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China Says It Must Add To Gold Reserves To Promote Yuan Globalization And As An FX Hedge

Tyler Durden's picture




 

Back in September, when we provided the monthly observation on what has become a record year to date surge in Chinese imports of gold from Hong Kong, we reminded readers that "in December 2009, the China Youth Daily quoted State Council advisor Ji as saying that a team of experts from Beijing and Shanghai have set up a "task force" last year to consider growing China's gold reserves. "We suggested that China's gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years," the paper quoted him. Has China managed to accumulated 6,000 tons yet?  We won't know for sure until the official disclosure which will come when China is ready and not a moment earlier, but at the current run-rate of accumulation which is just shy of 1,000 tons per year, it is certainly within the realm of possibilities that China is now the second largest holder of gold in the world, surpassing Germany's 3,395 tons and second only to the US."

Two days ago we showed that the relentless importing of gold in China continues, yet what has been missing is an update direct form the horse's mouth how China feels toward gold (because we certainly know how it feels toward US Treasury paper). Today, we finally got one straight from Beijing, and that during a very carefully supervised time when the 18th Communist Congress is still in session, and every word out of China has profoundly telegraphic implications.

From Bloomberg:

  • China needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks, Gao Wei, an official from the Department of International Economic Affairs of Ministry of Foreign Affairs, writes in a commentary in the China Securities Journal today.
  • While gold prices are currently near record highs, China can build its reserves by buying low and selling high amid the short-term volatility, Gao writes in newspaper
  • China’s gold reserve is “too small”, Gao says

And there it is: while many have speculated that China, which has not given an update of its official holdings in nearly 4 years, is quietly building up its gold reserve holdings behind the scenes, there was no reason to worry. The time to worry would be when China was starting to give indications it is prepared to tell the world what its true gold holdings are (by now certainly well over 1000 tonnes). And the above piece from Wei is just that: because in saying very little, the Chinese official with a key political post has just given the first hint that China is preparing to give its official gold far greater focus. And from there, the time until China releases an IMF update on its official reserve holdings will be measured in days if not hours. Because all the gold will have long been accumulated.

And once that happens it will be too late to buy any incremental gold. Or tungsten.

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Wed, 11/14/2012 - 07:05 | 2979126 onebir
onebir's picture

That's patience!

Wed, 11/14/2012 - 10:03 | 2979462 falak pema
falak pema's picture

I agree, I hate reading what I write, its depressing. Thats why I write on other subjects more refreshing on the side! 

But I abide by what I say, depressing on not. 

Wed, 11/14/2012 - 08:07 | 2979187 fijisailor
fijisailor's picture

"Can the one party crony politburo state manage this hubristic transition?

 

Duh yes.  Don't we in the US have a good idea how this type of govt works?

Wed, 11/14/2012 - 05:56 | 2979098 Anasteus
Anasteus's picture

Looking at the current relatively low gold price, one has to ask whether the US cronies actively support the Chinese efforts or not. The artificial price suppression managed by the comrades at JPM is exactly what China wants. Seems like Rothschilds have already grasp the fact America and dollar is virtually over shifting the focus on China and renminbi.

Wed, 11/14/2012 - 08:02 | 2979183 youngman
youngman's picture

I think that was part of the deal that Geitner made 3 years ago when he went over there....he guaranteed a price range for China...IMHO

Wed, 11/14/2012 - 06:06 | 2979105 Freegolder
Freegolder's picture

Could we have a link please, search of Bloomberg and google turns up nothing for me. Thanks.

Wed, 11/14/2012 - 07:32 | 2979158 slackrabbit
slackrabbit's picture

And remeber China does NOT export its mined gold!!!

 

 Max Keiser interview where guest Dominic Frisby makes a comment regarding Chinese gold bars (ref 20:30-21:15):

 

(edited for clarity) "... I had dinner about a year or two ago with the head of Gold at HSBC and one of the things that he described — and most of the world's gold goes through HSBC, at some stage — looking at the gold in his vault ... despite the fact that China is the biggest producer - he never sees bars, with Chinese stamps on them ...

youtube here: http://youtu.be/RjQu9qFpStw?t=20m9s

 

Database confirms Max Keiser Guest statement (updated x 2)

http://screwtapefiles.blogspot.co.uk/2012/10/database-confirms-max-keise...


 

Wed, 11/14/2012 - 08:50 | 2979273 Anasteus
Anasteus's picture

Another possibility is all the gold the dude sees in the HSBC vaults is Chinese gilt tungsten bars with stamps faked too.

Wed, 11/14/2012 - 07:50 | 2979167 spanish inquisition
spanish inquisition's picture

Well, that is good news for the (petroless) dollar survival!

When the SHTF there will a stable currency to peg to!

Edit: Can I get a "Irony Bitchez!" holla.

Wed, 11/14/2012 - 08:00 | 2979177 Monedas
Monedas's picture

Coming out of the closet about their gold plans .... defuses speculation and rumors .... disarming the alarmists .... provides calm reassurance and cover .... while they continue to hoard like MADMEN !   This is damage control for hoarding they can no longer deny !

Wed, 11/14/2012 - 08:00 | 2979180 youngman
youngman's picture

"China can build its reserves by buying low and selling high amid the short-term volatility, "

Interesting quote....

Buying low I understand..from us..the stupid west with our or their HFT´s computers that can tank the price....

now the "Selling"....SELLING..to me that means the tungsten gold they have produced for us stupid westerners...I do not think I would buy gold from China at this point....

Wed, 11/14/2012 - 08:05 | 2979184 Monedas
Monedas's picture

Pt can't be faked with tungsten .... it's 10% heavier than Au and muck (much) rarer .... I'd say Pt is a buy !

Wed, 11/14/2012 - 08:22 | 2979215 Snidley Whipsnae
Snidley Whipsnae's picture

Youngman... It's difficult to know what was lost in translation.

Perhaps the speaker meant that China is playing the paper gold game to aquire easy profits to purchase physical?

Perhaps the speaker meant that China's soverign wealth fund is aquiring low to sell to the PBoC at a profit?

Some other fu in translation?

I also found that comment odd.

Wed, 11/14/2012 - 08:37 | 2979235 Monedas
Monedas's picture

Think like a liberal !  They may be playing their "Oh, shucks, we are NOT very sophisticated !" card .... to play down their deadly earnest hoarding ?

Wed, 11/14/2012 - 08:09 | 2979191 orangegeek
orangegeek's picture

Funny how we hang off every word when it suits our opinion.

 

Remember folks - communists.  State run everything.  The truth is what the states says no matter what the truth is.

 

So China wants to buy up all this gold.  Great.  And you believe them?  Great.

 

The US Dollar transacts in 60% of global trade.  The Euro is second.  So the US will just politely let the Juan take things over.

 

Gold backed currency or military backed currency??

Wed, 11/14/2012 - 08:23 | 2979202 Monedas
Monedas's picture

I wish the US would keep adding to it's stack and even encourage it's citizens to do the same !  We should use a little of all the fiat we've created to buy some gold insurance ? How about Obamy and Bernanky doing a commercial for the U.S. Mint ?

Wed, 11/14/2012 - 08:17 | 2979204 DowTheorist
DowTheorist's picture

The gold/dow ratio has turned bullish on Nov 7, this has long term bullish implications for gold. Certainly not a good omen for stocks. More about it here:

 

http://www.dowtheoryinvestment.com/2012/11/dow-theory-update-for-nov-8-s...

Wed, 11/14/2012 - 08:19 | 2979210 fijisailor
fijisailor's picture

So the biggest coin counterfeiters and probably bar couterfeiters in the world may have 6000 tons.  6000 tons of what?  No one could ever reliably believe anything the Chinese say no matter how much they import or produce

Wed, 11/14/2012 - 08:24 | 2979223 Snidley Whipsnae
Snidley Whipsnae's picture

"No one could ever reliably believe anything the Chinese say no matter how much they import or produce"

Do you believe what any banker or pol says?

Wed, 11/14/2012 - 08:35 | 2979250 fijisailor
fijisailor's picture

Uh no, nor our govt either

Wed, 11/14/2012 - 08:40 | 2979260 youngman
youngman's picture

I am sure the Party´s gold is good gold...now the stuff they sell to us...that is suspect...but you die if you shortchange the Communist Party...period

Wed, 11/14/2012 - 08:48 | 2979272 fijisailor
fijisailor's picture

So their "party"  is much more reliable than our"party".

Wed, 11/14/2012 - 08:42 | 2979243 Monedas
Monedas's picture

Gold is part of the Chinese DNA .... Gold trumps Communism !   The lovely Arafat amassed quite a private fortune from the Palestinians .... I imagine some of those Chicom leaders have substantial hoards .... despite socialist protocols !

Wed, 11/14/2012 - 08:45 | 2979269 Quinvarius
Quinvarius's picture

The Western moron bankers have had enough warning to get out of the way or be destroyed from China.

Wed, 11/14/2012 - 09:01 | 2979297 fijisailor
fijisailor's picture

The western moron bankers will put money in their own private pockets assisting their own destruction.  There's no honor among thieves.

Wed, 11/14/2012 - 08:56 | 2979279 Monedas
Monedas's picture

You just know that "Ben Bern Banky" has his private hoard !  He probably buys his own dips ?

Wed, 11/14/2012 - 09:05 | 2979305 poldark
poldark's picture

I wonder if the UK could buy back the gold Brown sold at $230 oz?

Wed, 11/14/2012 - 12:01 | 2979902 Bansters-in-my-...
Bansters-in-my- feces's picture

*Gao smart man.

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