Opinion: China is about to come clean about how much gold it really owns

 

To join elite currency club, Beijing may agree to more transparency of its holdings

China may be ready to tone down its secrecy over state gold holdings — thanks to complicated maneuvering on the renminbi potentially joining the International Monetary Fund’s monetary reserve denominator, the special drawing right, later this year.

As part of diversification of reserve holdings, over the past five years China is widely believed to have amassed official gold reserves well above its officially reported total of 1,054 tons, a figure that Beijing has maintained unchanged since 2009 in data reported to the IMF. Gold mines in China — the world’s biggest bullion producer for the past eight years, with 2014 output of 452 tons — have been quietly selling some of their output to the state, possibly several hundred tons in some recent years.

The mystery over Chinese gold purchases has deepened at a time when central banks from other emerging-market economies, including Russia, Iraq, Turkey and Kazakhstan, have been overtly buying significant quantities of gold, while those from the developed world have stopped selling, pushing annual reported net central bank gold purchases to around the highest for 50 years. This is an important reason why gold’s price has remained in the $1,200 to $1,400 an ounce range in the last two years despite the sharp revaluation of the dollar.

China’s last revision to official gold reserves was in April 2009, when the reserves total was raised from just under 600 tons, a figure Beijing had maintained unchanged since 2002. China may wish to make an announcement of a new total, of a sufficient magnitude to create a stir on the gold market, at a time when international gold prices are stable or rising.

China’s present reported figure of 1,054 tons makes it the seventh biggest official gold holder. Russia overtook China last year as a result of Moscow’s gold buying to reduce its dependence on the dollar. Russia has official holdings of 1,207 tons, making up 13% of the state’s overall reserves, against a percentage of just 1% for China.

There has been speculation that China could announce at least a doubling of gold reserves to above 2,000 tons, potentially putting it in the same league as the other large gold holders — Germany (No. 2 globally with 3,384 tons, well behind the world leader, the U.S., with 8,134 tons), the IMF with 2,814 tons, Italy with 2,451 tons, and France with 2,435 tons.

Full article: Opinion: China is about to come clean about how much gold it really owns (MarketWatch)

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