Guest Post: "Does The World Gold Council Understand The Chinese Gold Market?", by Koos Jansen

Fri, Sep 5, 2014 - 5:41pm

Many of us in the gold community feel the the WGC rountinely overestimates gold supply while they underestimate gold demand. In this new article, our friend Koos Jansen takes the GTC to task in regards to their "understanding" of the Chinese gold market.

"Does the WGC Understand The Chines Gold Market (Or does it not want us to understand it)?"

by, Koos Jansen of BullionStar and

As I’m mostly occupied researching the Chinese gold market I feel obliged, again, to respond to the latest World Gold Council (WGC) report on China; Understanding China’s Gold Market, published July 2014. For readers of China specials it may appear the WGC is exposing in-depth information on the Chinese gold market, while partially true, all publications contain inaccuracies and inconsistencies and do not disclose the most crucial data that indicates Chinese gold demand is significantly higher than widely assumed. The WGC consciously withholds this data from the mainstream audience - their motives are left for speculation.

Chinese wholesale gold demand in 2013 was 2197 tonnes, though the WGC states consumer demand was 1066 tonnes. Despite several attempts this enormous discrepancy has not been elucidated by the WGC until this day. However, as time goes by and knowledge about the Chinese gold market is slowly spreading through the international gold space, the more pressure is building on WGC demand numbers regarding China.

In this post we’ll analyze and compare the penultimate and last China special, China’s gold market: progress and prospects and Understanding China’s Gold Market, to truly get a better understanding of the Chinese gold market. We’ll begin discussing several quotes from Understanding China’s Gold Market.


Whilst China is the simplest gold market on the globe because of the center role of the Shanghai Gold Exchange (SGE), the WGC retains stating the opposite; it’s a very complex market:

"In Gold Demand Trends – our quarterly overview of market fundamentals – we publish data for China’s bar and coin and jewelry demand, and in its annual Gold Survey, GFMS, Thomson Reuters publish data on technology demand. Beyond this, the market becomes a little more difficult to piece together. This note, which follows on from our report China’s gold market: progress and prospects, aims to shed light on China’s gold flows and explain how they relate to end-user demand. It is broken down into two sections: the first provides an overview of the supply chain and gold flows, highlighting the complexities surrounding imports, recycling and SGE delivery data. Section two builds on these insights to present a view on China’s aggregate demand."

SGE delivery, which should be titled SGE withdrawals but for the sake of simplicity we’ll stick to delivery in this post, is the single most important data point in the Chinese gold market; it’s the key to physical demand, as I‘ve written about frequently. In Understanding China’s Gold Market it seems if the WGC is actually expanding on SGE delivery.

(in the next screen shot from the WGC report the red box is added by me)

But are they really? Including the flow chart SGE delivery is mentioned twelve times in the report, but only one concrete number is disclosed: cumulative SGE delivery from 2009 to 2013 was 5811 tonnes. Instead of giving the exact numbers of SGE delivery for each year and the direct implication of these numbers (delivery equals wholesale demand), they’re only passingly hinting SGE turnover has been large in recent years. Though forced to expand on the structure of this market the WGC withholds a number that would to crush their credibility and is likely too sensitive for the international monetary system; the Chinese people bought 2197 tonnes of physical gold in 2013 (note, 229 tonnes of this was recycled gold, more on that later).

I’ve had email correspondence with the WGC in December 2013 in which they admitted to me not to know where all SGE deliveries end up, as “China will never disclose this information”. One phone call to the SGE explained a lot, "huge amounts of gold are withdrawn from the vaults by (personal) SGE account holders", I was told. Below the surface recent WGC reports on the Chinese gold market are abject apologies for not adjusting previous demand numbers or ways to keep their members ignorant on how much Chinese physical gold demand in reality is. Subsequently the global authority on gold writes reports in the hopes to strengthen their paradigm.


Let’s continue examining more quotes regarding Chinese import:

"Trade data: There are two issues which cloud the picture of gold flows into China. The first is that data are limited. Mainland China does not publish its own trade statistics so analysts rely on other sources, such as trade data from the Hong Kong Census and Statistics Department. … Trade data includes gold jewelry, semi-manufactured products, scrap, doré, and concentrates. … So while import data are very useful, they need careful interpretation and should not necessarily be taken at face value."

Chinese gold import is not so hard to grasp as the WGC wants us to believe. Jewelry, scrap and concentrates can be easily filtered out through customs data from Hong Kong and other countries. With some basic research anyone can come up with fair estimates of Chinese net gold import. My estimate, made in March 2014, was 1500 tonnes, measured through SGE deliveries.

CPM Group also makes reasonable estimates on net import; 1410 tonnes for 2013. They even have access to reports of commercial bank imports available from the Shanghai Gold Exchange, one would expect the WGC has the same privileges. From the CPM Gold Yearbook 2014, published in March 2014:

"Because official gold customs figures are not being reported, gross imports and exports are deduced from figures reported by China's trading partners to UN Comtrade and GTIS databases. Adjustments were made according to reports of commercial bank imports available from the Shanghai Gold Exchange."

And here comes the punch line: SGE chairman Xu Luode gave us the exact amount of gold import for 2013 at the Fourth Commercial Bank Gold Investment Forum May 15, 2014. He stated it was 1540 tonnes. Why doesn’t the WGC mention this extremely important number in a China special written a month later?

Prior to 2012, when Chinese gold demand hadn’t reached the level of sensitivity it currently is subjected to, the PBOC published SGE Annual Reports and China Gold Market Reports that disclosed gold import. From The China Gold Market Report 2008:

"Physical gold withdrawal on Shanghai Gold Exchange (SGE) topped 543.19 tons in the year, including gold imports of 81.44 tons by commercial banks, stock carry-over of 31.661 tons from 2007 and 282.007 tons of gold produced in the year. In theory, the gap of 148.082 tons was filled by recycled gold."

From the SGE Annual Report 2009:

"Gold import dropped 43 % to 46.42 tonnes, 35.02 tonnes lower than that of last year."

From the China Gold Market Report 2010:

We can see gold import (others) in 2010 was 240 tonnes, up 205.3 tonnes from the previous year.

In Understanding China’s Gold Market the WGC upholds a myth about unknown gold import in 2013. If they would disclose net import, 1540 tonnes, it would be severely in conflict to their consumer demand of 1066 tonnes, especially when one adds 428 tonnes of mining supply.

From Understanding China’s Gold Market:

"As reported in China’s gold market: progress and prospects and in GFMS, Thomson Reuters’ Gold Survey 2014, ‘round-tripping’ may flow through the SGE and could be captured in the Exchange’s delivery figures."

Round tripping does not inflate SGE deliveries! Only fifteen banks, blessed with a PBOC general trade license, can import bullion into the domestic gold market which is required to be sold through the SGE. Commercial (state owned) banks are not involved in round tripping seeking of cheap funds; banks already have access to the cheapest funds available. Additionally, bullion export from the mainland is prohibited as the WGC notes on page 4:

"In addition, bullion exports are prohibited."

Round tripping is done by merchants and jewelers that don’t have a PBOC general trade license, but are allowed to import gold into a Free Trade Zone for processing. This processing trade is exempt from a PBOC license because the gold is required to be exported after it’s processed. Gold trade through Free Trade Zones does not intertwine with the domestic gold market and the SGE. The lion share of gold exported from China is processing trade.

Another misconception on page 3:

​"Importantly, gold which has been withdrawn from the SGE cannot be sold directly back to the Exchange by private investors or non-SGE members – it first needs to be re-cast into a new bar."

SGE members are not allowed to sell gold directly back either, this rule applies for every trader on the exchange. Once bars are withdrawn from the vaults they are not allowed to re-enter.


From Understanding China’s Gold Market:

"Given the complexity of the market there could be many reasons, but the most likely explanation is that the SGE delivery figure includes the flow of recycled gold-for-gold as well as gold-for-cash. As explained previously, while recycled gold-for gold will increase supply and demand, the net effect is market neutral. For this reason, demand and recycling estimates as reported in Gold Demand Trends and GFMS, Thomson Reuters’ Gold Surveys exclude recycled gold-for-gold. But because the structure of the Chinese gold market requires refined and recast recycled gold to be sold through the SGE, it is likely the delivery figure captures this circulation of recycled gold-for-gold."

First of all, refined and recast recycled gold is not required to be sold through the SGE! The reason a lot of gold is being recycled through the SGE is because gold on the SGE is exempt from VAT, which creates an incentive to sell it through the central bourse. This also explains why SGE delivery (wholesale demand) is so much higher than WGC consumer demand: Every Chinese citizen can open an SGE account through a commercial bank. On the SGE he or she can buy VAT free gold, while some (not all) gold products sold in retail include VAT or profit margins. SGE bars are the cheapest not the prettiest, but how many gold investors would care? While the WGC measures gold sales in retail, SGE delivery captures the true size of demand. Needless to say, all jewelers purchase their gold at the SGE, so SGE delivery includes retail sales.

(Above, SGE 100 gram gold bar sold excluding VAT.)

In China standard gold are bars of 50g, 100g, 1kg, 3kg and 12.5kg, purity of AU9999, AU9995, AU999 and AU995. This is VAT free if traded over the SGE or SHFE, if not traded over the SGE or SHFE standard gold is not VAT-free.

Second, yes, recycled gold-for gold flows through the SGE, we know this since 2008. From the China Gold Market Report 2008:

"Gold scrap: At present, gold scrap in China mainly is in two major forms: repurchase of gold bars, only applicable to brand gold bars in reference to real-time gold price, and repurchase of gold jewelry through retailers."

I guess it took the WGC six years to figure this out.

Now scroll up and have another look at the last sentence from the first quote I presented of The China Gold Market Report 2008. “In theory, the gap of 148.082 tons was filled by recycled gold”. Note, The China Gold Market Report 2008 also states withdrawals accounted for 543.19 tonnes, import was 81.44, stock-carry over was 31.661 and domestic mining was 282.007 tonnes. We can clearly read the essence of the structure of the Chinese physical gold market. In a simplified equation:

Import + mine + scrap = SGE delivery

China mined 428 tonnes in 2013, which was required to be sold through the SGE. Net import, also required to be sold through the SGE, was 1540 tonnes. SGE delivery was 2197 tonnes, and thus gold recycled through the SGE was 229 tonnes (neglecting stock carry-over). SGE delivery minus recycled gold is 1968 tonnes, which is the amount that was net added to private reserves in 2013.


In "China’s gold market: progress and prospects" the WGC stated the glut in gold supply, the discrepancy between SGE delivery and consumer demand, may have been absorbed by the PBOC:

…the large and growing apparent ‘surplus’ in the local market, after taking into account supply, demand and net imports, has been suggested as pointing to unreported accumulation of gold by the state.

…in recent years supply of gold has risen even faster than demand because of a surge in bullion imports. This has fuelled talk of possible Chinese official gold purchases in the domestic market. Indeed, even taking into account very substantial amounts of financial arbitrage, gold exports, stock building and other phenomena, there still remains a large ‘residual surplus’ in the market, which some have interpreted as representing an implied build-up in official sector…

Back in April 2014 I have written it’s very unlikely the PBOC buys gold through the SGE as all gold on the SGE is quoted in renminbi and the PBOC would rather exchange US dollars for gold, likely buying gold overseas. I strengthened my theorem in a post from June 2014 when more pieces of the puzzle came out. In Understanding China’s Gold Market (July) the WGC writes:

"China’s authorities have a range of options when purchasing gold. They may acquire some of the gold which flows into China; there has been no shortage of that. But there are reasons why they may prefer to buy gold on international markets: gold sold on the SGE is priced in yuan and prospective buyers – for example, the PBoC with large multi-currency reserves – may rather use US dollars than purchasing domestically-priced gold. The international market would have a lot more liquidity too."

This is exactly what I wrote in my post in April; the PBOC has a strong incentive to exchange some of their supererogatory dollars for gold abroad (not exchange renminbi for gold on the SGE).

There is another strong indication the PBOC does not buy gold through the SGE. The foreign exchange reserves of the PBOC exceed $4 trillion. This is one of the largest stacks on the planet and it’s estimated two-thirds is denominated in US dollars. Prominent Chinese economist Yu Yongding illustrated the situation in a power point presentation as follows:

China needs to diversify its US dollar holdings and buy precious metals (next to a very interesting list of additional steps of which most are currently being taken). However, given the size of their reserves just a tiny move would greatly affect the market. This is why the PBOC is forced to buy gold in utmost secret, which it is perfectly capable of doing. China’s central bank is not your pawn shop around the corner, it can easily buy gold anywhere on the globe and ship it home without declaring anything to any customs, that’s why there is no gold analyst that knows the exact amount of Chinese official gold reserves. For this reason I believe everything we see (Hong Kong, UK, Swiss gold exports to the mainland, SGE delivery, etc) is not related to PBOC purchases. The PBOC would never leave a single trace and, therefore, SGE delivery solely relates to non-government demand.

Koos Jansen

Original link:

About the Author

turd [at] tfmetalsreport [dot] com ()


Sep 5, 2014 - 6:01pm


Surely I am not first?

His bolded sentences in the introduction are worth memorizing:

"all publications contain inaccuracies and inconsistencies and do not disclose the most crucial data that indicates Chinese gold demand is significantly higher than widely assumed... Chinese wholesale gold demand in 2013 was 2197 tonnes, though the WGC states consumer demand was 1066 tonnes. "

If that is not enough to make a gold bug out of you, specially given the role the Chinese are taking in leading the world in economic production, heaven help you.

transplanted baby
Sep 5, 2014 - 6:15pm


Take it when you can. Today is already looking up.

Sep 5, 2014 - 6:25pm

It's Amazing

China just sitting back quietly and watching the West fall to pieces and the West just watching China stack the Gold or does the West owe it. Lol

Gold import dropped 43 % to 46.42 tonnes, 35.02 tonnes lower than that of last year."

Maybe China already has it all. LMAO Keep Stacking

Mr. Fix
Sep 5, 2014 - 6:32pm

Best guess as to how long this could possibly last:

When Will It All Run Out?

Submitted by Tyler Durden on 09/05/2014 - 18:18

Nothing lasts forever (except central bank dovishness) in the real world. Here is an interpretation of when the world will run out of each metal or energy source...

Sep 5, 2014 - 6:36pm

And it makes me wonder

I am wondering if China is going to just patiently vacuum up all the gold in the world, while our Western central banks keep their Keynesian jalopy running with duct tape and baling wire until there is a dollar collapse. Then the stackers like us will bring our metals out of the ponds and rivers to buy land and other needed commodities, and Asia will keep buying the gold that comes out of the woodwork until they have it all...

At some point then, the Yuan will be connected to gold, China will run the world, and the rest of us will scramble to make a subsistence living.

The could crash the West at any time, but they have not.

sierra skier
Sep 5, 2014 - 6:47pm

I like the topic, it is

I like the topic, it is something new.

cliff 567 Doctor J
Sep 5, 2014 - 8:05pm

I was the first hat tip Turd.

I went to the bottom before ever reading a word because I wanted to thank you for putting more stuff public.

cliff says atta-boy Craig.

Mr. Fix
Sep 5, 2014 - 8:14pm

cliff 567


Sep 5, 2014 - 9:23pm

Upside Down?

Most "World Councils" are created to promote the interests of the product or service it represents. Whereas the WGC seems consistently to go out of its way to distort the supply (Overstate) and demand (Understate) picture? Is it controlled by CB's?

Safety Dan
Sep 5, 2014 - 9:36pm
Sep 5, 2014 - 9:49pm

Chinese demand twice what is reported . . .

Sounds normal. The truth is the last thing to expect from the western banking system and those who kow-tow to them.

Safety Dan
Sep 5, 2014 - 10:21pm

US economy stumbles in the

US economy stumbles in the face of monetary tightening and political dysfunction

Moderate probability, Very high impact; Risk intensity =


The US economy was generally resilient in 2013, shrugging off a prolonged period of fiscal sparring that led to higher taxes in January and US$85bn in indiscriminate spending cuts. However, the economy witnessed a sharp contraction in the first quarter of this year, and, although it subsequently bounced back in the second quarter, the markets remain sensitive to the ending of the Fed's QE programme (its third) and political deadlock in Washington DC.


A groundswell of positive economic data in the second half of 2013 prompted the Fed to begin rolling back the unconventional policies that have shaped the US economy since the financial crisis, with its QE programme reduced by US$10bn six times thus far this year. The Fed has been the main source of policy stimulus to the US economy during the past two years, and the prospect of the end of this support has on occasion caused spikes in the yield on the tenyear Treasury bond - as was the case in December 2013, when the rate rose to 3%, compared with 1.7% in May.

Although thus far the flight to safety following the onset of the Fed's tapering has prevented any consequent upturn in US Treasury bond rates, the continued tightening of monetary policy will eventually inevitably have an impact further down the financial chain. After such a protracted period of exceptionally low rates, this could have a profound impact on the recovery, especially for the revitalised housing sector (which has shown signs of softening). In addition, rising rates could make the task of reducing household debt that much tougher, and in turn prompt consumers to pare back their spending. Indeed, even though the Fed has indicated that its tapering will be gradual (and could be halted at any time), there is a risk that the prospect of an end to QE will undermine confidence sufficiently to cause a wider economic slowdown. In a possible indication of this, real GDP contracted by 2.1%, at an annual rate, in the first quarter - its largest contraction in years. Most worrying was the sharp drop in investment, which deducted over a full percentage point from economic growth. Although the economy bounced back in the second quarter, much of this was owing to an expansion in inventories, which contributed 1.66 percentage points of the 4% growth rate.

Bickering politicians have only added to the economic headwinds, with a confrontation over the federal budget and the "Obamacare" healthcare reforms culminating in a temporary partial government shutdown in October. Although the furloughing of hundreds of thousands of government workers on its own depressed domestic demand, the extension of the stalemate to the urgent task of raising the government's debt-ceiling added a considerably more dangerous element to the deadlock. Although a last-minute deal to avert default was eventually reached and the debt ceiling was raised in February, risks remain. In particular, the US political system remains dangerously polarised, and it is conceivable that more hardline Republicans may seek to provoke another fiscal showdown ahead of congressional elections in November.

The failure of the US's political class to advance economic and, in particular, taxation reform has added to a broader concern that the country's long-term productive potential is being damaged. Combined with the persistence of long-term unemployment - some 3.2m Americans are currently classified as long-term unemployed (jobless for 27 weeks or more) - the US's growth potential has now arguably fallen to 2% or below, compared with 3-4% in the 1990s. In addition, the equity markets have enjoyed a bull run over the past five years, which could easily be reversed in the event of renewed political deadlock or an external shock - for example, related to the increasing belligerence of Russia, Iraq's disintegration, or an oil price spike - or a more general shift in investor sentiment.


If the combination of a tighter fiscal and monetary policy, or a sharp dip in the equity markets, threatened to push the US economy back into the recession, the Fed would no doubt seek to lessen the economic impact by reversing course on QE. However, in reality its minimal room for monetary manoeuvre would limit its effectiveness, especially in the event of a US default. A recession in the US, the largest economy in the world, would only compound the drag on global growth being exerted by the ongoing crisis in the euro zone and the slowdown in the emerging market.

Safety Dan
Sep 5, 2014 - 10:27pm

World Official Gold Reserves

World Official Gold Reserves 15 year History

Notice they have increased? Gosh what does that mean?

Safety Dan
Sep 5, 2014 - 10:36pm


THE HORNET'S NEST « The Burning Platform

ISIS Leader Abu Bakr Al Baghdadi Trained by Israeli ...

My thougths:

The leaks reveal that intelligence services of three countries created a terrorist organization designed to attract extremists worldwide to one place, using a strategy called "the Hornet's Nest" and refer to its implementation “to protect the Zionist entity by creating religious and Islamic slogans” where "the only solution for the protection of the Jewish state is to create an enemy near its borders".

The documents also reveal that ISIS leader Al Baghdadi underwent military training in the hands of Mossad, besides courses in theology and the art of speech.

ISIS is America’s New Terror Brand: Endless Propaganda Fuels “War on Terror”By James F. Tracy, September 01, 2014


In the wake of World War I, political scientist Harold Lasswell defined propaganda as “the management of collective attitudes” & the “control over opinion” through “the manipulation of significant symbols”.

Man Predicted Illuminati Would Kill Joan Rivers Just 10 Days Ago (Video)

Safety Dan
Sep 5, 2014 - 10:45pm

Deconstructing Fed Vice

Deconstructing Fed Vice Chair's Grim Economic Forecast

PERI co-director Gerald Epstein discusses how Fed vice chair Stanley Fischer has ignored real solutions to improve the economy, like increasing wages

Deconstructing Fed Vice Chair’s Grim Economic Forecast
Safety Dan
Sep 5, 2014 - 10:47pm

This Is Very Important Regarding Central Banks,

I previously posted it.. here: The BIS Bashers SEP 4, by Safety Dan

22 hours 44 min ago

The BIS Bashers

SEP 4, 2014

PRAGUE – It might seem an unlikely proposition, but central banking has become exciting. This is not necessarily a welcome development. Decisions taken by the leading monetary authorities since the 2008-2009 global financial crisis have been unorthodox, creative, and at times risky. Their high-stakes choices today will affect the global economy for decades to come.

Moreover, central bankers have become more vocal in expressing strongly held positions in the mass media, as if seeking to win over popular opinion. It is a potent and dangerous mix. In this environment, sober, informed voices, like that of the Bank for International Settlements, the central bank of central banks, should also be given a fair hearing. Unfortunately, many central bankers have sought to marginalize the BIS rather than engage with it.

One of the most contentious debates has been over when to end the “unconventional” monetary-policy measures that were introduced in the aftermath of the financial crisis to ensure that banks continued to lend, thereby stimulating growth and averting deflation. Some central bankers now worry that ending these measures prematurely will tip the economy back into recession. Yet others fear that the current strategy, though originally intended to prevent an economic collapse, is now sowing the seeds of future instability, including the emergence of another asset-price bubble.

In their efforts to resolve such dilemmas, policymakers are also wrestling over whether to focus on traditional monetary tools such as interest rates, or make greater use of so-called “macro-prudential measures,” such as capital add-ons and buffers or adjustments to banks’ loan-to-value ratios.

At the heart of the debate – currently being conducted within leading economies’ treasuries and central banks, as well as in supranational bodies such as the International Monetary Fund and the BIS – is the relationship between monetary policy and financial stability. The BIS, for example, has suggested that financial stability is closely connected with monetary policy, and has advised policymakers to start weaning their economies off of easy money sooner rather than later. Central bankers, however, seem to want to try macro-prudential tools first (and sometimes exclusively).

It is unusual to witness a clash of views among monetary policymakers that is so radical and clear-cut that it has grabbed wider political and media attention. And, under the public spotlight, some central bankers have sought to downplay the BIS’s assessment, arguing that it is all too easy to issue far-reaching policy recommendations when one suffers none of the consequences should one’s prescription turn out to be wrong.

To be sure, a country’s domestic economic circumstances, and the tools available to policymakers, should guide policy. And, though monetary tightening may well be advisable in some economies, it might be inappropriate in others.

But the harsh reactions to the BIS’s analysis seem misplaced and unfair. It is always difficult to find the right monetary-policy stance for any given economy at a given moment. Central banks employ an army of experts to try to get it right, and other institutions are seldom so well resourced to present equally sophisticated counter-arguments. The BIS, however, is one of the few organizations that not only has the necessary research and analytical capabilities, but also a track record of making good calls. One should not forget – as many central bankers appear to have done – that the BIS was one of the first to warn of the dangers of financial excesses, several years before the 2008 crisis.

The BIS has a right to be heard. It exists not just to represent central banks, but also to offer ideas and intellectual feedback. Indeed, it serves policymakers well by challenging, debating, and perhaps swaying opinion. Rather than bash the BIS, monetary authorities should be grateful for the informed perspectives that it provides.


Sep 6, 2014 - 12:08am

SRSRocco: We Don't Come Out of The Collapse That's Coming!

I haven't been keeping up with TFM so apologies if this has already been posted.

SRSRocco: We Don't Come Out of The Collapse That's Coming!
3 Nutrients Chemical Fertilizer CAN NOT Provide Your Garden but Nature Can

They can kill everyone perhaps, but they won't kill MY JOY OF LIFE. And I'm not supporting the BASTARDS any more. crying yes

Safety Dan
Sep 6, 2014 - 1:30am

At Least 17 Fake Cellphone

At Least 17 Fake Cellphone Towers Capable of Invasive Spying Have Been Discovered Across America

Mike Krieger of Liberty Blitzkrieg blog,

Screen Shot 2014-09-04 at 11.12.08 AMWhen Lee Goldsmith drives by one of the many fake cellphone towers being discovered throughout the U.S., his $3,500 CryptoPhone 500 will immediately display the warning message in the thumbnail image to the left.

When you drive by the same fake towers, known as “interceptors,” your run of the mill iPhone or Samsung Galaxy won’t alert you to any potential security breach. And that’s exactly how those people who installed these interceptors, whoever they are, like it.

I’ve seen headlines about these fake cell towers over the past several days, but didn’t investigate the matter until today. It appears Popular Science broke the story in late August with the piece: Mysterious Phony Cell Towers Could Be Intercepting Your Calls. The article focuses on the revelations of Lee Goldsmith, CEO of ESD America, which makes ultra-expensive and ultra-secure cellphones (another player in this market is Silent Circle with its Blackphone) . What Lee Goldsmith and other users of the CryptoPhone 500 have discovered while driving across part of America will shock and disturb you.

We learn from Computer World that:

Through notifications such as that, CryptoPhone users found and mapped 17 fake “cell towers” in the U.S. during the month of July. While most phones can’t find those interceptors, a $3,500 CryptoPhone 500 can. The phone has a Samsung Galaxy SIII body, but unlike the Android OS that comes standard on the Galaxy SIII and “leaks data to parts unknown 80-90 times every hour,” ESD America hardened the Android OS by removing 468 vulnerabilities.

“Interceptor use in the U.S. is much higher than people had anticipated,” said Les Goldsmith, the CEO of ESD America. He told Popular Science, “One of our customers took a road trip from Florida to North Carolina and he found eight different interceptors on that trip. We even found one at South Point Casino in Las Vegas.” He added, “What we find suspicious is that a lot of these interceptors are right on top of U.S. military bases. Whose interceptor is it? Who are they, that’s listening to calls around military bases? The point is: we don’t really know whose they are.

Privacy groups have been fighting unconstitutional stingray surveillance for several years, yet there’s still a great deal citizens don’t know about the portable devices known as IMSI catchers, also known by the generic term “stingray.” It acts like a fake cell tower and tricks your mobile device into connecting to it even if you are not on a call. It is used for real time location tracking; some can pinpoint you within two meters as well as eavesdrop and capture the contents of your communications.

They can do even more than that, including pushing spyware to devices and sending spoof texts.

Goldsmith conducts testing on his company’s “baseband firewall” while driving by an unnamed government facility in the Nevada desert that runs an interceptor. “As we drove by, the iPhone showed no difference whatsoever. The Samsung Galaxy S4, the call went from 4G to 3G and back to 4G. The CryptoPhone lit up like a Christmas tree.”

You might know your phone is being intercepted if it shows 2G, instead of 3G or 4G, but some interceptors claim to be “undetectable.” The VME Dominator, for example, is marketed only to government agencies. It promises that it allows “you to intercept, block, follow, track, record and listen to communications using unique triangulation and other advanced technology,” but “cannot be detected. It allows interception of voice and text. It also allows voice manipulation, up or down channel blocking, text intercept and modification, calling and sending text on behalf of the user, and directional finding of a user during random monitoring of calls.”

Now here’s the incredible part. Although the phase out of 2G is several years away, those who wish to spy are so concerned about it, they are already making plans to ensure that surveillance isn’t impacted.

Although it will be a long time before cell phones no longer support 2G, Johnny Law is working on upgrading Harris Corporation “Stingray” systems, with “Hailstorm,” to support 4G LTE interception. The News Tribune in Tacoma reported on a March 2014 purchase order from the DEA, which stated, “The Hailstorm upgrade is necessary for the Stingray system to track 4G LTE phones.”

According to Ars Technica, the Oakland Police Department, Fremont Police Department, and the Alameda County District Attorney joined forces by applying for a DHS grant to pay for the Hailstorm upgrade. “The entire upgrade will cost $460,000—including $205,000 in total Homeland Security grant money, and $50,000 from the Oakland Police Department (OPD).” In theory, more documents are being gathered and will be released this month by the Alameda County DA’s office.

No surprise that one of the most insidious agencies ever created is set to fund the upgrade to spying technologies for law enforcement. I covered this threat in my recent post: Department of Homeland Security – A 240,000 Person Cancer on the American Soul.

Now more from Computer World...

While the FCC seems to have known about cellular network vulnerabilities that stingrays exploit, last month it established a “task force” to investigate the “illicit and unauthorized use” use of stingrays. Instead of investigating law enforcement’s use of such interceptors, the FCC “plans to study the extent to which criminal gangs and foreign intelligence services are using the devices against Americans.” The FCC also refused the ACLU’s FOIA request for stingray documents.

Meanwhile, the FCC is the agency about to destroy the internet on behalf of telecom companies. Do you really have any doubt as to who these agencies really work for?

Sep 6, 2014 - 1:34am

It's late. But I have something I want to say.

This community has a lot of great minds. Turd has done a great job establishing the site and especially providing the forums. His work should be rewarded.

Turd has awaked many that found him and I'm thankful of his efforts. I've been studying this stuff since the 90's and was convinced we would be dealing with what we are dealing with since then.

Turd, I'm NOT going to pay you 10 Bucks a month to enhance your newly educated ego.

I LOVE your ego and appreciate your personality a great deal. But I'm not going to give you money for it, and most of your insider information is so already OUTSIDE by the time you post it, even though I'm busy with things these days see it FREE before you post it in your VAULT. Turd, there is NO CENTRAL CONTROL of FREEDOM. It's up to each of us.

That said, I don't think you understand the value of what you created.

I post this to the TOTAL COMMUNITY that frequents this site. Would you be willing to pay 50 cents a month to help keep it going for only access to the forums?

Forums only moderated by those that participate? I certainly WOULD.

I love 'ya Turd, but I don't come here for your prognostication on PM's, I come here for the community I'm thankful you built.

God Bless,


Sep 6, 2014 - 2:58am

In Just One Day

Bo Polney is looking like Beau Phoney. Armstrong may be smokin towards genius, or maybe not. Fekete is Forgetaboutid too old to get Professorship fruits to mkt, whilst Fofoa has past history that his model cannot reconcile. Salinas-Price cannot sell monetised silver at 90% of the world's expense, whilst the Sprott spigot has shot himself in the foot. Martenson's peak oil does not account for the heights of hydrogen, which leaves SRS at SOS. Ah the sideshow of a zerosum game while the dealer takes their cut out from a zerohedge. Gotta galt me some of that, the bankers do rule, until they don't. In God we trust, for the abomination of an unjust weight will be brought down, at the cries of the oppressed, and we should not be surprised if it is done, in just one day.

In God We Trust.

Sep 6, 2014 - 3:35am

chinese national documentary channel showing experts

proclaiming "gold is just like nuclear weapon... gold is the best currency!"

while western morons like bernanke says gold is tradition.

the western elites have positioned themselves very well in shanghai.

rockefeller group controls the northern part of the "bund" in shanghai, called "rock bund" along with the "roosevelt house". less than one mile away to the north is the famous jewish settlement in WWII, where many jewish elites spent their childhood!at the southen end of the bund, sits the waldorf hotel.

in the 1930s, the richest landlord in shanghai are jewish. they took in millions of ounces of silver of rent every year!

shanghai is much more international than many can imagine.

the commie understand this very well. shanghai is the trump card since Deng's era.

shanghai gold exchange will replace comex very soon.

Sep 6, 2014 - 3:59am

What is happening with the Swiss refineries

Which, to my mind, are the canaries in the gold mine.

They have been operating flat out, triple shifts, 24 by 7 satisfying demand in parts east, while draining the vaults of the west.

What I would be looking for is an incapacity of these refineries to "get gold". - which could show up with reduced activity, like dropping back to two shifts a day.

Are there any reports of that happening?

Are there any recent reports of "not being able to get gold".

The current price drop should spur eastern demand, especially in India with the marriage season starting. We should see LBMA GOFO dropping in response to tight physical markets. (Not significantly negative since 19th of May)

Sep 6, 2014 - 4:02am

The causes of aggression.

"Collectivism is the doctrine that the social collective -- called society, the people, the state, etc. -- has rights, needs, or moral authority above and apart from the individuals who comprise it. We hear this idea continually championed in such familiar platitudes as 'the needs of the people take precedence over the rights of the individual,' 'production for people, not profits,' and 'the common good.'
"Collectivism often sounds humane because it stresses the importance of human needs. In reality, it is little more than a rationalization for sacrificing you and me to the desires of others." -- Jarret B. Wollstein in The Causes of Aggression,

Sep 6, 2014 - 4:15am

The collectivist mind

"Racism is the lowest, most crudely primitive form of collectivism. It is the notion of ascribing moral, social or political significance to a man's genetic lineage -- the notion that a man's intellectual and characterological traits are produced and transmitted by his internal body chemistry. Which means, in practice, that a man is to be judged, not by his own character and actions, but by the characters and actions of a collective of ancestors. [...] When men began to be indoctrinated once more with the notion that the individual possesses no rights, that supremacy, moral authority and unlimited power belong to the group, and that a man has no significance outside his group -- the inevitable consequence was that men began to gravitate toward some group or another, in self-protection, in bewilderment and in subconscious terror. The simplest collective to join, the easiest one to identify -- particularly for people of limited intelligence -- the least demanding form of "belonging" and of "togetherness" is: race. [...] It is thus that the theoreticians of collectivism, the 'humanitarian' advocates of a 'benevolent' absolute state ... led to the rebirth and the new, virulent growth of racism in the 20th century." -- Ayn Rand in "Racism",

Spartacus Rex
Sep 6, 2014 - 4:33am

GSR interviews G. EDWARD GRIFFIN Sept 4, 2014

GSR interviews G. EDWARD GRIFFIN - Sept 4, 2014
Sep 6, 2014 - 4:35am

The nation's spirit

"The unity of a nation's spirit and will are worth far more than the freedom of the spirit and will of an individual; and that the higher interests involved in the life of the whole must here set the limits and lay down the duties of the interests of the individual." -- Adolph Hitler

"We need to stop worrying about the rights of the individual and start worrying about what is best for society." -- Hillary Clinton

Spartacus Rex
Sep 6, 2014 - 4:35am
Sep 6, 2014 - 5:04am
Sep 6, 2014 - 5:07am
Sep 6, 2014 - 5:27am

the common good

" Throughout history, no tyrant ever rose to power except on the claim of representing `the common good.´ Napoleon `served the common good´ of France. Hitler [was] `serving the common good´ of Germany. Horrors which no man would dare consider for his own selfish sake are perpetrated with a clear conscience by `altruists´ who justify themselves by -- the common good." -- Ayn Rand,

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