Sun, Jul 29, 2018 - Page 14 News List

Is China slowly increasing its gold reserves?


Gold bars are pictured at the Valcambi SA precious metal refinery in Lugano, Switzerland, on April 24.

Photo: Bloomberg

The case for China raising its gold holdings seems compelling.

A potential trade war with the US that threatens growth, simmering tensions on the Korean Peninsula and this year’s slump in gold prices are reasons to buy.

However, People’s Bank of China (PBOC) data show the country’s gold reserves have not risen since Donald Trump was elected US president in 2016.

Still, this would not be the first time the central bank has kept silent while adding to its stash.

“The strategic imperative is probably still there to add some gold to reserves quietly bit by bit,” said Philip Klapwijk, managing director of Precious Metals Insights Ltd. “The reason to own gold as a portfolio diversification is even better given the rather strained relations with the US,” said Klapwijk, who has tracked precious metals for nearly 30 years.

China has officially kept its gold holdings unchanged at 59.24 million ounces since October 2016, or 1,843 tonnes, valuing them at US$74.1 billion as of the end of last month.

Bullion traded at US$1,219.30 on Friday, down 0.8 percent for the week.

Globally, central banks continue to increase gold reserves, albeit at a slower pace, adding 371.4 tonnes last year, according to the World Gold Council.

The PBOC referred Bloomberg inquiries to the Chinese State Administration of Foreign Exchange, which did not respond to a faxed request for comment.

The exchange manages China’s foreign exchange and gold reserves and foreign currency assets.

China has spent long periods before without revealing increases in gold holdings.

When the central bank announced a 57 percent jump in reserves to 53.3 million ounces in July 2015, it was the first update in six years.

In 2009, the country said it bought 14.6 million ounces since 2003.

The country started to disclose holdings monthly after the 2015 announcement. That coincided with the adoption of stricter IMF norms for foreign reserves and debt data as the government pushed for the yuan to be included in the Special Drawing Rights basket.

The IMF added the currency in October 2016, the last month that the PBOC announced an increase.

One reason that China might not actually be buying more gold for reserves could be that public purchases of bars and jewelry mean one measure of national holdings is increasing substantially and these assets could be accessed by the state if needed, Klapwijk said.

Second, as the world’s largest miner of gold, the country can always buy domestic production for yuan if it wished, he said.

The country would announce at some stage that it has increased gold holdings quite significantly, but the question is by how much, said Mark O’Byrne, research director of Dublin-based precious metals broker GoldCore Ltd.

Other commodities:

‧ Soybean futures in Chicago were up US$0.045 to more than US$8.80 a bushel in midday trading on Thursday. Earlier in the day they touched US$8.96 a bushel, the highest since July 9, which was shortly after China imposed duties on US exports.

‧ Two surveys of wheat-growing areas in the US and Canada continue to provide evidence that the spring crop will trail expectations due to heat drought.

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