China, Gold Prices and US Default Threats


00 107069-050-C2406D3B[1]

China, Gold Prices and US Default Threats

… by  F. William Engdahl


Rogozen Treasure
Golden treasure of the ages – Will paper beat it down?

Since August 1971 when US President Richard Nixon unilaterally tore up the Bretton Woods Treaty of 1944 and told the world that the Federal Reserve Gold Discount Window was permanently closed, Wall Street banks and US and City of London financial powers have done everything imaginable to prevent gold from again becoming the basis of trust in a currency.
Now, in the very days when a deep split in the US Congress threatens a US Government debt default, the gold price should normally jump through the roof. The opposite is the case. It is worth a closer look why.
On Friday, October 11, with no sign of any deal between US Congressmen and the Obama White House that would end the government “shutdown,” and with a government debt default appearing more likely by October 17 when the debt ceiling will be reached, the Chicago CME Group, which operates Comex, or Chicago Commodity Exchange where contracts in gold derivatives are traded, announced that at 8:42 am Eastern time that morning, the trading was halted for  10-seconds after a safety mechanism was triggered because  a 2 million ounce gold futures sell order was executed.
Something rotten in gold market
The result of that huge paper gold sale was that at just the time when a possible US Government debt default would send investors in a panic rush to the safety of buying gold, instead, the price plunged $30 an ounce to a three-month low of $1,259.60 an ounce. Market insiders believe the reason was direct market manipulation.
David Govett, head of precious metals at bullion broker, Marex Spectron, calls the sudden huge futures sale suspicious:

“These moves are becoming more and more prevalent and to my mind have to either be the work of someone attempting to manipulate the market or someone who really shouldn’t be trusted with the sums of money they are throwing around. There are ways of entering and exiting a market so that minimum damage is caused and whoever is entering these orders has no intention of doing that.” [1]

"Piled higher and deeper"
“Piled higher and deeper”

UBS gold trader Art Cashin echoed the suspicion: “…if that happens once it could be an accident of technology, or it could be a simple error. But when it happens five times over a period of months, it does raise questions. Is it being done purposefully?…Is somebody trying to influence the market?”[2]
That “someone” market sources believe is the Obama White House, in league with the Federal Reserve and key Wall Street banks that would be ruined were gold to really rise.
In March 1988, five months after the worst one-day stock market plunge in history, President Ronald Reagan signed Executive Order 12631.
Order 12631 created the Working Group on Financial Markets, known on Wall Street as the “Plunge Protection Team” because its job was to prevent any future unexpected financial market panic selloff or “plunge.”
The group is headed by the US Treasury Secretary and includes the chairman of the Federal Reserve, the head of the Securities & Exchange Commission, and the head of the Commodity Futures Trading Commission (CFTC) which is responsible for monitoring derivatives trading on exchanges.
Numerous times since 1988, reports have surfaced of secret interventions by the Plunge Protection Team to prevent a market panic selloff that could threaten the role of the US dollar.

Former Clinton White House staff chief, George Stephanopoulos, admitted in 2006 that it was used to support the markets in the 1998 Russia/LTCM crisis under Bill Clinton, and again after the 9/11 terrorist attacks in 2001. He said, “They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem.” [3]

Clearly stocks are not the only thing the Government manipulates. Gold these days is a prime focus. The price of gold in recent years—since the eruption of the US IT stock bubble in 2000—has exploded from around $300 an ounce to a recent record high above $1,900 in August, 2011. Gold rose an impressive 70% from December 2008 to June 2011, after the Lehman Brothers collapse and the start of the Greek crisis in the Eurozone.
Since then, with no clear reason, gold has reversed and lost more than 31%, despite the fact that talk of a unilateral Israeli military strike on Iran and the US financial debacle combined with a Euro crisis, and now, threat of US government default, created overall huge demand for investment in gold.

This past April 10, the heads of the five largest US banks, the Wall Street “Gods of Money”—JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup—requested a closed door meeting with Obama at the White House.
Fifteen days later, on April 25, the largest one day fall in history in gold took place. Later investigation of trading records at the Comex revealed that one bank, JP Morgan Securities, was behind the huge selloff of gold derivatives.

Derivatives are pieces of paper or bets on future gold or other commodity prices. To buy gold futures is very inexpensive compared with gold but influence the real physical gold price, largely because the US Congress, under lobby influence from Wall Street, since 2000 and the Commodity Trading Modernization Act has left gold derivatives unregulated. [4] The President’s Plunge Protection Team was at work now as well, clearly.


"Welcome to my stash"
“Welcome to my stash”

China smiles and buys
In effect a war, a financial war, is underway between the Wall Street giant banks and their close allies including the major City of London banks and banks like Deutsche Bank on the one side, using paper gold derivatives trading in the unregulated COMEX, with covert support of the US Treasury and Fed.
On the other side are real investors and central banks who believe that the world financial system, especially the Dollar System, is teetering on the brink of disaster and that physical gold is the historical best safe haven in such a crisis.
Here, the recent buying of gold reserves by several central banks including Russia, Turkey and especially China, are notable. The short-term derivative gold price manipulations by JP Morgan and Goldman Sachs are creating smiles at the Peoples’ bank of China and the Russian Central Bank among other buyers of physical gold. Since 2006 Russia’s central bank has increased its gold reserves by 300%.

Now, the Chinese central bank has just revealed data showing that China imported 131 gross tons of gold in the month of August, a 146% increase compared to a year prior. August was the second highest gold importing month in its history.
More impressive, China has imported more than 2000 tons of gold in the past two years. According to a 2011 Wikileaks cable, the Peoples’ bank of China is quietly seeking to make the renminbi the new gold-backed reserve currency.[5] Hmmmm.

Here is another stash
Here is another stash

According to unofficial calculations the Chinese central bank today holds about 3500 tons of monetary gold, surpassing Germany, to make it number two in the world after the Federal Reserve.
And there are grave doubts whether the Federal Reserve actually holds the 8000 tons gold it claims.
When former International Monetary Fund director, France’s Dominique Straus-Kahn, demanded an independent audit of the Federal Reserve gold after the US refused to deliver to the IMF 191 tons of gold agreed to under the IMF Articles of Agreement signed by the Executive Board in April 1978 to back Special Drawing Rights issuance.
Immediately before he could rush back to Paris he was hit by a bizarre hotel sex scandal and forced to abruptly resign. Straus-Kahn had been shown a secret Russian intelligence report prepared for President Vladimir Putin in which “rogue” CIA agents revealed that the US Federal Reserve had no gold reserves and only lied that it did. [6]

The stakes for Washington and Wall Street in depressing the gold price are staggering. Were gold to soar to $10,000 or more, where many believe current demand-supply pressures would find it, there would be a panic selloff of the dollar and of US Treasury bonds. China now holds a record $3.7 trillion of foreign currency reserves and the US Treasury bonds and bills are about half that.

That selloff would send US interest rates sky-high, forcing a chain-reaction of corporate and personal bankruptcies that have been avoided since the financial crisis broke in 2007 only owing to record near-zero Federal Reserve interest rates.
That selloff, in turn, would be the end of the US as the world’s sole Superpower. Little wonder the Obama Administration is manipulating gold. It cannot last very long at this pace, however.

Editing:  Jim W. Dean


[1] Frik Els, Gold price pares gains as talk of market manipulation intensifies,, October 14, 2013, accessed in
[2] Ibid.
[3] Ambrose Evans-Pritchard, Monday view: Paulson re activates secretive support team to prevent markets , Telegraph UK, 30 October 2006, accessed in
[4] Clark Kent, Exposed: JP Morgan’s gold and silver price manipulation, 30 April, 2013.
[5] Tyler Durden, China Imports Over 2000 Tons Of Gold In Last Two Years, 13 October, 2013, accessed in
[6] EU Times, Russia Says IMF Chief Jailed For Discovering All US Gold Is Gone, EU Times, May 31st, 2011, accessed in

Russia Says IMF Chief Jailed For Discovering All US Gold Is Gone



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Frederick William Engdahl (born August 9, 1944) is an American writer, economics researcher, historian, and freelance journalist. He is the author of the best-selling book on oil and geopolitics, A Century of War: Anglo-American Oil Politics and the New World Order. It has been published as well in French, German, Chinese, Russian, Czech, Korean, Turkish, Croatian, Slovenian, and Arabic. In 2010 he published Gods of Money: Wall Street and the Death of the American Century, completing his trilogy on the power of oil, food, and money control. Mr. Engdahl is one of the more widely discussed analysts of current political and economic developments, and his provocative articles and analyses have appeared in numerous newspapers and magazines and well-known international websites. In addition to discussing oil geopolitics and energy issues, he has written on issues of agriculture, GATT, WTO, IMF, energy, politics, and economics for more than 30 years, beginning the first oil shock and world grain crisis in the early 1970s. His book, ‘Seeds of Destruction: The Hidden Agenda of Genetic Manipulation has been translated into eight languages. A new book, Full Spectrum Dominance: Totalitarian Democracy in the New World Order describes the American military power projection in terms of geopolitical strategy. He won a ‘Project Censored Award’ for Top Censored Stories for 2007-08. Mr. Engdahl has lectured in economics at the Rhein-Main University in Germany and is a Visiting Professor in Economics at Beijing University of Chemical Technology. After a degree in politics from Princeton University (USA), and graduate study in comparative economics at the University of Stockholm, he worked as an independent economist and research journalist in New York and later in Europe, covering subjects including the politics of energy policy in the USA and worldwide; GATT Uruguay Round trade talks, EU food policies, the grain trade monopoly, IMF policy, Third World debt issues, hedge funds, and the Asia crisis. Engdahl contributes regularly to a number of international publications on economics and political affairs including Asia Times,,, The Real News, Russia Today TV, Asia Inc.,, Japan’s Nihon Keizai Shimbun, Foresight magazine. He has been a frequent contributor to the New York Grant’, European Banker and Business Banker International and Freitag and ZeitFragen in Germany, Globus in Croatia. He has been interviewed on various geopolitical topics on numerous international TV and radio programs including Al Jazeera, CCTV and (China), CCTV (China) Korea Broadcasting System (KBS), and RT Russian TV. He is a Research Associate of Michel Chossudovsky’s well-respected Centre for Research on Globalization in Montreal, Canada, and a member of the editorial board of Eurasia magazine. Mr. Engdahl has been a featured speaker at numerous international conferences on geopolitical, GMO, economic, and energy subjects. Among them is the Ministry of Science and Technology Conference on Alternative Energy, Beijing; London Centre for Energy Policy Studies of Hon. Sheikh Zaki Yamani; Turkish-Eurasian Business Council of Istanbul, Global Investors’ Forum (GIF) Montreaux Switzerland; Bank Negara Indonesia; the Russian Institute of Strategic Studies; the Chinese Ministry of Science and Technology (MOST), Croatian Chamber of Commerce and Economics. He currently lives in Germany and, in addition to teaching and writing regularly on issues of international political economy and geopolitics, food security, economics, energy, and international affairs, is active as a consulting political risk economist for major European banks and private investors.  A sample of his writings is available at Oil