Is China Secretly Hoarding Gold?
The world of cryptocurrencies and technological advancements have not rendered gold irrelevant. An antiquated asset indeed, the price of gold per gram, stands at $48.60, as of the 5th of November, 2019. Global Central Bank Gold Reserves account for 34,000 tonnes of gold, which is roughly about 20% of the 175,000 tonnes of gold, available about the ground.
The United States is the world’s largest owner of gold, accounting for 8,133 tonnes of the precious metal. Add to that private and institutional holdings of gold, and the number rises to staggering 26,000-27,000 tonnes of gold in the United States itself. China seems to be picking pace, and has been accumulating gold at a frantic pace since 2013. This may lead to considerable implications in the future.
The Numbers behind China’s Accumulation of Gold
In 2007, China became the world’s largest producer of gold, taking over South Africa, and mining 276 tonnes of the metal. In 2017, China mined 430 tonnes of gold - almost 50% more than what Australia had in due course of the year. Mind you, Australia is the second largest producer of the metal in the world. As of 2018, China accounts for 15% of the total gold production annually. While China is considerably increasing its efforts towards mining the metal, astonishingly, it does not sell a single gram of gold abroad.
Not only that, but China has also ramped up its gold imports considerably. Since 2010, China has been importing gold at a frantic pace. In 2014, China overtook India as the largest importer of gold, going on to buy the metal from Singapore, Hong Kong, Switzerland, London and Australia. To put it into perspective, China has accumulated over 10,000 tonnes of the metal since 2000.
The numbers could be much higher than this – We can’t know for sure. Buying gold surreptitiously allows China to buy the metal at bargain prices. If the world came to know how much gold China really has, a scramble for gold would ensure, and its price would shoot up considerably. According to Julian Philips of the Gold Forecaster:-
A gold rush is the last China would want while they’re accumulating the metal. It should also be noted that not all the gold mined and imported to China goes to the Central Bank of China. China encourages the private accumulation of the metal as well. All the numbers point to China accumulating gold at a frantic phase, while being shrewd about their acquisition. This could have severe implications in the future.
There is no way China will declare that it has over 10,000 tonnes of gold. They are unlikely to reveal this number anytime soon. Gold holds massive power, even in today’s age, and China are doing the smart thing by accumulating the metal while its price remains aggregated. Declaring its gold assets to the public eye would drastically increase the price of the metal, which doesn’t make sense to them when they are still accumulating the metal.
It would also disrupt the forex market considerably, leading to a Yuan backed by gold to strengthen significantly. While this is a part of their agenda, if not most of it, China prefers to hoard more gold as of now, and declare its assets when the time is right. China wants the Yuan’s price to remain low for trading purposes. Also, China has a massive United States dollar holding in its foreign exchange reserves, so the country would rather protect the value of its holding for now, while they continue to stamp their authority on the market at large.
Declaring their gold holdings may also be a direct challenge to the United States’ authority and supremacy. China is not ready for that as of now, nor do they want to risk the possibility of upsetting the United States. Along with China, Russia too has been weighing in on their gold reserves. Russia and China have been exchanging their United States dollar reserves to buy physical gold. The two countries rank among the top ten countries in due accordance to a gold capacity index.
While China could do with Russia’s backing in due course of time, they are not going to risk anything as of now. China is hoarding gold, and the time for a global shift of power may not be too far away. As of now, China will continue to hoard gold, away from the public eye, and in the shadows.
Michael Kuchar: My area of expertise is forex and cryptocurrency trading. I specialize in technical analysis, namely in chart pattern setups. I educate traders of all levels and I believe that a prerequisite to successful trading is always knowing the risks of the game. As of now, my primary interest lies in cryptocurrencies, especially in Ethereum and in decentralized applications.
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