The Shanghai Gold Exchange released a report on January 3rd that showed a huge rush for wholesale purchases of the precious metal during the last 3 days of December. 29 tonnes of gold were withdrawn on the SGE during a frantic buying spree as the country began to ramp up supply ahead of the Chinese New Year, February 19th.
For the past three months, withdrawal totals on the SGE have averaged 200 tonnes.
The Chinese New Year is traditionally celebrated with gifts of gold and with it occurring on a later date this year than last year, January is expected to be a very big month for consumer gold in China.
On the morning of January 3rd, ChinaNews.com reported a stampede at a gold dealer in one Chinese mall with gold being sold at a rate of 400,000 yuan per minute. It is not known how many similar scenes were simultaneously happening in other malls across the country.
But consumers aren’t the only ones buying gold as much and as fast as they possibly can.
In 2009, a Wikileaks cable revealed the country’s plans for hoarding gold in order to support the international use of the renminbi.
And in July of last year, the President of the China Gold Association, Song Xin, stated publicly that China should accumulate more than 8,500 tonnes in official reserves, more than the United States. He stated directly that China’s gold accumulation is in part to support the renminbi’s use as an international reserve currency. This does not mean that the country will “back” the renminbi with gold, but “support” it by holding reserves of gold to bolster credibility in the fiat currency.
The previous President of the China Gold Association, Sun Zhaoxue, wrote publicly in an article for Qiushi Magazine that part of China’s gold accumulation strategy was in part to destabilize the dollar’s hegemony as world reserve currency.
With every report we get from the SGE or the World Gold Council, we have to take it with a grain of salt. As the WGC admits:
“Mainland China does not publish its own trade statistics so analysts rely on other sources, such as trade data from the Hong Kong Census and Statistics Department. In addition, there is little publicly available information on direct flows into mainland China, such as to Shanghai and more recently Beijing.”
There have been several changes made to gold trading in China in recent years. As we have noted previously, the Central Bank of China hasn’t officially disclosed its gold reserves since 2009, and the country recently changed the way it imports gold in order to obscure actual totals. The numbers for the SGE and World Gold Council only reflect the amount of gold moving through Shanghai and Hong Kong.
Last Spring, the country opened up other ports including Shenzhen and Beijing to gold imports and those totals are not known.
Make no mistake, China is trying to buy up as much gold as possible and they don’t want anyone to know.