LAWRIE WILLIAMS: China says it added 10 tonnes to gold reserves in July

The People’s Bank of China (PBoC)- China’s central bank, says it added a further 9.96 tonnes of gold to its forex reserves in July – a seemingly particularly astute move given the strong recent advance in the gold price so far this month.  This is just one of the world’s Central Banks adding regularly to its gold reserves this year.  So far the PBoC says it has added a total of around 84 tonnes to its reserves over the first seven months of the year.  However, the latest increase is yet another reduction in the level of its monthly reported reserve accumulations after adding 10.26 tonnes in June.  China is thus tending to add rather less gold to its reserves than Russia which has announced additions of around 96.5 tonnes in the first half of the year.  It won’t report any reserve increase for July for another couple of weeks (it usually announces any gold reserve increases on the 20th of the month).

Of course, as we have pointed out beforehand, the veracity of the actual reserve additions by China – or for any other central bank for that matter – is always open to question as reported figures are not independently audited.  The PBoC has a track record of announcing what appear to be misleading statements regarding its gold reserves in the past in going for long periods of reporting zero increases and then announcing mega rises which must have been built up during the years and months of zero addition reporting.  China has claimed in the past that this gold has been lodged in accounts it has not been required to report to the IMF and only reports this when it is merged into its forex figures at a time it feels appropriate to let the world know.

Overall though even the total amount of gold held by China in its reserves has been questioned by many analysts – some think it is actually considerably more than the total of a little under 2,000 tonnes currently reported to the IMF.  The nation is thought to have a target of at least matching the U.S.’s reported holding of 8,133.5 tonnes (a figure which many also doubt given the resistance to it being audited).  China is thought to believe that gold holdings may have an increasingly important role to play in any future global monetary re-alignment which may come about in the next few years.

While Russia, China and Kazakhstan are perhaps currently the most consistent purchasers of gold for their reserves, the overall level of Central Bank buying remains impressive  According to World Gold Council figures Central Bank gold buying reached over 650 tonnes in 2018, while its latest quarterly Gold Demand Trends report puts first half 2019 gold purchases at 374.1 tonnes, suggesting that full year 2019 should at least match the 2018 figure.  Deposits into gold ETFs remain strong too, which bodes well for gold demand in the current year, and although supply may also rise slightly due to higher gold prices enhancing scrap sales the overall balance is likely to be positive for gold.

In a survey of Central Bank buying intentions,  8% of central banks said they expected to increase their gold holdings in the next 12 months.  Perhaps even more significantly a higher proportion of emerging markets and developing economy central banks (11%) expect to increase their gold holdings although the majority of central banks do not anticipate a change in their gold holding level.  But this is as usual for the majority where reported gold holdings tend to remain unchanged year–in-year-out.

08 Aug 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com