Solving the Secret Behind the Chinese Gold Market
Solving the Secret Behind the Chinese Gold Market BY
TDC Note – This article was originally published at The Epoch Times in March 2017.
Expert estimates total holdings at 19,500 metric tons
The world is full of golden rules. There is one for every field—ethics, communication, fashion. But there is only one that counts: the golden rule of money, “Whoever has the gold makes the rules.”
China, it seems, wants to make the rules in the international monetary system, which is why it has been acquiring vast amounts of gold through both private and official channels.
Because of the obscure nature of the Chinese gold market and the reluctance of Chinese officials to show their hand, nobody has been able to accurately calculate how much gold the Chinese have acquired since 2000, when they began amassing it.
Enter Koos Jansen, an analyst with Singapore bullion dealer BullionStar. He has studied the Chinese gold market for years and recently came up with an estimate of total Chinese gold holdings: 19,500 metric tons, or 21,495 U.S. tons, at the end of January 2017.
“They have promoted gold ownership as a store of value since at least 2002, but more so when they introduced the ‘storing gold with the people’ concept [a campaign encouraging private citizens to buy gold] in 2004,” said Jansen.
According to Jansen’s estimates, total private holdings, including those of individuals and firms, are 15,500 metric tons. The official reserves of the People’s Bank of China (PBOC) are around 4,000 metric tons.
This would make Chinese the second biggest holders of gold after India, where citizens are estimated to hold 20,000 metric tons of gold in jewelry and other forms. Private sector holdings for the United States are unknown, but the Treasury still holds 8,134 tons in official reserves.
But where did China get all this gold, when in the year 2000 it only had about 4,000 tons in total?
The first piece of the puzzle is domestic mining.
“In the 1970s, when China needed foreign exchange, that’s when they started their mining industry. They were supposed to start exploration, and the people were incentivized to mine gold. That’s why there are so many gold mines in China.” He pegs the number at around 600.
Those 600 mines produced 490 tons of gold in 2015, making China the biggest producer, ahead of Australia, which produced 300 tons.
Selling Into a Black Hole
The next piece of the puzzle is imports from other countries. According to Jansen’s estimates, China imported about 1,300 tons of gold in 2016, mostly through Hong Kong but also directly from Switzerland and the United Kingdom.