The Silver Bug: Once again gold manipulation is the talk of the town.

The mainstream media is running rampant with the story about the recently uncovered gold manipulation scandal in China.

China’s National Audit Office has determined that approximately $15.1 billion-worth of loans were made to Chinese bullion businesses who used gold as collateral.

The problem here is that the gold used was fictitious, as China Topix points out:

“China’s National Audit Office’s has reported that Chinese bullion companies using falsified gold transactions have defrauded the government of US$15 billion (CNY94 billion). It said the widespread fraud involved 25 bullion processing companies across China that also made an illegal profit of US$145 million. The scammers took advantage of government regulations that allow jewelers, gold miners and other firms involved in the gold trade to lease gold from banks. This deal reduces the firms’ inventory cost and is quite profitable when gold prices drop. Gold bullion processors, however, began to use the leased gold as collateral against bank loans, which they lent to other firms at higher interest rates thereby making illegal profits.”

Unfortunately, as the mainstream media is quick to point out, this means that Chinese gold imports have to be revised lower, as much of the gold used in these figures simply didn’t exist.

What is also unfortunate, but not surprising, is what the mainstream media is missing: the big picture.

The big picture is this. A large quantity of gold just disappeared from the market, as it never truly existed.

As Zerohedge points out, this makes it gold positive news, instead of gold negative news as the mainstream media would have you believe.

Hence why gold is up and not down.

This article is brought to your courtesy of The Silver Bug.