China Discovers $15 Billion Worth Of Loans Tied To Fake Gold Deals
Spot checks on 25 companies that process bullion, such as jewellers, showed they made a combined profit of more than 900 million yuan by using the bank loans to take advantage of the difference between onshore and offshore interest rates, as well the appreciation of the Chinese currency, according to a report published this week on the National Audit Office's website.Bad news, eh? Over at Mining.com, they had slightly different numbers, but, you know. Doom. Destin. Verhängnis. 厄運!
Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals by the end of 2013, the World Gold Council said in April, indicating a big slice of imports has been used to raise funds due to tight credit conditions, rather than to meet consumer demand.
At current prices, that would be worth about $42 billion.
Surely, the professional hand-wringers said, this is the rough hour of gold's doom come round at last! Why, it's enough to make gold-plated A.U. McGold jump out of his golden helicopter without a golden parachute.
Except, that, you know. It didn't.
Is that doom I see before me? Why, fetch the smelling salts as I clutch at my pearls. Oh wait ... I'm underwhelmed.
In fact, that looks like some rather ordinary consolidating after a big run-up.
So maybe, just maybe, this morning's hysteria was just another chance for Wall Street's breathless doom-meisters to slam yet another investment class.
Here's an idea: if $15 billion worth of Chinese loans are based on gold that doesn't exist, maybe gold that does exist has more value?
Here's another idea: If Germany asks for its gold back from US vaults over a multi-year period -- and then basically just gives up trying to get it back -- maybe there's another problem.
To quote Sprott on the German situation -- and yeah, I'm goin' there, because he has at least as much if not MORE credibility on gold today as Wall Street's paper pushers of record:
Reparations began last year, which resulted in a pathetically low amount of gold returned to Germany. To date, only 37.5 tonnes made its way home. Sadly to meet their goal, Germany would need to see 87.5 tonnes per year. Clearly, the FED did not have the gold it claimed to have.Sure, China could stop importing gold, and prices could crash. On the other hand, maybe we're near the beginning of a 20-year trend of rising gold imports into China.
Do what you want in precious metals. Buy gold or don't. Buy miners or don't. I am buying miners, because I see some priced like the earth is swallowing them up.
Whatever you do, don't listen to the fear-mongers.