA dispatch --
https://www.gata.org/node/23636
-- the respected gold advocate James Turk suggested that claims on physical gold in the U.S. may be as much as a hundred times the metal available. Clearly, the higher the level of claims or shortages of physical gold, the barer the cupboard at Fort Knox will turn out to be.
The adage probably still applies today: "He who owns the gold makes the rules."
Thanks to the diligent reporting by gold researcher Jan Nieuwenhuijs, always publicized by GATA, we know there is overwhelming evidence that much more gold has been delivered to China in recent years than is officially acknowledged. Here is a recent update from Nieuwenhuijs on gold shipments to China:
https://www.gata.org/node/23595
China may even control more than three times as much gold as the official holdings of the United States. If Chinese President Xi Jinping wants to weaponize these gold reserves to damage the U.S., it seems he would have considerable scope to do so.
A GATA dispatch on December 22, 2024, covered the risks that a unilateral gold price reset by China could pose, especially to holders of shares of gold exchange-traded funds:
https://www.gata.org/node/23538
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Chinese Espionage
Court papers about an alleged Chinese spy, John Harold Rogers, who held a senior advisory role at the Federal Reserve, were published recently:
https://www.gata.org/sites/default/files/Rogers-Indictment.pdf
The defendant denies all the allegations.
It is alleged that Rogers was passing information to his Chinese handlers from 2013 until as recently as January 30 this year. He is accused of having been paid $450,000 by his handlers for information and is even alleged to have passed them information held on spreadsheets. These could easily provide details on positions held in particular markets, such as gold.
So conceivably the Chinese know a lot about possible multiple claims on U.S. gold, including leases and swaps. Since Rogers is charged with passing information to China since 2013, it seems highly unlikely that this information did not include material about gold. Maybe Rogers didn’t have access to such information, but perhaps he did.
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U.S. vs. China -- International Tensions
Despite what appear to be chaotic first steps for the Trump administration in international affairs, there is a strong underlying theme of anti-China actions. Issues reported to be of concern in China include Panama, Greenland, Ukraine, Taiwan, Korea, Japan, and possible U.S. tariffs.
More details about these issues are provided in the appendix below.
The tone and direction from Trump and his assistants are reportedly construed in Chinese political circles as a campaign to rebuff China's efforts to increase its power and influence. In particular certain reports say Xi is furious about a potential double-cross by Russian President Vladimir Putin over the war in Ukraine. A veteran observer of China and especially its economy, Russell Napier, has referred to the Ukraine conflict as China’s proxy war with the U.S.
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China's Economy
The economic situation in China itself is also uncomfortable for Xi. China has a major debt problem and its non-financial debt-to-GDP ratio of 294% is worse than that of the USA, 249%. Reports from China indicate that overbuilding of residential and commercial properties is widespread and that this is at the heart of the high debt levels with many banks and property companies.
Many unrecognized bad debts are still in the financial system.
An economic depression is developing rapidly in China, with reports of youth unemployment above 20%.
More layoffs are happening along with bankruptcies of large retailers.
Here is a video by Decoding China on recent signs of the economic slowdown:
https://www.youtube.com/watch?v=E2eWXX2qOkA
Napier has suggested that China needs to devalue its currency, the yuan, and then write off the debts that will never be repaid and stimulate domestic consumption instead of investing more in manufacturing capacity. Given China’s substantial gold reserves, some sort of gold price reset driven by the central government, or a substantial, more gradual increase in the gold price would facilitate debt write-offs.
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China's Gold Market
Several recent reports from within China highlight that there is massive retail demand for gold bullion and jewelry. This video from China Observer makes such claims:
https://www.youtube.com/watch?v=3iqmeripwl0
There are additional reports via the ever-excellent Chris Marcus of Arcadia Economics that this strong retail demand is also appearing in India and Korea and that retail gold buying seems to be picking up across Asia.
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What Will China Do?
Hence there appear to be significant risks that China could take actions in the gold market that could force the U.S. to react, whether to a hostile act by China or to a financial restructuring to resolve the debt depression that seems to be deepening there. In this regard China, through espionage, well may have an understanding of any vulnerabilities of U.S. gold holdings.
Hence there appears to be a risk that the U.S. government would have to react to changes imposed on the gold market with little warning by China. This could include a formal introduction of gold into the Chinese monetary system whereby the gold price in yuan would be reset much higher. A period of chaos and uncertainty cannot be ruled out.
Perhaps it would suit China better to co-operate with the U.S. to concoct a measured debt devaluation in both countries, but the Chinese are less likely to agree to this if they regard U.S. actions internationally as hostile. Perhaps Xi’s own position in China is less secure because of the worsening economic depression and so an agreed way forward may be more acceptable to him.
Gold investors need to pay attention not only to developments in U.S.-China relations but also to economic developments in China. Trying to understand the economic and other information coming out of China is challenging, but is probably a nettle to be grasped rather than ignored.
The importance of this is perhaps best illustrated by whether a dramatic sudden move to raise gold prices unilaterally by China would lead to an attempt by the U.S. government to confiscate gold.
Here are GATA dispatches about gold confiscation risk:
https://www.gata.org/taxonomy/term/22
A report in this list by Jeff Thomas -- https://www.gata.org/node/22796 -- suggests that if China formally backs the yuan with gold, the U.S. probably would confiscate the gold of Americans. Gold investors may want to evaluate this risk and consider the extent to which gold reserves are unencumbered.
Whatever happens, whoever holds the gold will probably still be making the rules.
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Robert Lambourne is a retired business executive in the United Kingdom who consults for GATA about the involvement of the Bank for International Settlements in the gold market and about U.S. government debt.
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Appendix on International Tensions with China
A good resource on events in China, especially at the political level, is provided by YouTube Channel Lei’s Real Talk. Here is a recent video about President Xi Jinping’s anger at recent diplomatic rebuffs:
https://www.youtube.com/watch?v=VChdFQ3sJAY
Wherever possible it makes sense to check alternative sources since the Chinese Communist Party is very successful with disinformation.
As mentioned above, another useful YouTube channel is Decoding China.
China Observer, another YouTube channel, also seems credible.
Wherever possible alternative sources of information are checked.
1. Panama
It seems that there are genuine reasons for the Trump administration to be concerned about the Chinese influence in Panama. Things have changed there dramatically since Trump's first presidential term.
Panama only officially recognized China (rather than Taiwan) in 2017. Wikipedia says more than 300,000 Chinese are in Panama and calls it the largest Chinese community in the Americas as a proportion of the total population of about 4 million. Quite a lot of the immigration happened after Tiananmen Square, but reportedly the Chinese Communist Party repeated its tactic of threatening the China-based relatives and friends of any Panamanian-based Chinese wanting to resist them. More recent reports suggest 400,000 Chinese in Panama, but if "visitors and tourists" are counted, there may be twice as many.
Apparently the first ethnic Chinese mayor of a city in Panama has been elected and investment from China has increased substantially. Chinese banks and property businesses are in the country and local residents are reported to say they live in the "Panamanian province of China." Apparently four members of Panama's parliament are ethnic Chinese and many ethnic Chinese work for the Panamanian government.
After a recent visit by U.S. Secretary of State Marco Rubio, Panama announced its withdrawal from the China "Belt and Road" scheme. Hence it looks like the Panamanian political elite is listening to U.S. concerns. No doubt the Central Intelligence Agency is preparing a plan to foment anti-Chinese sentiment in Panama if the political elite reneges on commitments made to Rubio.
2. Greenland
This article on the longstanding U.S. defense concerns about Greenland offers more context. China's interest in the Arctic is well known and seems to go beyond any potential commercial interest:
https://www.rferl.org/a/russia-china-arctic-greenland-trump/33273910.html
3. Ukraine
This article from CNN covers the possible ramifications for China from the opportunity that Trump appears to be offering Russian President Vladimir Putin to end the war:
Reports from China, possibly less reliable, paint a different picture, with Xi Jinping described as furious that Putin might be double-crossing him and that the U.S. seems to be cutting China out of a role in any peace deal.
4. Taiwan, Korea, and Japan
China is reported to be facing pushback from voters in Taiwan and Korea over its efforts to influence local politicians.
This is a report on requests to a court for recall motions to be brought against politicians alleged to have links with the Chinese Communist Party:
https://focustaiwan.tw/politics/202502030014
Efforts by South Korea's unpopular president to declare martial law were thwarted by protests. Rumors suggest that the president has close ties to the Chinese Communist Party, and hearings have started for his impeachment:
Japan's Prime Minister Ishiba visited Trump in Washington this month and missed a scheduled trip to attend the Asian Winter Games In China. This video notes the absence of leaders from neighboring countries:
https://www.youtube.com/watch?v=gmrFEvkuBWY
5. Tariffs
Trump's plan to impose tariffs on imports to the U.S. has been well publicized and while the reaction from China has been muted, it is understood that China is a primary target.
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