China Finally Reveals Gold Holdings

After six years, China finally revealed its “total” gold hoard today in a statement issued by the PBOC (People’s Bank of China). The grand total? 1,658 metric tons, placing the country in 5th place worldwide. It’s an increase of more than 50% since their last reporting but the number is intriguingly much lower than what most analysts were expecting. Bloomberg Intelligence issued a report earlier this year estimating China’s total hoard to exceed 3,000 tons. Some analysts have even put forth the theory that the country could have amassed as much as 30,000 tons.
 
As we have reported before, China has gone to great efforts to obscure its true gold holdings and rapid accumulation in recent years by reconfiguring its imports, purchasing via proxy banks, and buying entire gold mining companies in order to bring gold into the country without notice.
 
So what do these new numbers from China mean? Not much, unfortunately. Since China has geopolitical and economic motivations for hiding their true gold total, there is no reason to believe that these totals issued by the PBOC are accurate.
 
There are multiple reasons why China would want to lie about how much gold it has accumulated. China is attempting to get the yuan (or renminbi) included as part of the IMF’s SDR, or Special Drawing Rights reserve currency later this year. In order to do this, the country has been compelled to be more transparent about their banking practices and currency reserves. So they have to reveal something. But they don’t want to reveal a total that is so large that it devalues the other currencies currently in the SDR.
 
Another reason why China would downplay its gold accumulation is because they don’t want to initiate a massive spike in price because they are still trying to buy as much as they possibly can before making a move or having the truth leak out. By revealing a modest 1,658 tons, China doesn’t disrupt the market, doesn’t cause any price spikes, and doesn’t unbalance the SDR. It makes them seem like more of a team player. And for a country that is wanting more participation in the IMF and more influence in global trade, being a team player means that they are more likely to get cooperation from the West.
 
So what are China’s true gold holdings? No one but China knows the truth. What we do know is that China has been purchasing gold as fast as possible in recent years and that going by official, reported totals, Russia has tripled its gold holdings in the past 10 years.
 
Whether China actually only has 1,658 tons (it doesn’t) or has 30,000 tons, the fact of the matter is that China and Russia have both dramatically upped their gold purchases in recent years, Germany and The Netherlands have repatriated much of their gold reserves, Chase Bank has cornered the silver market, and Gold American Eagle sales by the U.S. Mint spiked by more than 250% last month. The largest countries of the world, the largest financial institutions of the world, and even American citizens are all trying to prepare themselves for a potential economic crisis.
 
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