A lot of people think about gold as a percentage of total reserves. So countries have reserves. What percentage of your reserves consist of gold? For example, a lot of people are surprised to learn that the United States has 70 percent of its reserves in gold. China has about 1 percent of its reserves in gold. So people look at that and think that’s the imbalance. But that’s not a very meaningful figure in my view.
Gold never went away. It was officially demonetized by the IMF in 1975. The U.S. ended the convertibility of gold in 1971. So gold disappeared officially in stages in the mid-1970s. But the gold never went away.
So here’s the problem: If you took the lid off and ended the gold price manipulation and let gold find its level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because their economy’s growing faster and because the price of gold would be skyrocketing, they could never acquire it fast enough. They could never catch up. All the other countries would be on the bus. The Chinese would be off the bus.
So, when you have this reset, and when everyone sits down around the table, China’s the second largest economy in the world. They have to be on the bus. So the global effort is to keep the lid on the price through manipulation, which is very obvious. I tell people, if I were running the manipulation, I’d be embarrassed because it’s so obvious at this point.
So the price is being suppressed until China gets the gold that they need. Once China gets the right amount of gold, then you can take the cap off. If it doesn’t matter where gold is because all the countries will be in the same boat. But, right now, they’re not, so Chinese has this catch-up.
Source Daily Reckoning
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