https://asia.nikkei.com/Spotlight/Caixin/Mystery-of-2bn-of-loans-backed-by-fake-gold-in-ChinaI kort om skandalen:
:-We knew for years that he doesn't have much gold -- all he has is copper," said the source,
who declined to be named.
:-Local financial institutions in Hubei have avoided doing business with Kingold, but they don't
want to offend him publicly, the source said.
:-But wait, counterfeiting gold is just the tip of the company's fraud iceberg, several industry
sources told Caixin that the institutions were willing to offer loans to Kingold because Jia
promised to help them dispose of bad loans.
:-In short, more than 4% of China's official gold reserves may be fake. And this assume that
no other Chinese gold producers and jewelry makers are engaging in similar fraud?
(spoiler alert: they are.)
:-As for what this means for the price of gold... well, Kingold is certainly not the only Chinese
company engaging in such blatant fraud, and the consequences are clear, once Chinese
creditors or insurance companies start testing the "collateral" they have received in
exchange for tens of billions in loans and discover, to their "amazement", that instead
of gold they are proud owners of tungsten or copper, they have two choices, reveal the
fraud, risking tremendous adverse consequences and/or prison time, or quietly buy up
all the gold needed to literally fill the void from years of gold counterfeiting.
Something tells us option two will be far more palatable to China's kleptoculture where
one domino cold trigger a collapse of the entire financial system. What happens next,
a panicked scramble to procure physical gold, one which even our friends at the BIS
will be powerless to stop from sending the price of the precious metal to all time highs.
