LAWRIE WILLIAMS: Chinese gold reserve misinterpretation
Much seems to have been made of an article on Chinese gold reserves which appeared here yesterday (See: http://www.china.org.cn/china/Off_the_Wire/2021-08/19/content_77702675.htm ) This suggested that China’s gold reserves were now at 14,727.16 tons and was quickly picked up by much of the gold-related media as confirming their suspicions that China’s forex gold reserves are, in fact, far higher than the 1,948 tonnes it reports to the IMF. However, our interpretation of the figure relates to potentially mineable gold reserves in the ground, which relates to a volume possibly supporting 40 years of gold production at the current rate of around 365 tonnes a year.
In fact, ongoing gold exploration will undoubtedly continue to increase this figure for reserves in the ground enabling China to retain its place as the world’s top gold producer for at least another few years before it is overtaken – probably by Russia - several years hence. We could be wrong in our interpretation of the figure from the China Gold Association, but it seems to us to be the most logical explanation as the CGA does not tend to announce anything that contradicts official Chinese government figures.
As to the true level of China’s Central Bank-held gold reserves, these most probably are in excess of the officially reported level. The country has a track record of only announcing reserve increases when it suits them to do so, claiming internal transfers from non-reportable accounts into its official central Bank-reported figures.
We have picked up reports that, for example, the Chinese military holds gold in its own right, and this is not, under the Chinese interpretation reportable to the IMF. Additionally we have speculated that gold held in the Chinese state-owned banking system, thought to total a substantial amount, could also be considered part of the state’s ‘stealth’ gold reserves, although similarly not reported as such.
China tends to be remarkably secretive in its announcements regarding its gold holdings. It is believed to be of the opinion that gold may well play a significant role in any future global financial reset and probably be part of any reserve currency basket developed by the IMF as a possible replacement for the current Special Drawing Rights (SDR) system.