By Dave Kranzler, Investment Research Dynamics:
To begin, I would like put forth the observation that the U.S. Government has become particularly belligerent militarily toward the rest of the world. Anyone who thinks the U.S. is not provoking Russia and China all over the globe has their head in the sand or is incapable of looking at the facts outside of the tragically skewed propaganda coming from Washington, DC that is being funneled through the U.S. media pipeline.
The reason the U.S. is trying to stir up global military chaos is simple, the U.S. dollar is being systematically removed from its reserve status. The latest evidence of this is the news report yesterday that China and Argentina are going to begin trading in their respective currencies, with trade settlement in yuan – NOT dollars: News Link. Please note this news is not being reported by the U.S. mainstream financial media.
“Big deal,” you might think. But also unreported over the last couple of years is that China has been quietly arranging these bi-lateral trade deals with EVERY major trading partner, including several European countries. Recently China signed huge deals with Iran and Russia to trade energy in their respective currencies. This IS a big deal. China and Russia are systematically extricating their trade activities from the dollar.
Yes, the dollar has bounced considerably higher in the last couple of months. But this is because the main components of the dollar index – the yen and the euro – have been melting into oblivion. The yuan and ruble are not included in the standard measurement of the dollar’s value. Russia and China don’t care about that value of their currencies in relation to the dollar, other than the effect it has on their Treasury holdings. But Russia and China are slowly unloading their Treasuries. They are both accumulating physical gold hand over fist.
At the end of March the GLD trust had 820 tonnes of gold in it. It’s down to 785 tonnes. I bring this up because the market falsely assumes that a decline in the amount of gold held in GLD is a sign investors are selling gold. This is not true. Selling a GLD shares is not a trigger for the removal of gold from the GLD trust. The ONLY way gold is removed is if one of the Approved Participant banks puts together 100,000 share baskets and exchanges them for gold bars. Note: the banks can create shares by borrowing them. The short interest in GLD is quite high. Gold is being removed from GLD because the western bullion banks (JP Morgan, HSBC, Scotia, etc) are on the hook for paper claims they have printed up and dumped into the market. Some of those claims (LMBA forwards, especially) end up in Chinese hands. The U.S. can not default on those.
I bring this up because if you’re wondering where that gold from GLD has gone, look east to China. That gold is sitting in vaults in China, owned by the Peoples Bank of China and private investors. China is systematically extracting as much gold as it can from the west. China, an d Russia, is methodically killing the dollar. The sign posts are there to see for anyone who wants to look for them.