China, Gold and Reserve Currencies

Our pal, John Butler, has alerted us to this very interesting new report from the OMFIF (Official Monetary and Financial Institutions Forum). The report discusses the likelihood/probability that, one day soon, the world will be offered an additional "reserve currency", the Chinese renminbi.

Many of you will recall the podcast I had with John Butler back in May. If you need a refresher, here's a link. Obviously, the material covered is still relevant. http://www.tfmetalsreport.com/podcast/3835/tfmr-podcast-22-john-butler-author-golden-revolution

This new report covers some material that is near and dear to our hearts here in Turdville. However, since it was compiled for the OMFIF by the World Gold Council, some of its conclusions are debatable. Namely, the idea that a gold standard would be nearly impossible to resume and that fiat currency will likely continue to rule the day. Regardless, as John explained to me in the email below, once the "Golden Genie" is out of the bottle, it's going to be difficult for fiat currencies to compete. And why is China accumulating all of that gold, anyway? (800 metric tonnes in 2012 alone and that's just the amount they voluntarily reported!)

Hey there, Turd.
Happy New Year to you.
Thanks for your note. I consider the OMFIF report significant given the context. On it's own it would mean little as the OMFIF is strictly an advisory and discussion group. But when you consider the rapid rate of gold accumulation by China, the other BRICs and various other countries and the BRICs stated aim of reducing the use of the dollar as global reserves, well then the OMFIF report, as I argue in my brief comment here: http://www.financialsense.com/contributors/john-butler/breaking-news-omf... , represents a new, unfolding working arrangement for what the next major policy steps are likely to be. As my book argues, once the golden 'genie' is out of the bottle I doubt that it will be easily controlled and any attempt by currencies to 'share the stage' with gold will be short-lived. Eventually, gold will assume the dominant global reserve position and some sort of 'gold standard' will emerge. It may happen quickly in a crisis or it may unfold over a longer period of time in a more controlled fashion. I don't have the answer to that although something tells me that the occasional crisis will be unavoidable.
Indeed, a crisis may be brewing just now as I read that the Bundesbank has decided to repatriate Germany's gold: http://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-will... But is the gold available? Will the US, the UK and France deliver? On what time frame? This one will be interesting to watch; we're not talking about Venezuela or Ecuador here, we're talking Germany.
2013 is off to an exciting start!
Best,
John

Here's some additional background before you get started. First, here's a link to the OMFIF site:

http://www.omfif.org/

And if you're not familiar with the WGC, here's a link to their site:

http://www.gold.org/

and a video from their site discussing the report:

http://www.gold.org/government_affairs/research/

Finally, here's the report link in pdf format so that you can print a hard copy if so desired:

http://www.omfif.org/downloads/Gold,%20the%20renminbi%20and%20the%20multi-currency%20reserve%20system.pdf

And here it is in scribd. Please take the time to read and comprehend this report.

TF

Gold, the Renminbi & Reserve Currencies by Turd Ferguson

366 Comments

Ircsum's picture

Duh!

Guess everyone is either asleep or mesmerized by the Germany gold story. It may be Germany-specific rather than just gold-specific but the Dealer I've been using for a while (Warehouse is in Germany) jacked up the premium on its gold coins by about £20 per ounce between this morning & this afternoon.

edit: Premium has returned to "normal" now.....guess it was a computer glitch.blush

Nana's picture

Long Time Waiting

But will the metals stay up?

القراع عصفور's picture

Ja wohl.

Ja wohl.  Zweites mal Dritte.  Aber nie Erste.  Gott im Himmel!

Urban Roman's picture

It looks like Platinum has just passed Gold

... when did that happen? I just noticed it. 

Mr. Fix's picture

Let's just keep digging deeper.

http://www.zerohedge.com/news/2013-01-15/why-americans-are-broke-and-getting-further-debt#comment-31

Edit:

Where did this thread come from?  I didn't even notice that it had changed!yes

¤'s picture

Now let the lion beware! ~ 1894

29055v.jpg

Title: Now let the lion beware!

  • Creator(s): , Louis, 1866-1905, artist
  •  
  • Date Created/Published: N.Y. : Published by Keppler & Schwarzmann, 1894 November 14.
  •  
  • Summary: Print shows Henry C. Lodge playing a horn labeled "Discrimination Against England", Benjamin Harrison playing cymbals labeled "Bimetallic Standard", Thomas B. Reed beating a tub labeled "Bimetallism" with a club labeled "Speech", and Whitelaw Reid playing a trumpet and holding a paper labeled "Tribune"; they are on a wharf labeled "U.S." and raising a bimetallic clamor with silver and gold instruments, against the British Lion who is smugly reclining on a bit of land labeled "England" and holding papers labeled "Free Trade", with ships along the shore labeled "To Japan, To India, To S. America, To Australia, [and] To China".
¤'s picture

Front Page MarketWatch Headline ~ Germany's Gold Repatriation

 
 
Why Germans want the Bundesbank's gold back
Germany may be ready to bring home its foreign gold holdings — a move that may reflect pressures stemming from the euro-zone financial crisis. Gold prices are building on prior-session gains.
 
 
Green Lantern's picture

Where is the gold?

Damn, the Turd is posting new articles fast and furiously.   So I'll repost  this here about the German repatriation.

This story starts to get at the crux of the matter of the entire secret financial system that Catherine Austin Fitts keeps referring to. If the gold that isn't there and has been rehypothecated, than where is it?

For all of you that remember history, the chinese and romans debased their currency by shaving their gold coins. It took awhile but eventually people started to recognize what was going on. I suspect that tungsten filled bars and rehypothicated gold is the modern form of Roman coin shaving.

Of course, the obvious question remains. Where is all the gold going?

And to take the speculation even further, Joseph Farrell wrote some time back that with all the quantative easing and all the predictions that the dollar would collapse, why haven't we seen a Weimar style inflation? Because the quantative easing is going to the same people that have the gold? The inflated money supply is not going into circulation.

Catherine Fitts Austin just gave an interesting interview with USAWatchdog that I posted in the forums. She is one of the few that seems to be able to tie alot of disparate, seemingly unrelated issues into one cohesive story.

Fitts says we are not necessarily going to get a “new” currency, but it is definitely going digital. Fitts warns, “Once we are in a spot where the currency can be entirely digital, then we’re in a new state of very invasive control. . . . One of the reasons I love gold and silver is that it allows me not to be digital” Fitts says the real fight over the fiscal cliff is how we are going to pay for the mess. Fitts thinks, “Politicians have already committed to inflation.” Fitts predicts, “The chances of another financial collapse are very small because every time we come up to a moment where a financial collapse starts to be a real risk, what happens? We get war.”

I'll repost the video here. But fair warning, besides discussing gold/silver and inflation, she is tying together all the other events together that were the subject of the last thread, gun confiscation, possibilities of civil unrest with the financial realities. So fair warning. And please do not discuss stories unrelated to main topic unless you can tie it together. It can be done. But if you like to compartmentalize your gold and silver news , then this video and Catherine Austin Fitts is not for you.


See video

What I like about this German gold story is it begins to bring stuff to the surface that so many people reject-a financial system controlled by a secret group of people. This makes the subject of manipulation seem like kindergarten and since there is a good number of people still not on board with manipulation, ignore this post.

Lastly, somebody posted this inspirational little photo. I guess I didn't find it too inspirational but my twisted mind asked the question what if an egg represented the global financial system, then the breaking down of a system, any type of system, doesn't necessarily have to break down from the inside. Ponder this riddle on your next potty break.

Patrancus's picture

They best have the gold because

They best have the gold because China has a severe shortage of china in the closet, besides the facts that they breath the most polluted air in the world and they have to import millions of gallons of American drinking water every day. No place I need to go anytime soon.

rocoach's picture

Lion Beware

But what does it mean?  Perhaps that while the insular Yanks were banging on about the virtues of owning silver and gold, the rest of the world was going about the more important business of establishing beneficial trading relationships.  Do we see a parallel today?  Stackers hunkering down with their guns and stockpiles of food, isolating themselves from the rest of society. While the rest of the world goes about business as usual - despite the center shift to China.

Puck T. Smith's picture

I don't remember who it was...

...but someone posted a link to the omfif report overnight.  I remember trying to read it but it was too late and I had to sleep.  Turdites are ahead of the curve.

Daedalus Mugged's picture

Germany and the Gold/Silver relationship

It seems gold as the preferred (sole) monetary metal of the CBs is destined to rise.  Silver historically has a higher 'beta' than gold.  When the metals go up, silver typically has gone up more than gold.  When the metals go down, silver typically has gone down more than gold.  The question is when the great Keynesian experiment ends, the world loses faith in the fiat reserve currency and the metals pop, does the historical higher beta for silver remain in place, or does gold disassociate and have a much higher increase.  Essentially the Turd silver thesis vs the FOFOA gold thesis. 

I would love those two to interview each other and try to hash it out.  I try to cover both outcomes by holding both, but am wondering which I should overweight.  Thoughts from the community?  It seems like several of Turd's favorite inspirations actually prefer gold to silver (Santa, Jim Willie) although Sprott is definitely has the silver outperforms gold perspective.  I am personally torn, in my mind it comes down to physical fundamentals favor silver, but the fact that the central banks and the 'powers that be' in almost all forms seem to favor a higher increase in gold.  If those that set the rules set the rules, I think gold outperforms.  If there are no rules, I think silver does.  But I am not sure which camp I am in. 

Daedalus Mugged

Puck T. Smith's picture

It was Xeno

SRSrocco's picture

THE BEAUTY OF SILVER....IS GOLD

High Gold Prices Push India's Farmers Toward Silver

Author: Shivom Seth
Posted: Friday , 11 Jan 2013

 

MUMBAI (Mineweb) -

Seventy year old Surinder Singh Ahuja, a progressive farmer who has been planting cotton on 50 acres in his Haryana land and wheat in 10 acres in Fazilka in Punjab for the past four years, is in an expansive mood.

In the case of a new bride it is particularly significant, where traditionally, the in laws present clothes and gold jewellery to the her, and a grand feast is organised by the family. This year though, things are slightly different at Ahuja's house.

"Every year, we light a bonfire, and play games. It is an opportunity for the farming community to get together and bond and also a chance to allow the children to get a glimpse of our traditions. It is especially a grand time to gift gold to different members of the family. Only this year, we have decided to give them silver antique jewellery items," said Ahuja.

...Ahuja said most of the farming community across Haryana and Punjab in North India, were buying silver as a cheaper alternative to the more expensive gold for investment purpose. "The trend began at the end of 2010 when silver prices started rallying to a 30 year high. The price of silver has great potential to go even higher this year. Plus, most shops have been showcasing exquisite silver jewellery items. The lure is too much," he added.

Article here: http://www.mineweb.com/mineweb/content/en/mineweb-silver-news?oid=169649&sn=Detail

-------------------

While gold is known as the King of Monetary Metals, Silver will become the "OFFICIAL ROYAL UNDERDOG".

Investment demand for silver hasn't even begun yet.  This is what I will be discussing in my upcoming presentation.  Investors who are worried about silver selling off after the big move up with gold (AS JIM SINCLAIR HAS STATED)... shouldn't be.  Sinclair is excellent in understanding gold, but is still forecasting the future price of silver based on 1970-1980 world economic conditions.

Energy will be a MAJOR FACTOR going forward that will impact SILVER INVESTMENT DEMAND.

Dr Jerome's picture

I got a feeling

Something tells me that TPTB will not let this news about Germany's gold push the metals up in any significant way...

But, I am sitting some dry powder thing I ought to make my purchase now.

Mr. Fix's picture

Reply to Daedalus Mugged

You raise a great question, and the answer can be rather complicated. I think in the end, it comes down to who is going to win.

As you stated, the powers that be are favoring gold, but if they win, they will win it all, and we may not have our lives or our freedom anymore. The powers that be are playing for keeps, and it is just as likely if they are victorious, that us little people will be prohibited from owning gold, not to mention a few other unmentionable items.

Silver on the other hand is a true monetary metal that they do not hold in a abundance. This I believe is the true reason why they are trying so desperately to squash silver as an alternative currency to either the dollar or gold. Ultimately, they cannot possibly succeed unless they plan on instituting martial law, a police state, and creating a new currency such as digital that cannot be circumvented. In this scenario, they may be able to maintain a worthless silver.

Deciding which metal to collect means that you are taking sides in the inevitable battle that is about to begin.

If you think that the powers that be are going to win, and that by some miracle they will still allow you to own gold, then gold it is.

If however you believe that the powers that be have overreached, cannot possibly pull off their plan for world domination,

and truly believe that in the end good always defeats evil, then I would go heavy on the silver. You see, if good is victorious, then fundamentals will actually mean something someday. If not, then fundamentals will forever be meaningless.

I personally try to maintain a 50/50 split denominated in dollars.

This way I do not have to choose sides, but I am most definitely rooting for the good guys.

Since the reason that I stack is for preservation of wealth, as well as for the preservation of me and my family's life,

I do tend to try to cover all of my bases. So I make sure that I have enough food, and enough of that other precious metal, lead,

to tide me over for a good long time.

Hope that helps. 

ratioarbitrage's picture

@ Daedalus Mugged, GSR debate

Hi DM

Having started a dialogue with someone from the FOFOA site here I started writing about it on my blog at 

http://tyrannyofthepresent.wordpress.com/2012/12/11/the-cultural-salience-of-gold-and-silver/

Round about then they started a thread to argue about that and other issues and a huge discussion followed at

http://fofoa.blogspot.co.uk/2012/12/arguments-against-freegold.html

There were other arguments, but silver was the big one in my view. There are a factors  to take into account, but after the end of it all I just ended up where I was (bimetallism). One important realisation for me was that I decided not to trade the ratio, but just to accumulate by weight, due to the risk that it will go strongly one way or the other and stay there. The atmosphere of debate is shall we say robust.

Bear in mind the whole blog was inspired by a chap called Another from Saudi Arabia, who had little/no interest in silver (see google trends - it is a national feature). I posted here on google trends interest in the two metals the other day here:

http://www.tfmetalsreport.com/comment/258668#comment-258668

Good luck, above all make up your own mind!

ABQBear's picture

A little confused...

I thought we knew about the impending repatriation of Germany's gold a couple months ago... 50 tons/year? Are they now requesting the whole shebang asap ?!

R man J's picture

Deadalus

Along with the great responses from SRS and Mr. Fix (as to why gold will not leave silver in the dust) , I would add the fundamental of decreasing supply.  Above-ground has steadily decreased, in-ground has steadily become lower grade, Ranting Andy has quoted the USGS as saying silver will be the first element to become extinct.  When it is running out, can the price remain where it is?

SIlverbee's picture

The PM charts

Are not moving / behaving as they normally do?

My spider senses are twitching and its Tuesday.

Road_Scholar's picture

Does Germany Repatriation

make the Euro stronger or begin to rip it apart at the borders of each individual country (who has gold/resources and who has nothing)?  And does that get the "people" to the next level of awakening that fiat is only worth what their government wants it to be worth?

barbrady.jpeg

TJeffson's picture

Off Topic - Boatman, Mr Fix ... anyone else .. re Lupus

Just wondered if anyone had any info on Colloidal Silver and Lupus... or for that matter, mega dose vit. C and Lupus?     Got a good friend that has Lupus so I'm trying to find what's out there to help.  I know some of you folks are really into alternative treatments for illnesses. 

Didn't see a forum topic for any of this stuff. 

pm me with info so we don't clutter up the main thread. 

SRSrocco's picture

YOU HAVE TO THINK OUTSIDE THE BOX

ORTHODOX SILVER ANALYSIS IS USELESS IN DETERMINING FUTURE SILVER INVESTMENT DEMAND

The problem today with the typical analysis coming from the BULLS & BEARS concerning future silver investment demand and price is that it is based upon an ENERGY SYSTEM that is more than a 1,000 years old.  You cannot understand silver if you DO NOT UNDERSTAND ENERGY.

This is my biggest BEEF with the folks in which I have a lot of respect in the precious metal community... as well as the NITWITS in which I hold very little.  As I stated before, I was writing about DECLINING ORE GRADES 4-5 years ago when most were talking about how great the gold and silver stocks were going to perform.

Well, we found out in the past several years just how bad the mining stocks have performed and how fast the ORE GRADES HAVE FALLEN.  I also believe today, that the same ANALYSTS are missing the important fundamental when making their forecasts.... and that is ENERGY.

For example... this was Endeavour Silver's newest Press Release;

Endeavour Silver Delivers 8th Consecutive Year of Production Growth in 2012; Silver Production Up 20% to 4,485,426 oz, Gold Output up 77% to 38,687 oz

This was great news from Endeavour as they are increasing reserves as well as production.  However, this is what they failed to mention to the investing public:

ENDEAVOUR SILVER PRODUCTION DATA

2007 silver production = 2,135,484 oz

2007 tonnes milled = 291,561

2007 average silver yield = 7.3 oz per tonne

2012 silver production = 4,485,426 oz

2012 tonnes milled = 1,065,689

2012 average silver yield = 4.2 oz per tonne

Q4 2012 silver production = 1,235,026 oz

Q4 2012 tonnes milled = 362,799

Q4 average silver yield = 3.4 oz per tonne

---------------------

So, Endeavour has doubled its annual silver production since 2007, but has done so as its average silver yield has declined in HALF.  Thus, Endeavour is consuming more energy to produce the same oz of silver than it did 5 years ago.

Most of the investing public and the folks from FOFOA have no clue how energy will impact the future silver investment demand as well as its price.  They FAIL TO THINK OUTSIDE THE BOX.

SILVER INVESTMENT DEMAND WILL BE HOTTER THAN GOLD.

...mark my words.

Bollocks's picture

Great analysis SRSrocco

Wow, those yield figures are dropping fast.

Indenture's picture

Mr Fix: "If you think that

Mr Fix: "If you think that the powers that be are going to win, and that by some miracle they will still allow you to own gold, then gold it is." So if the powers that be win there will be no gold held by individuals because they won't allow it, presumably to force people to use currency. If the powers that be lose then it will be ok to use metal. So why will the people choose to use silver in your scenario when they were never forced to give up their gold?

Urban Roman's picture

@ GL,

Damn, the Turd is posting new articles fast and furiously.  

I saw what you did there.

Response to: Where is the gold?

Xeno's picture

Transition

Transition yeah babyyes 

I agree that barring a crisis it may take a little while yet but -damn- isn't this the greatest time to be alive or what???

Re: German repatriation; maybe they will finally find Hitlers' lost gold deep in some vault instead of at the bottom of a lake in Austria. Would seem to explain the coin melt gold in national vaults we've heard so much about.

Mr. Fix's picture

A reply to Indenture:

6000 years of historical precedent says that both gold and silver are money. Even the United States Constitution clearly states that only gold and silver can be used as money.

The powers that be have clearly stockpiled gold, but have managed to squander the supplies of silver to the point of near extinction.

Silver is the only commodity on the planet that trades for less today than it did in 1980, and yet is infinitely more scarce.

I guess the direct answer to your question of why people would  choose to use silver, is because they would have that choice.

As long as people have the choice to use what ever they want to, gold and silver will always be a preferred currency.

If the choice is removed by the powers that be, then all bets are off.  Since the above ground supplies of silver are far less than gold right now, and even the in the ground supplies are guesstimated at a bout a 10 to 1 ratio,

it is safe to  assume that as a percentage of increase, silver will be revalued much higher than gold will. 

In this scenario that I outlined above, even though people were not forced to give up their gold, at this point in time, almost nobody has any. Therefore, silver will be a viable alternative to gold, since it is still somewhat affordable, even at several hundred dollars an ounce, as compared to gold which will easily be several thousand dollars  an ounce.

Bollocks's picture

Excellent first-half Keiser Report

JP Morgan's copper ETF and Blythe's whore-ding.

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