China is buying massive amounts of gold and silver and dumping dollars.
KWN has just released Alasdair Macleod’s latest audio interview discussing gold, silver, miners and much more (LINK BELOW). But first…
July 11 (King World News) – Alasdair Macleod: Goodbye to Western paper. Moving in plain sight, China has set up a new market in Hong Kong ready to take over from London and New York when the dollar dies.
First, let’s look briefly at what happened to gold in the 1973—1974 OPEC crisis.
Note that gold drifted lower when the oil price was hiked by 66% by OPEC led by Sheik Yamani. Having traded down to $90 in late-November, it then began to rise before Yamani hiked the price even further in early-January 1974 to $11.65. Gold went on to double by the year-end. If this was repeated today, we would see gold nearly doubling to $7,750 in less than four months before going on to over $8,000 in just twelve.
Food for thought, not a forecast.
China Is Buying Massive Amounts Of Gold & Silver And Dumping Dollars
Now to today…
Having shaken out the speculators, the PBOC and China’s commercial banks have taken the opportunity to acquire significant quantities of bullion. In 2026 up to May, China imported 692 tonnes of non-monetary gold, with May’s figure of 163 tonnes the highest monthly total for over a year. We have yet to see June’s total but there’s every reason to believe that this rate of gold imports has continued.
Monetary gold is not recorded in customs figures. So far this year, this has amounted to an additional 40 tonnes to end-June, representing sales of foreign currencies by the PBOC, almost all dollars, to the tune of about $60 billion. But that’s not all. She also imported 1,626 tones of silver in Q1, selling a further $4 billion. Add in the non-monetary gold, ridding the banks of a further $100bn up to May.
To this activity we can add other base metals and commodities which she has been buying such as copper. Add in sulphuric acid and fertilisers etc. which she no longer exports for dollars. Perhaps China sees this chart and understands the implications:
Get out of credit, which has been weaponised against her allies and could be weaponised against her. Furthermore, the decline in currency values priced in real money is accelerating. Clearly, the risk that the end of the fiat currency system is nigh is significant, in which case China should get rid of them to buy anything which she might need in the future.
Being an ally of Iran, we can bet she sees the situation very clearly. G7 capital markets fail to do so, clinging on to the hope that Hormuz will be opened soon. And anyway, look at the price of oil which has drifted back to not much higher than it was before America and Israel attacked Iran.
With respect to gold and silver prices, it looks much like the October—November 1973 drift lower. But this oil crisis is potentially worse than the late-1973 OPEC crisis.
In other words, the most important central bank in Asia is acting as if the dollar and attendant fiat currencies will soon be worthless. Meanwhile, her exports are hitting records, totalling $452bn in the five months to May. See the problem? If you have any unwanted gold and silver in return for dollars, the PBOC would like to hear from you.
Meanwhile, paper markets in London and New York are comatose, with only a flicker of interest developing, as the chart of gold’s open interest indicates:
This week, gold was little changed on the week, following last Friday’s Independence Day holiday on Comex, and renewed attacks on Iran by the US. But open interest remains at the lowest levels since 2014. And now China’s banks are looking to close down onshore speculator’s positions by 24 July. We can only guess it is so that they can cover their shorts — ahead of a major development?
That is the problem for traders in this market in a nutshell. They might wake up one morning wrong-footed because the story has radically changed. Only stackers not sidetracked by paper games will secure the value of being free from collapsing credit in the form of fiat currencies.
The story in silver is similar. Open interest on Comex is the lowest for many years, but after a brief uptick is trending lower again. The reason is the same as that facing Chinese banks in gold. The establishment is short and effectively refusing to print more silver-linked paper. In China, they merely command the longs to close their positions. The Swaps don’t have that luxury.
So, what is the PBOC up to: it is extending the SGE (which it owns and directs) into Hong Kong. At the same time, it is freeing up movement of physical gold between Shanghai and Hong Kong having announced that permission from the PBOC to export gold to the island is no longer required. It has announced a substantial expansion of facilities in Hong Kong, set up a clearing and settlement system based facility, is reviving dollar gold futures trading alongside gold-yuan futures, establishing a delivery connection with the SGE, coordinating with Shenzhen for refining and regulatory refinement, giving tax incentives for gold trading in Hong Kong, enhancing yuan liquidity, encouraging new gold-linked investment vehicles even for onshore pension funds, and planning a massive expansion of storage facilities to 2,000 tonnes+.
Quite a list. It is also consistent with earlier steps to permit China to put the yuan on a gold standard. Is that the significance of July 24th when major banks want to see speculative longs closed? Perhaps not but a replay of late-1973 is on the cards as a start.
Watch this space, very closely. To listen to Alasdair Macleod discuss what to expect in the coming weeks and months for gold, silver, miners, and oil CLICK HERE OR ON THE IMAGE BELOW.
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