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LAWRIE WILLIAMS: China’s official gold reserves unchanged – again

The Chinese central bank announces its latest forex reserve position early in the month and tells the world that its gold reserve position – in terms of volume – remains unchanged at the end of April yet again – for the 18th successive month.  For a country which has often implied that it sees gold as an important constituent of its reserves going forward this, as we have pointed out several times beforehand is something of an anomaly.  With a long term track record of only announcing its gold reserve increases at multi-year intervals we have assumed that the nation, which is comfortably the world’s largest gold producer, is yet again building up its gold reserves in non-reported accounts - perhaps held by 'independent' state-owned enterprises - which can be moved into official figures at a later date.  We further suggest that it will only release the true figure (if indeed it is even then a true figure) when certain targets are reached and it is deemed politically expedient to let the world know what its actual gold reserve position is.

It should be remembered that the IMF, which records national gold reserve figures and releases these every month, has no way of checking member nations’ own figures and is totally reliant on the figures reported to it.  In this respect it is possible for any nation, not only China, to misreport their true gold reserve positions in a similar manner.  Maybe I’m being too cynical here, but it is certainly possible the whole table of reported gold reserves as released by the IMF, is more of a fiction than a reality!  We certainly don’t believe the Chinese figure as reported to the IMF which now puts China as the sixth largest national holder of gold, having been overtaken by Russia which has been reporting monthly gold reserve increases at the rate of 200 tonnes a year plus.  The real Chinese figure is undoubtedly considerably higher.

Overall China’s forex reserves are reported to have fallen in April to US$3.1249 trillion.  According to China’s Xinhua news agency, the State Administration of Foreign Exchange attributed the drop to the weakening of non-dollar denominated currencies against the US dollar and lower asset prices (which will include the Chinese gold given that the gold price in dollar terms dropped in April). Cross-border capital flows and transactions are reported to have remained stable.

Total Chinese forex reserves are thus at a five-month low, but remain still by far the world’s largest.  They may be affected by the apparent U.S./China trade dispute, but the Chinese say that any such fluctuations can be ‘managed’.

08 May 2018

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

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