Guest Post: "The Geopolitics of Gold" by Alasdair Macleod

Our friend, Alasdair, actually wrote and released this article last week and it received considerable attention. We never had a chance to discuss it here in Turdville, though, so with Alasdair's permission I thought I'd reprint it today.

Alasdair is spot on with this analysis and he summarizes the main issue with this sentence: "The outcome is a choice: the West will either have to stop intervening and allow gold to find a level where physical and derivative markets interact properly with each other, or capital markets in the West will face a growing crisis likely to spill over into other markets."

The Geo-Politics of Gold, by Alasdair Macleod of GoldMoney

Western central banks have got themselves horribly wrong-footed as a result of not adjusting their anti-gold policies to allow for the realities of Asian gold demand. Though their dealings are shrouded in secrecy, there is compelling evidence that much – if not most – of Western central bank gold has been quietly sold over the last three decades.
More recently all members of the Shanghai Cooperation Organisation, a common security and trading bloc led by Russia and China and incorporating the bulk of Asia’s land mass, have been accumulating gold. Between current SCO and future members (India, Iran, Afghanistan, Mongolia, Belarus and Sri Lanka), with their citizens numbering over 3 billion people, they have together cornered the global market for physical supply, without even taking account of demand from the rest of South East Asia’s gold-hungry population.
The result is that gold markets are now failing to clear. The outcome is a choice: the West will either have to stop intervening and allow gold to find a level where physical and derivative markets interact properly with each other, or capital markets in the West will face a growing crisis likely to spill over into other markets. While these outcomes were always going to be a choice to be made at some time in the future, the disconnection between physical gold and derivatives has become so great that it is now an immediate concern.
At the government level it is a geopolitical clash of the titans. Russia and China are almost certainly aware of the lack of gold in Western central bank vaults: they are fully capable of thorough due-diligence in this respect. They have so far been careful not to disrupt capital markets because it has not been in their interests to do so; however, the current hiatus in gold markets is almost certain to modify their view.
Fundamental to all this is their attitude to Western currencies: the yen is now collapsing, the euro area is in deep trouble and the US economy is at very best stagnating. Until now, payment for Russian energy and Chinese goods in foreign currencies has been welcomed, because it has allowed the Russian and Chinese elites and middle classes to accumulate wealth. This balance of interests can only be maintained for so long as Russian and Chinese governments and their citizens can hedge foreign currency risks through an offsetting accumulation of foreign-owned gold.
This is no longer the case, because to all intents and purposes western capital markets are cleaned out of physical supplies, and the ability of the Western central banks to suppress gold prices appears to be ending. And with the West’s financial system no longer able to deliver their most prized commodity, hitherto passive attitudes in Asia to Western currencies are likely to be reassessed.
The gold question has become central to east-west trade. The sensible approach for Western central banks is to defuse the problems arising by taking positive steps to ensure that gold markets operate properly. This is conceptually difficult, because the most likely result, a higher gold price, would risk undermining confidence in the major currencies and most probably damage the bullion banks in London.
Despite these difficulties, realities have to be faced.

http://www.goldmoney.com/?gmrefcode=tfmetals

120 Comments

Strawboss's picture

The problem with "Free gold"

The problem with letting gold clear in an honest and transparent manner is what the follow on effects of that would be.  Massive dollar denomination.  Interest rates spiking.  Government deficits exploding.  Retail prices exploding.  Gas prices through the roof.  The list goes on and on.

That would lead to massive civil unrest - hence DHS with all their bullets and tanks.

The politicians and banksters would quickly find themselves in the crosshairs of a livid population bent on revenge - something they wish to avoid at all costs.

Historically when societies get to this point - they either default or they go to war.

Considering the size of the problem - it will need to be a rather large war.

Physical gold (and silver) will definitely make it "through to the other side" but the process of getting from here to there will be fraught with risks.

sandy beach dave's picture

furst

furst

sandy beach dave's picture

second is pretty good

second is pretty good

Dr. Fix's picture

The geo-political implications of gold,

A very nice broad topic, since gold seems to be at the center of the universe these days,

and as everything in the news unfolds, in the end, if you follow the money, it all points towards gold.

As the essay says, the gold is being transferred from West to East. All of the West's stockpiles are either gone, or are dwindling quickly. When the “great reset” occurs, the West will be left in a state of poverty, while attempting to simultaneously take over the world. This event only be accomplished by convincing the rest of the world that paper money is of some value, and the rest of the world will simply laugh at that notion.

America has been sowing the seeds of its own demise for generations, but in more recent times they are not even trying to hide it. The rest of the world is laughing at Americans, for the line of bull that our government dishes out, that most Americans accept without question. The average  American is now considered “dumb as a stump” by the rest of the world. The only thing we export is worthless paper, rapid inflation, and a military-industrial complex hell-bent on a  tyrannical takeover of other sovereign nations.

In the upcoming world war, America will have no allies.

Just the way Obama wants it.

Dr. Fix's picture

This post was a screwup,

It does not count in the top 10.

azygous's picture

First, second, "thurd tradition"

Adds nothing but irritation and annoyance. Please join me in clicking on "ignore user" for all these juvenile posters who insist in engaging in this practice. It really detracts from the otherwise high quality and superior informativeness of the site.

dgstage's picture

Platinum

I am hearing from a lot of different sources that platinum will out perform all other precious metals. Any thoughts.

luv2stak's picture

top 10 again! ayzygus...

ayzygus, the '123' Tradition probably came about and continues because it is an honor to Turd. To show him -- who does this not only for free, but with his own money! -- how excited and thankful the Community gets when we happen upon a new post/new information!  It's 'positive reinforcement' for a dedicated Researcher/Writer/FamilyGuy who scours the Net on our behalf, and is very generous with his time and 'translations' of financial numbers and gobbledygook to plain English! His irregular postings keep us fresh, and checking in often.  

If I were more cynical, I'd say 'like throwing peanuts to a monkey', but that doesn't come close to the respect and gratitude I feel having a place to come to where everyone understands the pain and exhileration of being in precious metals. I value this group of oddballs and eccentrics who believe in 'alt economics'. 

(Admit it, didn't you have even the slightest frisson of glee when you posted Number 3 or so?... If not, then it seems your critical post is even more a waste of time 'cause of the negativity you spread, and a loss for you b/c of the people you'll end up 'Ignoring'....  BTW, there are many MENSA members and eligibles here, all sharing...)

For free.

Note: you can ALSO post 1-2-3-4-5-etc., and THEN feel obligated to immediately search the Net for an interesting article or relevant piece of information and post it onto your original 1-2-3 post -- using the 'Edit' button --  before the time limit on the button runs out. Because your post is high up, the info will be seen by many people -- choose wisely! Or some regular high posters seem to have a clever cartoon or short essay on file to 'cut-and-paste' if the occasion arises...

------

If I ever get in the Top Three,  I've got a personal Tradition of making a donation -- @ 'Feed The Turd' button.

(Not the only time I donate, and sometimes it's only a few bucks, but it reminds me!)

This  1-2-3 Giving is a small trickle, but if everyone who posted 1st, 2nd or 3rd, did it, it could become a Tradition and a torrent!

Dr. Fix's picture

The dollar can't take too many days like this,

Gold and silver should be screaming, they are just sitting there. They have to be   in the middle of a massive paper selloff, just to keep the prices at a stand still.

[Most Recent USD from www.kitco.com]

azygous ,

I'll be happy to ignore you.

Bollocks's picture

@azygous

awww, come on, enjoy your life. Come on, I dare you!

11th!!!!

Xty's picture

Today's topic

is looking fiesty!

Urban Roman's picture

@Turd,

In response to your query in the last thread, yes. Yes, I do see tapering. Right here:

¤'s picture

Doubting that

"In the upcoming world war, America will have no allies.

Just the way Obama wants it."

But hey, to each his own.

I could be wrong and I'll freely admit I don't know 'the truth'.

Thanks for the new thread TF.

Everyone have a great day...Haze....out.

(crank it)

The Watchman's picture

Nice Chart

China_-_Monthly_Imports.png

Dr. Fix's picture

More doom and gloom for your Thursday.

12 CLEAR SIGNALS THAT THE U.S. ECONOMY IS ABOUT TO REALLY SLOW DOWN

A lot of things that have not happened since the last recession are starting to happen again.  As you read the list below, you will notice that the year “2009″ comes up again and again.  There is a reason for that.  Many of the same patterns that we witnessed during the last major economic downturn are starting to repeat themselves.  In fact, many of the things that are happening right now have not happened in quite a few years.  For example, manufacturing activity in the U.S. has contracted for the first time in four years.  The inventory to sales ratio is the highest that it has been infour years.  Average hourly compensation just experienced the largest decline that we have seen in four years.  We also just witnessed the largest decline in the number of mortgage applications that we have seen in four years.  After everything that Barack Obama, the U.S. Congress and the Federal Reserve have tried to do, there has been no real economic recovery and now the U.S. economy is suddenly behaving as if it is 2009 all over again.  A whole host of recent surveys indicate that the American people are starting to feel a bit better about the economy, but the underlying economic numbers tell an entirely different story.  The following are 12 clear signals that the U.S. economy is about to really slow down… [Read more...]

The Watchman's picture

The Cobra

Live New York Gold Chart [Kitco Inc.]

Monedas's picture

Alasdair Macleod passes the STINK test !

Being a casual guy .... I prefer my Jack Ass .... or my Keiser .... however, Alasdair .... is genuinely a thoughtful .... and well informed soldier .... in our Army .... I forgive him for being .... uh, BRITISH .... he goes a long way .... in making up for Pierced Organ .... one of Harvey's .... long lost cousins !        Monedas      1929       Comedy Jihad Immigration Nazi World Tour    devil

Iceberg Slim's picture

We Have Lift Off...

Dollar weakness finally carrying over to the PM's...let's see if this holds.

Turd Ferguson's picture

Taper this!

MODERATOR

Moving too fast and labeled the top as "FOMC" when it was, instead, the day The Bernank testified at Congress. Regardless, all the talk of "tapering" is being exposed as a big lie and SPIN.

Xty's picture

Hey 'Zeroes are our Bag' Bollocks

Been wanting to add that us Brits (did I mention I was born there and have my passport and all that proof stuff) also have 007.  Not just 7, or 07.   But Double O Seven.  Now that is just way cooler.

edit to add: what is worse, someone feeling lucky and shouting first, or a useless comment that merely complains about someone else's exuberance?  And the meta-comment, complaining about the complainer.  Turtles all the way down, and surely a very small mote to be finding when there are undoubtedly beams aplenty in the complainer's eyes.

Dr. Fix's picture

Some nice charts from zero hedge, all down.

It's USDJPY waterfall time and Mrs Watanabe has just left the building. She is now getting familiar with the far less known cousin of the "wealth effect" - the "poverty effect."

USDJPWHYYYYY_0.jpg

Meanwhile, someone big just got the proverbial tap on the shoulder. That, or is already getting carted out feet first.

20130606_oops_0.jpg

 
argent rampant's picture

Remember...

when a FUBM followed by a $.40 up move in AG would get us all excited? Everyday occurrence now...

AlienEyes's picture

Looks like the US$ is taking

Looks like the US$ is taking a high dive at low tide.

argent rampant's picture

YIKES!

I spoke to soon...

Dr. Fix's picture

Finally, a corresponding spike.

[Most Recent Quotes from www.kitco.com][Most Recent Quotes from www.kitco.com][Most Recent USD from www.kitco.com]

Tabberto's picture

V INTERESTED

to see if we can close above Turd's key resistance/stop-tripping level - 1415 is it? Should be fun if that happens. 

Mr Macleod is a fine fine fellow, I love the way he uses the fewest words possible in his articles, a skill indeed.

We've all had enough of this:

4747944.jpg

No more stretchers for our team (please!) - Time for Gold to attract lots of media attention for its outstanding behaviour in the face of a collapsing equity market and a Dollar on the slide.  The fact that it will really just be short-covering initially wont matter a jot and is a supreme irony as these are surely perfect conditions for the mania phase to start after the traditional deep secular wash out...

and then soon it will be time for grins all round and a huge effort at propagandising Turdites as being deranged and no doubt dangerous to boot!

kim-jong-il1.jpg?w=625&h=390&crop=1

JY896's picture

Not sure how immediate/urgent this is - re: High Street

...but from previous thread:

"Major high street banks in the U.K. include Barclays PLC, Royal Bank of Scotland Group PLC (RBS), Llyods TSB Bank PLC, and HSBC Bank PLC. These large High Street banks typically offer a diverse selection of banking services such as online banking, mortgages and savings." -- the UK TBTF according to Investopedia

Only current candidate with any news out there (though several hours older than the RANSquawk headline):

RBS Breakup Said Not to Be Consensus View of U.K. Lawmaker Panel -- Bloomberg

"Members of the U.K. Parliamentary Commission on Banking Standards have not yet reached a consensus on whether Royal Bank of Scotland Group Plc should be broken up, three people familiar with the discussions said.

The people said lawmakers are considering the contents of a draft report before meeting next week to agree on conclusions. The future of RBS will be part of those talks, two of them said. They asked not to be identified because the draft is private"

Will the bad be taken out of RBS? -- BBC

"A draft report from the Parliamentary Commission on Banking Standards calls for the split of Royal Bank of Scotland into a good bank and a bad bank, I have learned.

The MPs and Lords on the Commission have till next Monday to read the report and formulate their views."

zman's picture

Can anyone explain the

Can anyone explain the recent Yen strength?   I know nothing goes in a straight line, but still.

The BOJ's QE program is 3 times larger relatively to what the US is currently doing.

mrneutron's picture

As a reminder, Comex Gold Shorts - ZH

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