China ups gold reserves at last – gold bulls disappointed

China has announced a long awaited update to its gold reserves but its figures will disappoint.  In the event, after reporting the same 1,054 tonnes for the past six years, the People’s Bank of China has now announced a paltry 604 tonne rise to 1,658 tonnes.  While this official figure enables China to leapfrog Russia to again become the world’s 5th largest gold holder according to IMF figures, the size of the uprating of the reserve, although by what might seem a significant 57%, will have come as a huge disappointment to gold bulls who had been predicting a very much larger figure.

Top 10 National Gold Reserves updated

Rank Country Gold Reserve (t)
1. USA 8,133.5
2. Germany 3,383.4
3. Italy 2,451.8
4. France 2,435.4
5. China 1,658.4
6. Russia 1,250.9
7. Switzerland 1,040.0
8. Japan     765.2
9. Netherlands     612.5
10. India     557.7

Source: World Gold council, IMF, lawrieongold

Indeed even the more conservative China followers, almost unanimous recently in the view that China had again surreptitiously been increasing its gold holdings, had been looking for a figure of virtually double that of the Chinese Central Bank’s latest announcement, while the ardent gold bulls had been looking for a figure of perhaps 5,000 tonnes or more.  But to an extent the new increase does at least demonstrate that China continues to manipulate its own gold holdings figure without reporting the actual levels to the IMF until it chooses a specific moment to do so. And even then is this really a true reflection of China’s actual gold holdings.   Thus speculation will continue that the country’s true gold reserves will still be far higher than those stated and the latest announcement will not really have changed anything, apart perhaps from sentiment.

China’s own gold production over the past six years has totalled somewhere around 2,500 tonnes and many will have seen this as being the absolute minimum level of accumulation by the nation’s Central Bank – which would tie in pretty well with the more conservative analysts’ predictions.

There had been recent additional speculation that the Chinese desire to have the Yuan as part of the make-up of the IMF’s Special Drawing Right would indeed lead to an official uprating of the nation’s gold reserves, perhaps bringing them more in line with top gold holders like the U.S. and Germany, but the latest increase falls far short of the levels necessary to accomplish this.

It looked as though initial gold price reaction to the PBoC announcement was muted, the market treating it as something of a non-event – which in reality it is.  However expectations of a much higher Chinese gold reserve level could be seen as being dashed by the announcement and this could have an adverse impact on gold holders who had been banking on something more.  As the details sunk in gold was being marked down.


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