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“How much Gold do they really have?”  This is a question which is asked all the time regarding the ETFs and of inventories such as the COMEX and in London.  Of course the real hardcore whack jobs ask even more “conspiratorial” question like how much gold is in Ft. Knox?  A logical question mind you since there has been no audit since 1956, but what’s not to trust?  You see, no matter where you look when it pertains to gold, the “motive” to lie is off the charts.  So, how much gold do they really have?  …the Chinese, that is.  And why are the numbers and reports so vague and not often reported?

And yes, THEY also have reason to hide the true facts and to cloak what they have really accumulated but obviously for different reasons.  China is a mirror image of the West, while the West wants you to believe that they have vaults filled to the brim and bursting at the doors, China cry’s “poor.”  They claim to have 1,054 tons of gold.  They have much MUCH more and I’ll talk about that in a minute.  Another 180 degree opposite between the West and China is that here in the West we are told that gold is “a barbaric relic.”  It is said to be volatile, scary, in a bubble and all sorts of other negatives to keep the populace away.  And in China?  They are encouraging their people to buy.  On a side note, while growing up in the 1960’s I never could have imagined a situation where the Chinese or Russian governments would promote something good for their people while the U.S. did the opposite, my what a changed world we live in.

So China says that they have 1,054 tons of gold, not a huge amount but it does put them in the top 10.  They produce 200 tons or so internally from their own mines, and that supply never, NEVER gets exported.  They keep ALL PRODUCTION and have done so for years.  Over just the last 10 years even assuming that in earlier years they didn’t produce 200 tons, they must have at least accumulated 1,500 tons.  On the import side, they have imported nearly 1,800 tons just over the last 2 years alone… so what’s up with this “1,054 ton” number?  This cannot be, they have without a single doubt in my mind well over 3,000 tons and this number comes from simple connect-the-dots and 3rd grade addition.

But why would they “lie?”  It doesn’t make sense to “cry poor” does it?  Well, if you think like the Chinese it makes perfect sense.  They are not a “flashy” society by nature and are not ones to boast.  If you are accumulating something then why would you do anything to push the price up in the middle of your operation?  If you knew (because you have the financial muscle and your finger on the pulse to see it) that the gold market supply and demand situation was quite fragile, would you do anything to spook the market higher?  If you knew that your opponent (the West) had a vested interest in keeping the price of gold down yet could slowly deliver real product over time, wouldn’t you “carry your opponent a few rounds?”  Or as long as they kept delivering?  If your goal was to clean up and accumulate as much gold as possible you would do NOTHING to spook the herd and cause short covering or a run on inventories… “never” until you have seen the bottom of the barrel that is!

It is sad to say, but the communists like Mao were “right.”  They said long ago that “fiat” was our Achilles heel and would lead to a financial implosion.  While we “partied” they “stacked.”  They have “stacked” metal for years now and recently done it with income from the largest trade surplus in all of history.  In my gut I know that they have over 5,000 tons of gold and if pushed I would bet that they have over 10,000 tons.  “Someone” was buying in the 80’s, 90’s and 2000’s as western central banks gave away metal at laughable prices.  “Someone” was on the other side of the trades, certainly it was not China alone but I believe that they have been there quietly buying for far longer than many of us suspect.  Do not be surprised to see a new BRIC “trade settlement currency” introduced at any time now and with zero advance notice.  By the way, this new currency will backed by more gold than they have let on to up to this point.

Briefly changing gears, I watched the open of the precious metals last night with gold down $25 and silver down $2.00+ …it only took 4 minutes for this smash to occur.  I had an e-mail back and forth with Harvey Organ (he testified for the good guys at the CFTC hearing 2 years ago) and I suggested that today was the perfect setup for a reversal day.  So far so good, gold has turned and is up $23.80 while silver is finally green by 40 cents.  We will see how the day goes from here but any momentum from this point could turn into a stampede which traps the shorts… not to mention adding some fire under those ordering physical AND requesting deliveries from metal bought years ago and not delivered.  Maybe this really is the “bottom of the barrel?”