China Goes Dark: PBOC To Keep Goldbugs Clueless About Its Gold Buying Spree

Tyler Durden's picture

One of the more perplexing divergences that have plagued precious metal watchers and goldbugs when it comes to the great "black box" that is the world's biggest buyer of gold in recent years - China (which overtook India after that particular country established unprecedented capital controls to block the import of gold) is that on one hand China has been allowing the outside world to glimpse its ravenous buying of gold through the Hong Kong-Shenzhen corridor (where nearly 70% of the Chinese gold jewellery business is located) since Hong Kong customs provides a full breakdown of how much gold it exports into China, yet on the other the PBOC has refused to update its official gold holdings in exactly five years.

Recall that it was Zero Hedge who before anyone else in September 2011 disclosed not only what the reasons were for China's historic, and largely under the radar, gold buying spree - namely that while consumer demand for gold would rise, it was mostly the Chinese central bank that was the origin of China's seemingly endless demand. We got tangential confirmation as much when in January Shanghai Daily reported the PBOC was expected to announce its gold holdings have "more than doubled." Of course considering China's official gold inventory is a paltry 1054 tons, this would hardly surprise anyone at this point.

So now that everyone is breathing down the PBOC's neck to finally reveal - with a five year delay - just how much gold it does hold, the Chinese central bank has done a U-turn on its indirect transparency and, as Reuters reports, has begun allowing gold imports through its capital Beijing, sources familiar with the matter said, "in a move that would help keep purchases by the world's top bullion buyer discreet at a time when it might be boosting official reserves."

"We have already started shipping material in directly to Beijing," said an industry source, who did not want to be named because he was not authorised to speak to the media. The quantities brought in so far are small, as imports via Beijing have only been allowed since the first quarter of this year, sources said.

But are about to get much, much bigger.

In a nutshell, going forward China can continue importing hundreds of tons monthly, but without Hong Kong being the main transit route and without its monthly export updates, nobody will have a concrete number of just how much gold China is importing.

More from Reuters:

The opening of a third import point after Shenzhen and Shanghai could also threaten Hong Kong's pole position in China's gold trade, as the mainland can get more of the metal it wants directly rather than through a route that discloses how much it is buying.

China does not release any trade data on gold. The only way bullion markets can get a sense of Chinese purchases is from the monthly release of export data by Hong Kong, which last year supplied $53 billion (31 billion pounds) worth of gold to the mainland.

Finally, with a five year delay, the PBOC has finally woken up not only to the data disclosure...

One of the reasons why China could be encouraging more direct imports was because it wanted to avoid taking the Hong Kong-to-Shenzhen route that makes its gold purchases public, while China wants to keep the trade a secret, sources said.

 

"There is a view that why should people know how much China is buying," said one of the sources at a bullion banking operation in China. "With the Hong Kong route, there is a lot of transparency and people can easily monitor what is going in and out."

 

Another source said the move to open up Beijing "is partly driven by the fact that Hong Kong is perhaps a little too transparent", but it is also to accommodate upcoming free-trade zones and non-jewellery demand.

... but the discrepancies:

Besides the 1,160 tonnes of gold imported from Hong Kong last year, China had about 428 tonnes of local production. The WGC has said Chinese demand in 2013 was 1,066 tonnes, leaving industry guessing about the "surplus" of around 522 tonnes, not including the amount of direct imports.

 

The central bank last disclosed its gold reserves in 2009, when it announced that its bullion holdings had risen to 1,054 tonnes from 600 tonnes in 2003.

Which goes back to the original question: just how much gold does the PBOC own, and what other catalyst is it waiting for before it provides the much anticipated update:

Central banks tend to be very secretive about their gold purchases and sales because prices are extremely sensitive to their trades. Rumours last year of Cyprus selling its gold reserves to prop up finances sent the metal down more than 10 percent over two days - its biggest such decline in 30 years.

 

...

 

"The major increase in gold supply to the Chinese market in 2012 and especially 2013 could be partly related to large-scale official purchases," according to a Klapwijk-led survey for the WGC that was released last week.

 

The report said while a part of the surplus was being used for commodity financing deals, some of it could be for the PBOC as well.

 

Rumours on PBOC's gold reserves range from 3,000 tonnes to 5,000 tonnes. The United States is the biggest holder of gold reserves with over 8,000 tonnes.

 

Even a 1,000 tonne increase from last announced levels could prompt a jump in gold prices, which would make the PBOC very cautious about the timing of any announcement, said two China gold market analysts, who didn't want to be named due to the sensitivity of the issue.

One thing is certain: it is only a matter of time before China does reveal how much additional gold its has bought since April 2009, the date of its last official update. One other thing that is certain: the PBOC (and everyone else who has been piggybacking on this trade) has been able to buy up thousands of tons of physical gold at cheap prices not only due to the relentless manipulation of paper gold prices by central banks and their market proxies, but also by China itself: recall that it was Zero Hedge that first explained "How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring." In short, it had to do with gold's domiannt role (more so than copper) in Chinese financing deals, in which physical is bought in the spot market while gold futures are sold at the same time.

And since the physical gold would likely remain in China no matter what (likely transferred over to satisfy consumer demand), we suggested that the imminent unwind of various Chinese gold-backed funding deals, in addition to any reports out of the PBOC, would further add to the upward pressure on gold once financing deal intermediaries, were forced to cover their forward market shorts.

In either case, what the latest news out of China means is that what happens to gold once it enters the Chinese economy, where it is used not only as a simple commodity store of value, and money (much to the chagrin of the Chairmanwoman) but also as a major component of the carry-trade enabled gold financing deals, will be even more nebulous and an even bigger mystery than ever before. Just as the gold accumulating central bank wants it.

Still, if there is one thing that gives us comfort, it is that as we reported over the weekend, when it comes to the ordinary person on the street, the demand for physical, not paper, gold is higher than ever.

 

It is only a matter of time before this demand finally manifests itself in the manipulated price as well.

 

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LawsofPhysics's picture

Tell me again Krugman, what's the significance of "prices" if there is no such thing as price discovery...

shouldn't be long now... 


Bindar Dundat's picture

Stop -- who cares about gold -- I can't get the image of that  car out of my head. Someone shoot me!

RafterManFMJ's picture

Where's there's smoke, there's fire! 

They are doing everything but explicitly instructing you to buy gold, and buy it with both hands.  And yet the sheeple sleep...

Oh regional Indian's picture

Should we call it Zero Dark 30,000?

BaBaBouy's picture

THIS IS THE WAY YOU ACCUMULATE VERY VERY VERY CHEAP ... GOLD ...

Just As FORT Knox Is Void Of Any USA-OWNED GOLD.?.

DoChenRollingBearing's picture

 

 

The Central Bank of DoChenRollingBearing also buys gold from time to time.

But, it will follow the Bank fo China in not telling the world how much.

goldhedge's picture

Imagine if the car was gold plated then.

 

idea_hamster's picture

to accommodate upcoming ... non-jewellery demand.

Thank you and good night.

Winston Churchill's picture

Just imagine Hitlary naked, you will forget the car.
Probably insane, but no car.

1stepcloser's picture

The american made False Flag is superior in every way

unrulian's picture

 

Stop -- who cares about gold -- I can't get the image of that  car out of my head. Someone shoot me!

 

this might help: http://eyebleach.com/

 

 

unrulian's picture

 

Stop -- who cares about gold -- I can't get the image of that  car out of my head. Someone shoot me!

 

this might help: http://eyebleach.com/

 

 

Bunga Bunga's picture

Even if gold becomes worthless and you are broke, you can still decorate your wife with that and therefore she will love you. Gold is like an insurance for bad times, no matter what the prices does.

post turtle saver's picture

China goes dark... ROR... like they were ever "light" to begin with... say the words "Chinese accounting" to anyone close to finances and get ready for some long and loud belly laughs

Urban Redneck's picture

China may have gone dark but someone switched on a light at the other end of the underground railroad a few months ago. You just have to know where to look...

http://www.ezv.admin.ch/themen/04096/index.html?lang=en

Jack Lew must have pissed someone off because there's actually an official English translation.

magnumpk's picture

It occurs to me that perhaps China is waiting for a crisis/collapse in the dollar before it announces its holdings.  Thoughts?

Amish Hacker's picture

Or waiting for the right moment to cause the collapse of the dollar by announcing---and displaying--- its true gold holdings (probably some multiple of the numbers in this article), while demanding a new international monetary system that's friendlier to the yuan. 

McMolotov's picture

Half-joking nerd hypothesis: Animosity between the US and China might be a ruse, and at some point the two countries could form a military and economic alliance to take over the rest of the world, like in Firefly.

JRev's picture

Down-votes from mental midgets abound, because though you jest, that's EXACTLY what's going on. China is a colony of the Anglo-American Establishment, as is America. Have been for a long time. The fact that so few, even within an "awake and aware" community, recognize the history of the Rhodes Roundtable in an intimate enough fashion to understand that a wealth transfer from West to East is about equalizing commodity holdings for a new global monetary order, not some grandiose "economic war," is disheartening, to say the least.

...or do some of you dopes actually believe the Empire's Hong Kong handover earlier this century was genuine? Don't make me laugh. Gold Standards are ALWAYS a predicate to fiat tyranny, and a global Gold Standard is a prerequisite to appease not only individual sound monetarists, but more importantly Nation-States, ahead of the ushering in of global fiat control. Unless, of course, you also believe that the Rockefeller Foundation-funded National Geographic provides accurate metrics for mined and refined above-ground gold available for investment, in which case you're probably beyond help. America has much more gold than we're being told; the Rhodesians are bull-headed warmongers, but they're not stupid.

 

Educate... before it's too late.
http://peacerevolution.podomatic.com/entry/2014-04-04T04_47_18-07_00

 

Doubleguns's picture

It would add an additional crushing blow to the dollar during a dollar crisis or could be strategic tool to keep USA toeing the line so to speak. 

HardAssets's picture

Well, if you REALLY want to get more of something -

wouldn't you want those you might compete with in the market remain in the dark?

In a collapse, those with gold might very well announce gold currency backing of their currency, if even partial backing.

Soul Glow's picture

Well, I guess that gives us more time to buy too.

DosZap's picture

"in a move that would help keep purchases by the world's top bullion buyer discreet at a time when it might be boosting official reserves."

 

It MIGHT be boosting reserves, ROTFLMAO!!!
savedeposit's picture

You maybe can't eat gold, but he you can drink it if you like !

https://www.google.nl/search?q=bols+goldstrike

john39's picture

gold was medicine in ancient times, and still is.  similar to silver... can be very beneficial to the body when done properly.

Fix-ItSilly's picture

We can't get an informative article on Federal Reserve gold holdings, but someone feels they can write with authority about China's?

JustObserving's picture

Rumours last year of Cyprus selling its gold reserves to prop up finances sent the metal down more than 10 percent over two days - its biggest such decline in 30 years

That is absolutely ridiculous.  Cyprus had only 13.9 tonnes of gold worth about $550 million compared to gold bullion in the world worth about $3 trillion.  So Cyprus gold represented 0.018% of world gold bullion and yet it was enough to drive down gold prices down by 10% or $300 billion.

The Fed is constantly attacking gold (and silver) using High Frequency Trading computers.  The Cyprus gold sale rumor was just a red herring.


Amish Hacker's picture

As was the story, repeatedly planted in the media over the past few years, that the IMF was going to sell its gold and use the proceeds "to help the poorer nations of the world."

JustObserving's picture

The icing on the cake was that Cyprus decided not to sell its gold.  So a tiny phantom sale allowed the Fed to steal $300 billion from gold investors.

Cyprus central bank has no plan to sell gold reserves

Here- Reuters, Fri Dec 13, 2013

This article was by some quirk was just released on Friday the 13th - I suppose to show what a joke this was on gold investors (that Cyprus was ever going to sell its gold).

http://seekingalpha.com/article/1907421-gold-completing-bottom-as-cyprus...

Cyprus has no plan to sell gold reserves to fund its 10 billion euro ($13.75 billion) bailout, officials at the central bank said on Friday.

Cyprus's government in April undertook to look into selling its gold reserves to raise 400 million euros to help finance part of its EU-IMF bailout.

 "We do not intend to sell the gold," a senior official at the central bank told Reuters, declining to be identified.

http://www.reuters.com/article/2013/12/13/cyprus-gold-idUSL6N0JS1N220131...

Bastiat's picture

The "IMF Gold" was mostly loaned to the IMF by, guess who?  The US.  They can't sell it without explicit permission from the congress if I recall correctly.  Originally that was to provide some protection--not that it would now.

USGrant's picture

Wasn't Strass-Kahn deposed as head of the IMF because he began to question wheather or not IMF gold was still at the NY FED? The answer must be no.

bonin006's picture

I think it was because he proposed replacing the USD with IMF SDR's, and also, because he was going to run against Sarkozy, France was quick to reject his claim of diplomatic immunity.

Latitude25's picture

It's incredible the level of disinformation even with articles like this one which support high demand.

Kaiser Sousa's picture

"The Fed is constantly attacking gold (and silver) using High Frequency Trading computers."

u mean like last night....when no Asian markets would be opening....

http://www.kitco.com/charts/livesilver.html

Millivanilli's picture

I saw that too.  Laughed.  Don't really give a fuck at this point.  I stack and stack because it is really beautiful stuff, and important for industry.

rosiescenario's picture

Yeah....man that was about as obvious as it gets.

Al Huxley's picture

Regardless, the traitorous FIs who are profiting by selling out the western world's real money, simultaneously manipulating the price artificially lower (and no doubt filling their own pockets at the bottoms) will probably succeed in setting new lows on this leg down.   Unfortunately, when the magnitude of their treason finally becomes known, they'll likely never be held accountable for their role in the destruction of our financial well being.  Bankers of the worst kind truly own the world now.

LawsofPhysics's picture

I'd argue that the bankers/politicians are simply the primary mechanism by which a relative few people/families maintain and control the population.  These people have "title" to the productive capacity of numerous real assets.  Land, oil wells, mines, factories, tech companies etc.

It is and will always be about power and control and understanding what real wealth is and real wealth has nothing to do with paper, aside from a mechanism to usurp individual rights and rights of ownership etc.

Al Huxley's picture

That's why I qualified it as 'bankers of the worst kind' - I think we're talking about the same people/families. I'm not referring to the regionals, small commercials or even the big dumbass TBTFs by and large...

Latitude25's picture

I really don't think new lows are even wanted at this point since it would drive Asian buyers into another frenzy which is undesirable in the west  since it only accelerates default.

heavy.metal's picture

I've been expecting new lows since last december's sub-$1200 lows. But then I noticed how the GLD raids have become less and less effective. It's been at 800 tons since the beginning of 2014!!

This means GLD is in "strong hands" of sorts. Or as strong as it gets for GLD (if they're not giants with the ability to redeem, it's a bunch of clueless idiots holding IOUs).

In any case, if they want to extract more physical out of it again, they will have to do a REAL CARNAGE to the price, which for GLD suckers it means panic-sell and for Asian buyers (and me) means panic-buy.

I don't think the market can stand it. But if they're so desperate to try, I'd say let 'em.

 

beegle's picture

why would the chinese ever want to show the world that they are buying lots of gold ? whats the point ? 

NotApplicable's picture

Pissing off the goldless Germans would be about the only reason I can fathom.