China: What Happened to the Gold Data?

Pivotfarm's picture

Imagine the scenario. The company accounts are going to get checked out; the accounts department doesn’t have them ready. There’s a gap in the figures and they don’t tally. Never mind, they may just get through at a pinch and nobody will notice. The Chinese government must have been thinking the self-same thing when a 500-tonne gap appeared in the gold data of the country. Now the question on everyone’s lips is did the People’s Bank of China actually start hoarding gold while the price of the yellow stuff was weak last year?

Is China increasing its holdings of gold, just in case things go all pear-shaped in the economy? Apparently, the Chinese always said that gold wasn’t a useful asset and they already had $3.8 trillion in currency reserves that were diversified enough not to need that gold. But, in 2013, gold imports and gold production figures were much higher than the level of consumption. The Chinese government might have been strongly denying that they were buying up the gold at low prices, but they certainly seem to have been doing so. Still, who can blame them? They have the money to buy it and in true capitalist fashion, they bought when the price was low. Any Western consumer knows that’s what you do. Why would we expect anything less of the Chinese?

• Chinese demand for gold rocketed by 41% (to 1,176 tonnes) in 2013 according to the data published on Monday 10th February (China Gold Association). 
• In comparison with 2012, China last year imported double the amount that it had imported then (1,158 tonnes through Hong Kong). 
• Domestic production of gold bullion also saw an increase on the 2012-2013 figures by 6% (428 tonnes). 
• Figures are still unpublished for imports of gold through Shanghai. 
• China has now superseded India as the highest consumer in the world.
• It has been calculated that gold consumption in China was over 1,700 tonnes in 2013 and that figure is 500 tonnes more than is being reported.

The other alternative is that the Chinese government is not trying to pull the wool over the eyes regarding hoarding of gold (and they really do only have 1,054 tonnes and that figure has been constant since April 2009) and that it is the jewelry companies in China have taken advantage of the low prices and hoarded the stock themselves. Or, better still, it’s both of them; the PBOC and the jewelers. 
Speculation has been rife in the past few months regarding the holdings of gold by the People’s Bank of China and it has been very much on the cards that they will announce this soon (whether or not that remains a forthcoming announcement is debatable today). At the present time, gold reserves only amount to 1% of official reserves of the PBOC (if we have the right figures!). That is very much under the norm for other countries.

But, maybe the jitters about tapering and certainly what will happen in the emerging markets’ economies means that China has been increasing its stockpile, stashing the stuff away for a later date. Gold demand totaled at the end of 2013 in the world 2,805 tonnes (World Gold Council).

So, how much does everyone have in the vaults, locked away just in case? The biggest hoarders are as follows:

  1. India 557.7 tonnes
  2. Netherlands 612.5 tonnes (54% of its reserves)
  3. Japan 765.2 tonnes (2.6% of its reserves)
  4. Russia 1,015.1 tonnes (8.3% of its reserves)
  5. Switzerland 1,041.1 tonnes (8.3% of its reserves)
  6. China 1,054.1 tonnes (1.2% of its reserves)
  7. France 2,435.4 tonnes (66.1% of its reserves)
  8. Italy 2,451.8 tonnes (67.2% of its reserves)
  9. Germany 3,387.1 tonnes (68.7% of its reserves)
  10. USA 8,133.5 tonnes (71.7% of its reserves).

However, the People’s Bank of China may indeed to stay quiet about the increase in its gold reserves since the price has been on the up over the past few weeks. Coming clean about the hoarding may have the effect of causing a greater increase in the price of gold and they may want to avoid that to continue.

It has increased by 4.12% over the past thirty days and was up at the last close by 1.22%. January 1st saw an increase of 6.78%. Prices have fallen in comparison with last year by 22.87%.

 

Originally posted: China: What Happened to the Gold Data?

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