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Gold DisappearingTHE LONG CON

The "long con" is a plan to defraud. The plan is simple but it takes a long time to execute. A person establishes a commercial relation with a wholesale supplier of valuable goods (e.g. electronics) and this person does so one step at the time. Every order is paid on time and without problems. Every subsequent order is larger and larger hence building confidence in the mark. Until one day the "respected and trustworthy" buyer requests an ultra-large shipment to be delivered "on credit". The shipment is delivered but payment never comes. Game over. This is the long con.

MOTIVATIONS

The history of gold prices over the last 200+ years has had a very remarkable trail, but since the 60's it has been nothing short of exceptional. Not only it is utterly inexplicable but there has been massive manipulation and counter-manipulation between countries themselves. The objective of gold manipulation has been twofold:

  1. To ensure that fiat money had no reference whatsoever to gold quantities stored in Central Banks. In so doing, politicians ensured that the face value of fiat money when printed is whatever they say it is with no relation to real markets whatsoever. They not only want to remove the idea that the capacity to store wealth of fiat money is related to stored gold, but they want people to even forget that gold exists.
  2. To "adjust" (mostly depreciate) the value of their fiat money to levels "convenient" to mercantilist economic theories (i.e. export-driven) and internal political matters.

By so doing, politicians (and central bankers) believe that they have reached monetarist nirvana. They can print as much money as they want and use it to buy any good and service they want at face value. Of course, the tiny flaw in the plan is that markets are not stupid and they wise up pretty quickly producing inflation thus negating the part of the benefit of printing, thus a race to the bottom develops (see Currency Wars II and The Beginning Of Cryptocurrency Wars).

CENTRAL BANK GOLD

Yet, central bankers are not stupid. They fully understand that although keeping other countries' currencies in their virtual vaults as "reserves" is kind-of, sort-of, more-or-less OK for now; in the end those "reserves" are nothing but coloured paper (or virtual ones and zeros) with no real value in the world, other than what they can brainwash people into believing. Thus, they need something that won't change in value as other countries play with the value of their respective currencies. And that "something" can only be one thing: Gold.

That's right!

Central Bankers not only lie to you systematically every time they open their mouths, but they also adopted the "do as I say but not as I do" way of operating. On one hand central bankers have managed to "educate" people so well about the uselessness of gold, that gold very seldom -if any- becomes the topic of their speeches. This is a complete and utter reversal of what was going on up to the 60's.

On the other hand however, Central Banks continue to store gold! Yes, Central Banks continue to gather and protect that utterly useless yellow metal at great expense to the taxpayer (that would be you). Hum…. we wonder why? Must be a mistake right?

Well… no.

As we mentioned above, central bankers are anything but stupid. Wel… not quite.

CENTRAL BANKS PURCHASES

Over the last two years or so there has been a tidal wave of articles pointing out the massive purchases of gold that central bankers have been doing. You can scarcely do a Google search for "gold" and "central banks" without hitting one of those articles. And so we decided to investigate what this noise was all about. But as we are data-oriented or evidence-dependent or reality-bound (do you like our politically correct terms?), we decided to look at some numbers.

The information that we sought was the gold reserves held in Central Banks. This information is not readily available but can be extracted from other numbers. More or less. We got hold of data from the World Bank as well as from the London Fix and from there we calculated backwards the amount gold reserves in Central Banks. However, before we analyze the results, we must caution our readers that this data is very, very suspicious at best. World Bank data originates from the IMF which in turn collects it from countries. And we all know how accurate and reliable those numbers are, right? Basically, what we are saying is that although the data we will use cannot be relied upon in numerical terms, it can be relied upon in terms of trends; and this is enough for our analysis. Lastly, please never forget that this is "their" data, now ours.

WORLDWIDE SITUATION

According to all the doom and gloom articles "out there" there has been a massive onset of gold purchases by central banks, thus the price of gold will skyrocket any time now. The sky is the limit. Gold 10,000 USD/oz? Sure. How about 20,000? Yeah! Hyperinflation? Let it rip!

All this hoopla and zippidy-do seemed like a little bit too much to us. Something just wasn't right. And so the first thing we did was to calculate the world-wide gold reserves held in central banks. The result can be seen in the picture below.

World Gold Reserves

As you can see, there has been a substantial sell-out between 60's and the 80's but after that period (and with the exception of the period around 96) not much has been going on. World-wide gold reserves held in central banks seem to oscillate around 25500 tones.

What this means is that in general terms (i.e. on average), central bankers are neither buying nor selling gold, but how is this possible? Well, for that we need to analyze what's going on country by country. If we do this, we end up with three groups.

THE CON ARTISTS

These are the countries that were "heavily involved" in all those overt Gold Selling agreements (beginning in 1999) that indicated the sale of gold by other central banks (for example see "Washington Agreement on Gold" in Wikipedia) plus all the covert ones (that began earlier). Gold selling was supposed to be a joint venture with everybody selling. Let's see what did the con artists do:

US Gold Reserves

Hummm… not much of "selling" here…

Germany Gold Reserves

Not much selling here either… must be a coincidence…yeah…must be…

THE SUCKERS

These were the "marks" that were suckered into selling everything including the kitchen sink, the cat and the AAA disposable batteries. Let's take a look:

Canada Gold Reserves

Humm…do you notice the difference… and what about this one

UK Gold Reserves

No, nothing to see here… move on…move on…

And this one:

Switzerland Gold Reserves

No, nothing either… wink…wink…

THE DISBELIEVERS

This group of countries never swallowed the idea that selling Gold was a brilliant scheme to…well…to…something…something…something…because…well… some big countries said so…yeah…that's it!

Take a look at the result.

China Gold Reserves

Hummm… if selling gold was such a great idea how come this country did the exact opposite? Must have been a mistake…yeah…

But then, how about this one?

Russia Gold Reserves

No… another mistake.

Note: please see the Glossary if you are unfamiliar with certain words.

 

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