China’s Support of Commercial Gold Buying May Hide Effort to Boost Reserves

China’s Support of Commercial Gold Buying May Hide Effort to Boost Reserves

May292013

Written By:The WealthCycles Staff

There is a dichotomy in China’s approach to the gold market. Officially, the government maintains a very small percentage of central bank reserves in gold. Yet the Chinese people are importing gold at an unprecedented rate. All may not be as it seems.

The People’s Bank of China—the country’s central bank—officially holds1054 metric tons (mt) of gold, which amounts to 1.8% of its total reserves (pricing the gold at spot). In a recent press release, the vice governor of the bank confirmed the size of the gold reserve and ruled out announcing an increase in its level. Any increase in gold reserves, he stated, would raise prices for consumers and investors, an outcome not desired by the bank. This is the first statement of the People’s Bank of China gold reserves since 2009.

China officially last added a whopping 454 tons to reserves in 2009, after accumulating the money over the previous six years. More recently, China has posted imports from Hong Kong. This does not exclude other points of import or domestically mined gold. Gold imports from the island into China totaled 135.5 tons between January and March 2012. China then went on to import another 103.3 tons in the month of April alone. In other words: in the first four months of 2012, Chinese purchases have increased by an unprecedented 782% over 2011. Eric

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