Gold News

What Beijing Just Said

Is the US really selling its Gold Bullion reserves...?

is truly inscrutable, writes Julian Phillips of the

Beijing is very careful not to say any more than is necessary on any subject. It's also very careful to have people, supposedly close to government, make statements that may appear to be government policy, but which may simply help lay a smokescreen for the true picture. These spokespeople may otherwise be looking to provoke, to get a reaction, like tossing a stone into a bush to see what flies out.

So before we get to what may be a crucial quotation, we have to tell you this quote is not from a top official but from a central-bank researcher. Because of his closeness to the People's Bank of China, it may be assumed he is telling us facts that are common knowledge at the bank. On the other hand, the quote is so explosive, and not backed up by fact, that it runs counter to common sense and against the information we have.

It's natural to then say, "Maybe he knows something we don't know". So whether you accept this as fact, or not, is your decision...

"Sales by overseas central banks could see a sharp fall in Gold Prices," the Financial News reported Wednesday, citing Zou Pingzuo, a central bank researcher. He continued, "Investors should be careful about investing in gold. Gold Prices could fall sharply because of intensive gold sales by the United States and other overseas central banks."

Are the United States and other central banks selling gold? We are of the opinion that the World Gold Council is a competent body and that they do gather accurate information on 'official' gold sales worldwide. We also note that leasing is not selling, just as swapping is not actually selling. And the figures published by the WGC tell us that the gold selling has stopped and that central banks, including China, are buyers.

Yes, when gold is leased or swapped – such as happened via the Bank for International Settlements earlier this year (see BIS Gold Swap) – the gold leaves the owners control. But unless the overriding agreement is broken the gold should return to the owner's control. It's there that the main questions lie. And it's there that the statement may gain credibility.

Many people are convinced that leased gold or swapped gold is a cover for what in reality is a sale. As a result many believe that the central bank holdings of gold are far less than published. If such obligations do attach to the gold owned by a nation, then at best, it is 'at risk' and this should be clarified. The risk of the gold not being returned does attach to that gold, because it lies under the control of an entity or person outside that bank. That certainly weakens ownership control as we all know.

More pertinently, why isn't the Federal Reserve happy to prove its Gold Bullion holdings in an audit? Congressman Ron Paul has wanted an audit of the Fed for a long time for, as he said, "the audit should determine not only the simple presence of gold in the US government's vaults at Fort Knox, Kentucky, and elsewhere but also "whether any of it has been obligated."

Congressman Paul is fully aware of the Federal Reserve's involvement in gold swaps with foreign banks, an admission made by Fed governor Kevin M. Warsh a year ago in his battle with GATA's litigation against the Fed under the Freedom of Information Act. It was there that Governor Warsh insisted that the Fed's gold swap arrangements must remain secret. What was the Treasury's response to the Senator?

"Representatives from the Treasury Department and US Mint did not respond to requests for comment on Paul's proposal."

Shouldn't the Treasury, the Fed and public institutions in general be transparent? You would think so, but then the perceptions we have of government, the Fed and its Gold Bullion reserves, may be radically altered and confidence damaged.

After all, it was only after the Gold Standard was dropped that it was discovered that the UK could not cover all the banknotes they had issued based on the previous commodity-exchange rules for Gold Bullion.

What stands out starkly is that if the Federal Reserve does have the gold they say it has, then an audit will reveal this and ensure confidence is bolstered in the central bank's reserves at all levels of the monetary world. So why would a central bank not audit its holdings regularly to shore up any waning confidence? After all, as the nation's purse holder, they should assure the public that their reserves are what they say they are.

And what would happen to the Gold Price if central banks and the US were selling? The answer to this question is not what you – or the Chinese central bank – may initially think. Our conclusions are available to subscribers of here...

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JULIAN PHILLIPS – one half of the highly respected team at – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

See full archive of Julian Phillips.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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