China Going for Gold

A year has passed since oil prices went negative, with China ending up the big winner. They managed to have oil traders pay them to take oil off their hands, and I wondered back then if a similar move on gold was imminent, but with prices going sharply higher rather then negative. My advice was for people to buy some physical gold, just in case. But nothing much happened. Gold prices went up until August, then back down again. However, things are again looking interesting, and the latest move is again from China.

China has lifted restriction on gold imports. People in China can import as much as they want, and this is sure to increase the flow of physical gold into China.

This is a clever geo-political move because it puts pressure on the Dollar and western gold markets without being directly confrontational. All that China has done is to relax their regulations. It's a free market move that the West cannot very well complain about. However, it will accelerate the demise of the Dollar and drain western gold vaults. Anyone in China sceptical to the Dollar, or the Chinese Yuan, can now convert either currency into gold, and do this by direct import from the West.

Chinese authorities need not do a thing and the West must nevertheless show restraint, because the Chinese public will react impulsively to tension between the West and China by buying physical gold, and the West cannot afford to let even more gold drain out of their vaults and into the hands of the Chinese.

China is holding the West hostage to western manipulation of gold and currencies. China is calling the bluff, and there's nothing the West can do. The West must move quietly and carefully or risk a sudden spike in the gold price, with a corresponding drop in the purchasing power of Western currencies.

This fits well with the game plan I outlined in January. Western dominance over gold and currency markets is coming to an end. Gold will continue to move east, and its price will continue to go higher. With time, the Dollar will be replaced by the Yuan as a reserve currency, because reserve status is always dependent on gold, and with reserve status comes geo-political power.

Xi Jinping

By Palácio do Planalto - https://www.flickr.com/photos/palaciodoplanalto/47945730807/, CC BY 2.0, Link