Eric King:  “I want to go back to the gold smash which took place in April last year, because former US Secretary of State Henry Kissinger and former US Treasury Secretary Henry Paulson are reported to have traveled to China to meet with the new president of China, Xi Jinping, that month.  Your thoughts on this meeting taking place the same month the gold price was crushed.”

Powell:  “There are a number of State Department documents showing that Kissinger, as secretary of state, was very much involved in the US policy of gold price suppression in the early 1970s.  

There are some very interesting minutes showing that gold price suppression was explained in great detail in a meeting in his office with his assistants....

Continue reading the Chris Powell interview below...


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“So Kissinger knows what is going on here.  The gold smash last April was so intensely executed that it had to have been planned long before Kissinger and Paulson arrived in China.

In the late 1990s there was speculation that an agreement was made between the United States and the Middle-Eastern oil producers to exchange cheap oil for cheap gold. This was near the bottom of the gold and oil bear markets.  The oil producers knew they had a wasting asset in the ground and they wanted to get something permanent for it -- something that would hold its value.  

These are savvy and well-connected people who knew that paper money was not going to hold its value and they had a predisposition toward gold anyway and they were happy to accept it as payment.

The US wanted a low gold price to support the dollar and so there was a notion that this was cheap oil in exchange for cheap gold.  Regardless, there is enormous documentation of gold price suppression involving the Western central banks and particularly the U.S. government.

Such an arrangement would match what William Kaye postulated yesterday in his KWN interview about an arrangement between the United States and China.  So there may well be an arrangement between China and the United States allowing China to accumulate gold at cheap prices.

This allows China to hedge its large holdings of dollar-based foreign-exchange reserves, and such an arrangement would make sense not only in a general policy framework but also as a practical matter from what we see in the foreign exchange markets.

China has the largest foreign exchange surplus in the world, roughly $3 trillion.  If you accept that, then you have to accept that nothing happens in any major market without China’s consent.  With a foreign exchange surplus like that, China can run any market it wants to.  China can run the Treasury bond market, the oil market, the gold market, the copper market, and so forth.  With that kind of surplus, nothing happens in any major market that China doesn’t want to happen.

A couple of years ago China's interest in acquiring gold was noted and It was said that there was a ‘Chinese put’ under the gold market.  Well, we saw last April that the ‘Chinese put’ disappeared on April 12 and 15, during a time when the gold price was driven down hundreds of dollars.  I don’t think that could have happened without China’s complicity.

I suspect strongly, as Kaye does, that the plunge in gold last April was an intervention involving the United States, its allies, and China.  As part of that intervention, China would have agreed not to exercise the ‘Chinese put’ in the gold market but rather to allow the West to drive the price down by hundreds of dollars so that China might acquire a lot more gold cheaply.

This had the effect of liquidating much of the remaining private gold holdings in the West, particularly the gold in the GLD exchange-traded fund.  All the data shows that large amounts of gold were sent from London to Switzerland, where it was re-refined into Chinese-standard gold bars, and then shipped to China.

So we know there has been this huge flow of gold from London into China since the attack on gold last April.  This points to a deal being made between China and the West, and the timing of that trip by Henry Kissinger and Henry Paulson just adds fuel to that speculation.”

Eric King:  “Chris, what is the end game with regards to the West hemorrhaging away its gold to China?”

Powell:  “The end game is probably a great revaluation of gold to a fairly spectacular level and re-liquefaction of the central banks that have gold.  This will greatly devalue the world’s major currencies and relieve the Western world of much of its debt burden.

A year or so ago two fund manager in New York, Paul Brodsky and Lee Quaintance, wrote a paper speculating that for the last few years central banks have been involved in a scheme of redistributing gold reserves to compensate the nations that have held their reserves disproportionately in dollars.  China would be key to that scheme.

Interestingly, right now I am involved in a struggle with the Federal Reserve Bank of New York.  I obtained a copy of speech given by a former vice president of the Federal Reserve Bank of New York, H. David Willey, in which he said the Federal Reserve Bank of New York provides gold accounts to banks that are members of the Federal Reserve System.

This indicates much greater involvement by the Federal Reserve in the gold trade.  The New York Fed has refused to answer my question about Willey's assertion: Does the New York Fed provide gold accounts to bullion banks or not, or did the New York Fed used to provide such accounts?  I've asked my congressmen to try to get the answer for me out of the New York Fed.

Regardless, Western central banks are deeply involved in the gold market.  The Bank of France told a meeting of the London Bullion Market Association in Rome a year ago that the bank trades gold nearly every day.  Why is that?  The answer involves manipulation of the gold and currency markets.

So when you take a trip down the rabbit hole to examine a possible deal between the West and China, you have to suspect that gold again will be at the center of the world financial system before too long, and China knows it must have thousands of tons of gold to shift the power from West to East.  One way or another it looks like China is going to get that gold, and the power.”

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Eric King

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