China wants something the United States has. No, it’s not gold. China wants to take control in the financial system like the US does with its dollar. To be able to dominate the world, they need gold and the need it cheap. Gold has risen more than $100 on Brexit fears. This could ruin China’s gold plan.
It’s obvious the world needs a new financial system. The dollar dominated world is running his last legs. Gold is the poker chip at the negotiating table. To play with the big boys, China needs more gold. There is probably a secret agreement to get the Chinese on board: China doesn’t sell its Treasuries and the US will let the Chinese buy as much gold as possible.
But now, a possible exit from Great Brittain out of Europe can push the price of gold much higher. The Brittan’s want a Free Trade Agreement like the one people thought they were voting for in 1975. They don’t like to be told what to do from Brussels. So a Brexit is very possible.
June 23 is the big day
About a year ago, nobody thought it would be possible that most people in Great Brittain wanted to leave the European Union. Now it will be a very exciting week as ‘remain’ and ‘leave’ have grown together.
James Butterfill, ETF Securities, thinks gold can rise to $1,400 after a Brexit-vote. He sees lots of parallels with the possible Grexit a few years ago. Gold could even rise to $1.500 at the end of 2016 when Brexit is followed by a Trump Presidency. When the Fed isn’t able to raise rates at least one time this year, it’s a real slam dunk for gold and we could even see $1.600.
Another problem for China’s gold plan
This will cause big problems for China. For example, Russia has only 1/8 of the US gold reserves, but their GDP is also 1/8. So de facto they have an even gold reserve. Russia’s gold reserves to GDP are 3%, just like the United States. Europe even has 4% reserves, China only 0.7%.
To get equal, China needs 4.000 tons of gold. But then there is another problem. Chinese GDP grows faster so they need even more than 4.000 tons to get the gold/GDP ratio up. When Brexit or a Trump Presidency puts the price of gold higher, it will be even more difficult to acquire enough chips to play along.
Meanwhile gold again broke out above $1,300… like we have predicted here for weeks. All the while, our competitors were warning to ‘wait for a further pullback’, we advised to ‘back up the truck’, especially with the Best Gold & Silver Stocks. With gold above $1,300 and the HUI-index breaking out to new cyclical heights, China won’t be happy.
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