China’s Stealth Gold Reserves To Quadruple as IMF Seek Answers

gold timeGoldCore: Enter the Dragon – China Stealthily Accumulated Massive Gold Hoard
– IMF Seek Answers On China’s Mysterious Gold Reserves according to Bloomberg
– Major demand issue and bullish support for gold rarely covered in mainstream
– China may disclose its gold reserves by October in a bid to have the Yuan included in SDR currency-basket
– China has not made its gold holdings public since 2009
– Bloomberg estimates that reserves may be as high as 3510 tonnes, 2nd largest in the world

Image of Gold Hoard and Dragon’s Eye from ‘Desolation of Smaug’
Image of Gold Hoard and Dragon’s Eye from ‘Desolation of Smaug’

Enter the Dragon. China’s push to challenge U.S. dominance as the global economic superpower and to challenge the dollar as a global reserve currency involves gold – “a lot of gold.”

China may soon make public that it has quietly accumulated a massive hoard of gold in recent years. This was done in order to bolster their bid to have the yuan included in the basket of currencies that make up the IMF’s Special Drawing Rights (SDRs) according to an article by Bloomberg.

This is something Jim Rickards, ourselves and many analysts in the gold sector have said would happen for some time. The People’s Bank of China’s (PBOC) quiet ongoing accumulation of gold is something we frequently cover as we believe it is an important demand factor in the market that is largely ignored by most analysts and in most coverage of the gold market.

Officially Reported Gold Holdings (Not Including People’s Bank of China) – Wikipedia
Officially Reported Gold Holdings (Not Including People’s Bank of China) – Wikipedia

Currently the SDR is composed of dollars, euros, yen and sterling. It is further testimony to the new emerging order that the yuan is under consideration even as it establishes the AIIB which looks set to rival the IMF and World Bank.

China has not publicised its gold holdings since April 2009 when their holdings doubled to 1,054 metric tonnes. The announcement surprised most market participants at the time and was likely a factor in the higher gold price seen in 2009.

Bloomberg speculates that the PBOC may have increased its gold reserves three-fold since that time to over 3,000 metric tonnes.

“The People’s Bank of China may have tripled holdings of bullion since it last updated them in April 2009, to 3,510 metric tons”, says Bloomberg Intelligence, based on trade data, domestic output and China Gold Association figures.

China would therefore have the third largest gold reserves in the world – second only to the U.S. and Germany.

It is worth noting that the U.S. refuses to allow their gold reserves to be publicly audited and the Bundesbank is having difficulty repatriating much of its gold stored with the Federal Reserve. This has led many analysts to speculate that the U.S.’s gold reserves have been leased out or sold or are encumbered as part of an ongoing effort to manipulate gold prices.

Analysts who closely follow the gold market, believe that Chinese reserve holdings may be much higher. Shanghai and the SGE has superseded Hong Kong to become a major hub for trading in physical gold not just in Asia but globally.

It seems likely that the Chinese government have been accumulating gold by stealth using proxies in Shanghai.

China’s ambition to make the yuan a dominant, if not the dominant reserve currency is now beyond dispute. However, they have a long way to go yet. The IMF estimates that the dollar and the euro together currently make up 85% of global reserves.

If their IMF ambitions do force them to disclose their gold holdings it does not follow that they will make public their entire reserves unless they deem it politically expedient to do so.

So Bloomberg Intelligence estimates of China’s reserves may be accurate but they may be significantly understated.

This is unlikely, however. The secrecy with which China operates with regards to gold demonstrates the strategic importance that they, like Russia, place on gold.

Bloomberg reports,”In a rare comment on gold, Yi Gang, the central bank’s deputy governor, said in March 2013 that the country could only invest as much as 2 percent of its foreign-exchange holdings in gold because the market was too small.”

Elsewhere, Bloomberg reports that China’s foreign reserves “have surged more than fivefold in a decade and are the biggest in the world.”

Central banks globally are expected to add another 400 tonnes to their reserves this year indicating a degree of distrust in the current monetary order by the very entities that issue fiat currencies.

The Dragon’s Gold Hoard

It is almost certain that the People’s Bank of China (PBOC) is accumulating more gold than they are declaring publicly and indeed officially to the IMF.

It is interesting as the PBOC is the only major central bank that has not been transparent with regard to gold reserves, even Russia has declared their gold purchases.

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