• News
• 2024-07-07

Fed Can't Stop 1,250 Tons of Gold Leaving, Likely Headed to China

In the global economic process, gold has been the only universally recognized constant currency that transcends cultures and languages for thousands of years. For over half a century, to maintain the status of the US dollar as the reserve currency, the Federal Reserve has been safeguarding approximately 7,000 tons of gold reserves for more than 60 countries in the basement of the Federal Reserve Bank of New York, located 20 meters underground in Manhattan, New York, on the fifth level. This gold custody practice is based on the specific global economic environment after World War II, when global central banks had a relatively high level of trust in the Federal Reserve and the US dollar.

This implies that if multiple countries initiate the process of repatriating their gold and keeping it themselves, the status of the US dollar as a reserve currency could also face a decline. At the same time, these two phenomena influence each other. Especially this year, with persistently high inflation in the US market and the continuous decline in the purchasing power of the US dollar, the process of repatriating gold has been accelerating. Data shows that the gold reserves in the Federal Reserve's underground vault have now fallen to their lowest historical point, totaling about 5,750 tons. Approximately 1,250 tons of gold have been removed from the United States.

Advertisement

Among them, Germany, France, Italy, Belgium, the Netherlands, Switzerland, Austria, Venezuela, Romania, Turkey, Hungary, Russia, Slovakia, and Poland, 14 countries, have all announced the repatriation of part or plans to repatriate gold previously stored in overseas vaults such as the Federal Reserve. However, according to a testimony by former Federal Reserve Chairman Alan Greenspan in 1988, the Federal Reserve would挪用 and lease part of the gold at different times based on the fluctuation of gold prices to gain profits.

Alan Greenspan

It is not hard to understand that when the German central bank recently proposed to repatriate the remaining gold, it was blocked by the Federal Reserve on the grounds of unclear intentions. There is a saying that the Federal Reserve has so far blocked the gold repatriation plans of many countries. This has led to speculation that the Federal Reserve may have melted,挪用, or embezzled a large amount of gold deposited by others.

An even more unexpected event is that, according to a report by the well-known American financial website ZeroHedge a few weeks ago, the Australian public learned for the first time that almost all of the Australian central bank's gold reserves are stored in the underground vaults of the Bank of England and the Federal Reserve. The gold reserves of the Australian central bank were audited in 2013, but the audit report has never been made public. Gold expert Egon von Greyerz, who successfully predicted quantitative easing, analyzed that at least 11 tons of the above-mentioned gold reserves of Australia may have been挪用, and the Federal Reserve or the Bank of England has remained silent on the secret disposal of Australia's gold, while the Australian central bank seems to dare not ask for another inspection and audit. However, this is not a consistent attitude of many countries in the world towards gold reserves.

It is worth noting that the Russian Finance Minister warned the Federal Reserve a few weeks ago, "If our gold reserves are confiscated, or even if there is such an idea, it will be regarded as a financial declaration of war." That is to say, Russia has publicly warned that the Federal Reserve will face serious consequences if it挪用 or embezzles gold.

According to the Russian media RT, the ownership of these gold reserves is very clear, so the United States will not take the risk of its national credit. That is to say, the United States wants to maintain its position as the world's main reserve currency, and will not allow the gold reserves to be unsafe. The Federal Reserve has no right and dare not prevent many countries from repatriating their own gold together. At the same time, the BWC Chinese website financial observation team noticed that for the US economy, which is already heavily indebted at this time, the credibility of the Federal Reserve in maintaining gold reserves is particularly important, because it is related to whether the US economy can continue to borrow in the future.

The latest developments and changes are that, as of September 20, the total amount of US federal debt has accumulated to a new record of $28.8 trillion. Whether the debt ceiling, which expired at the end of July (with a limit of about $28.5 trillion at the time), will be raised is still uncertain. Economist Lou Crandall said that the US Treasury will run out of deposits before October 22. Reuters reported on September 19 that US Treasury Secretary Yellen once again called on Congress to raise the federal debt ceiling, saying that a default on US debt would trigger a historic financial crisis.

This has been a warning from Yellen several times since June this year. She believes that the credibility of the United States has always been an advantage. If there is a default on US Treasury bonds, it will "permanently" weaken the United States. She also said earlier that the United States may default on its debt in October. This further shows that credit is particularly crucial for the US dollar and US bonds.Not only that, but assuming the U.S. debt ceiling is raised and the U.S. Treasury continues to issue debt, whether U.S. debt can still win the favor of global major buyers also depends on the credit of the U.S. dollar. From this perspective, when many countries have successively requested to repatriate gold, the Federal Reserve has no right and dare not prevent the repatriation of gold.

It is worth noting that, with the increase of uncertainty factors in U.S. inflation and the U.S. debt market, according to the latest report of the World Gold Council in September, as of July, global central banks have net purchased 333 tons of gold in 2021, which is a net increase for three consecutive quarters, 63% higher than the same period last year, and 73% higher than the quarterly level since 2017. This indicates that global central banks pay more attention to gold.

In addition, according to the "Global Gold Demand Report" published by the World Gold Council, China has currently allowed domestic and international banks to import a large amount of gold. China's total gold import volume in July was 55 tons, and the net gold import volume in June was 68 tons, making the total import volume from April to July reach 302 tons, an increase of 200 tons year-on-year.

Zerohedge followed up on September 15 and reported that Switzerland's gold exports to China also soared to the highest since 2019 from April to August, with the latest batch of about 175 tons shipped from Europe and America to China from June to August. Superimposed with the previous data, it can be seen that since 2021, at least about 470 tons of gold have arrived in China.

Not only that, but the American media also reported earlier that since some acquisition data has not been reported to the International Monetary Fund or the World Gold Council, a large amount of gold may have been shipped to the Chinese market. And for several new changes in the global gold market, the Federal Reserve also has no right to prevent it.

It is worth mentioning that Zerohedge cited Simon Hunt, the CEO of Simon Hunt Strategic Services, in a letter to customers a few months ago, saying that China may actually have 30,000 tons of gold, a number much larger than we know. Because a large amount of gold purchased and stored in the past has never been included in the official reserves.