The Country With The Most Gold Wins

He who dies with the most toys wins.

• 1990s bumper sticker

Bumper-sticker wisdom.

It’s a lot like those posters at Successories (I think that’s still a store…?) that tell you “the slowest zebra only needs to be slightly faster than the fastest lion.” Or something.

What does it all mean?

Well, maybe the fun is in working it out…

If they’re any good, poster mottos and bumper stickers at least make you think for a moment.

So, let’s think for a moment…

If I were to rewrite that 1990s bumper sticker and apply it to countries of the world—this is how it would read: The country that ends up with the most gold wins.

It has been a minute since we’ve talked about gold and its role in the global financial system, and now seems a good moment to reflect on gold’s movements of late.

It’s just over a month since the Federal Reserve released minutes from its December meeting. Those were the minutes where Fed poohbahs announced they expect three interest rate cuts this year…

That prompted me to go back and look at gold’s price action starting March 16, 2022, when the Fed first launched its post-COVID, inflation-fighting fiesta. In that time, gold is up 5%.

Seems like a yawner.

It’s not.

In a normal world, the Fed raising interest rates—especially at the historic pace the Fed pursued at that time—would have caused a bloodbath in the gold pit. Gold earns no interest. Gold pays no dividends. All gold really ever does is sit around in a vault or a safe-deposit box or a shoebox under the big rock in the backyard.

So if Billy Bob and Becky Sue can collect safe interest payments of 5% or more on Uncle Sam’s debt, then why own an asset that pays diddly squat?

Well, there’s a word in that last sentence that tells you why gold is actually up, not down over the last two years…

“Safe.”

Investors increasingly no longer think that “safe” is a word they should associate with US debt and, by extension, the US dollar.

“Unsafe” and “risky” are more appropriate these days.

Which brings us back to bastardized bumper-sticker wisdom…

“The country with the most gold wins.”

Some believe that America holds the world’s largest stash of gold…

I, however, do not share that delusion.

There are very, very good reasons to believe that the US does not own the gold it says it does. We will never know, of course, because the Federal Reserve has not allowed a credible audit of America’s gold reserves since 1953.

Sure, there have been “audit lights” along the way, but nothing that proves beyond a doubt that Uncle Sam owns the gold he claims to own. And given that we are talking about government, which always has a need to obfuscate, lie, and dissemble, I’ll wait to be proven wrong.

In the meantime…

The country with the most gold is quite likely China.

We can track a lot of China’s gold buying through import/export documents collected in Hong Kong (where China’s gold imports tend to arrive) and in Switzerland (where a lot of China’s gold buying originates).

By the way, China never exports gold in any quantity. They’re hoarding it. Stockpiling.

We also have statistics from Chinese gold miners, which indicate China has been one of the top two gold producers for around a decade. Now, clearly, China’s public companies could certainly be lying about their production numbers. So we can haircut that by some amount.

But I tend to believe Hong Kong and Switzerland data are probably close to the truth.

And based on those documents, there’s a case to be made that China has something close to 10,000 tons of gold, outstripping the 8,113.46 tons America reports. That number that Uncle Sam reports he owns in gold—8,113.46 tons—never changes. Like, never ever. Which is unique in the world of central bank gold holdings. That makes the number highly suspect.

Anyway, the country with the most gold in the world is very likely China.

Which raises the question: Why is China so gung-ho on owning gold?

And, why, a decade ago, did China suddenly tell its citizens to begin buying gold, when buying gold had previously been illegal?

These aren’t headscratchers.

When crisis hits, the country with the most gold wins. It has the hard assets in reserve to back up its financial system. Gold has functioned as the store-of-wealth-of-last-resort for people and governments since the dawn of time.

China is preparing for—and actively trying to bring about—the downfall of the US dollar. It wants a world where America no longer has the same power over global trade, because the dollar is no longer the main currency of global trade.

And other countries are preparing for the dollar’s demise, too…

On a global scale, the World Gold Council recently report that “Central bank [gold] buying maintained a breakneck pace” in 2024.

If you’re an American who’s paying attention, the rest of the world is sending you a message: You’re in trouble! Lower the lifeboats now! Iceberg dead ahead!

Central banks all over the planet are adding more and more gold to their reserves because they rightly fear a financial catastrophe tied to America’s larger and larger debt. That will slam the dollar hard.

As I say all the time, the dollar is not a bad a currency. It’s a fine currency.

The problem is that our currency has been mismanaged by a string of incompetent politicians. They’re not interested in solving actual problems. Our political overlords have come to realize that all they need do is give their constituents money and pork-barrel largesse. That’s all they need to do to get reelected time after time, and remain in the halls of Congress for decades on end… like rats who never leave the sewer. (Seriously: When do we impose term limits on D.C.?)

Here at the end, I’m going to rephrase the bumper sticker again…

He who doesn’t own gold dies with no toys.