LAWRIE WILLIAMS: China Gold Reserves – Another Month, Another Zero
LAWRIE WILLIAMS: China Gold Reserves – Another Month, Another Zero from Sharps Pixley
This is beginning to sound like a broken vinyl record, but the Chinese Central Bank has reported yet another zero increase in its gold reserve in August – for the 22nd month in a row! The country’s total gold reserve – as reported to the IMF – officially remains at 1,842.6 tonnes although most China followers reckon the nation’s real gold reserve is considerably in excess of this figure but held in a way that the country does not feel the need to report the true amount until it is deemed expedient to do so. When it feels the time is right, the additional gold is then moved into the official forex data.
Thus on an official basis, the value of the country’s gold holdings fell in August by US$1.096 billion given the lower gold price, and this amounted to only 2.3% of the country’s total forex holdings, which themselves fell by $8.23 billion in August to still a massive $3.11 trillion. A fall had been anticipated by the markets but perhaps by not quite as much.
Regarding the reporting of its gold reserves China has quite a track record of delaying increases for several years at a time as is shown in this graphic from Nick Laird’s goldchartsrus.com website.
Chinese Gold Reserves as reported to the IMF
As can be seen, the country reported zero increase in its gold reserve from late 2002 to April 2009 and then again from April 2009 until July 2015 and on each occasion then reported massive increases, presumably built up over the previous 6 years, but held in some unspecified accounts which the Chinese government felt no need to report – at least that’s what they said at the time. Then from July 2015, somewhat cynically, the country did report monthly gold reserve increase for the 15 months prior to the yuan’s final acceptance into the IMF’s special drawing right (SDR) basket of currencies as the third largest constituent after the US dollar and the euro. The other two constituents are the Japanese yen and the UK pound sterling. And once this acceptance was confirmed, China abruptly ceased to report any monthly increases in its gold reserve. Make of that what you may! (The SDR was initially defined in 1969 as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system, the SDR was redefined as a basket of currencies which has changed over the years to the five constituent currencies noted above.)