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LAWRIE WILLIAMS: China gold reserve increases – back to the bad old days

Once again the Chinese central bank has announced a zero increase in its gold reserve for December, making a grand total for the year of zero as well.  Indeed the Asian dragon has purportedly not added to its gold reserves ever since its currency was fully accepted as part of the IMF’s Special Drawing Right back in October 2016 after a brief period of announcing monthly increases from July 2015 until then ‘in the interests of transparency’.  We have expressed our opinions of the veracity of the zero increase announcements before: See: China’s official gold reserves level – as believable as Santa Claus or the tooth fairy.  Suffice it to say that the zero increase announcements go against stated policies and advice from various Chinese politicians and academics over the years and looks to be taking us back to the bad old days when China would announce sudden big rises in its gold reserves after long intervals of zero official increases, as seems to be happening again now.

China’s excuse for doing this is that it had been building and holding gold in various accounts which were not reportable to the IMF, but were then moved into the officially announced foreign exchange reserve figure at perhaps five or six year intervals.  Whether the accounts holding the gold accumulations were being held by the government or the central bank – or as we have speculated by the state-owned commercial banks – is uncertain, but we assume some of the same smoke and mirrors hiding of the official figures is continuing today.  Indeed there is no guarantee that any of the Chinese gold holding figures are true representations of the nation’s real gold accumulations.

But this could also be true of any nation’s reported gold holdings.  The IMF relies on the figures it is fed as being reliable and accurate and does not check them.  There is thus considerable speculation among the more sceptical analysts that reported figures by many countries do not take account of gold loans and swaps and thus may not actually be available  There are also further claims that some of the world’s gold held in official reserves – notably that of the USA -  is of questionable quality and thus not easily tradable without re-refining and subsequent losses.

08 Jan 2018 | Categories: Gold, China

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