Friday, Apr 24, 2009
Does this explain the latest move up in gold?
FT: China reveals huge rise in gold reserves
China revealed on Friday that it built up its gold reserves by three quarters since 2003, making it the world’s fifth largest holder of bullion. Treasuries look out below.
Posted by mountain goat @ 01:19 PM (1240 views) Add Comment
13 Comments
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1. mountain goat said...
FT will no doubt block access
China reveals huge rise in gold reserves
Chris Flood in London
Published: April 24 2009 09:31 | Last updated: April 24 2009 12:32
China revealed on Friday that it built up its gold reserves by three quarters since 2003, making it the world’s fifth largest holder of bullion.
The move comes as European central banks continue to sell their gold and the International Monetary Fund has discussed selling some of its bullion reserves.
“This is probably the most significant central bank announcement since the Central Bank of Russia announced at the LBMA gold conference in Johannesburg in 2005 that it wanted to hold 10 per cent of its foreign exchange reserves in gold,” said John Reade of UBS.
Ahead of this month’s G20 meeting in London, China said reliance on the dollar as the world’s reserve currency should be reduced by making greater use of special drawing rights, the synthetic currency run by the International Monetary Fund.
This led to speculation China was considering changing its policy which has seen the majority of its foreign exchange reserves channelled into the US govermnemt bond market and other dollar denominated assets.
This has raised the question of whether China plans to increase the proportion of its foreign exchange reserves that it holds in gold and how much it could buy.
Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told the Xinhua news agency in an interview on Friday that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure. The value of its total holding was reported as $31bn.
China now holds 1,054 tonnes of gold and has overtaken Switzerland, Japan and the Netherlands to become the fifth largest official holder of gold.
The price of gold, which rose above $1,000 an ounce in February, on Friday rose to $912.80 on Friday after ending trading in New York on Thursday at $902.00.
“The comments [on Friday] indicate that China will buy more gold to improve its foreign reserve portfolio. This is a trend,” said Yao Haiqiao, president of Longgold Asset Management.
As the world’s largest gold producer, China might decide to source the supplies from local mines and through refining scrap metal.
The International Monetary Fund has indicated that it wishes to sell 403.3 tonnes of its gold holdings which has raised speculation that China might try to do a deal with the IMF.
But China’s central bank has other options available if it has decided that greater foreign exchange diversification is desirable.
“We would not rule out purchases on the open market,” said UBS: “China could buy gold in the open market and add to its holdings, although it would only be able to do so at a slow and steady rate.”
Virtually all major official sector sales have been restricted under the Central Bank Gold Agreement since 1999 but the IMF is not a signatory to this agreement so the proposed sale might provide an opportunity for China to boost its gold holdings rapidly.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.
“It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis,” he said. “The financial crisis means the US dollar’s value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage.”
2. general congreve said...
Some good news for a change, nice.
3. debtfree said...
"the International Monetary Fund has discussed selling some of its bullion reserves"
To China maybe ?
4. general congreve said...
Debtfree @ 3 China holds the cards at the moment. I suspect China negotiated to buy the gold from the IMF in return for some much needed dollars for the IMF. China probably made it a condition of the agreement that Gordon Brown announce the IMF gold sale at the G20 to temporarily lower the price to make their dollars go further on the purchase. Everybody is happy, for the meantime then. IMF get some much needed dollars, China off load dollars they don't want to be left holding in exchange for real gold money and the gold price is held in check for a while by the sale to help support the western nations corrupted fiat currencies.
5. mountain goat said...
China tends to do things low key. They don't trumpet they are going to buy something and then do it. But military issues might be different, this also in the FT today.
China's show of sea power challenges US
China paraded its growing naval strength yesterday, including previously unseen nuclear-powered submarines, in a military demonstration seen as a challenge to the US, the world's leading maritime nation.
To mark the 60th anniversary of the People's Liberation Army navy, a total of 52 navy vessels and aircraft were shown taking part in manoeuvres off the eastern port of Qingdao.
As naval delegations from 29 countries watched, Hu Jintao, president, also reviewed 21 foreign naval vessels.
"You could call this the coming-out party of the Chinese navy," said Bates Gill, director of the Stockholm International Peace Research Institute......
6. debtfree said...
@4. general congreve
defo.
china is holding something that is on the brink of collapse, so not a happy bunny.
I can imagine the G20 meeting with chinese telling the west they want to swap some of their trillion odd dollars for gold.
west say "no"
china say "Any of you f**king pricks move, and I'll execute every motherf**king last one of ya!"
OK
7. little professor said...
Bullion!
8. inbreda said...
@6 debtfree - Very funny, and probably close to the truth
@7 lp - p1ssed meself laughing. Set me up for the weekend. Cheers!
9. Don't Hold Your Breath. . . . said...
@ mountain goat said...
I've found you can get around FT block by posting the artical title into google and it then bypasses the the block if you go in through the search result.
10. Ned Coates said...
Excellent! Call me old fashioned if you will, but shouldn't that have read " you plicks"?
11. Goldtracker said...
That news about China is def helping the rise of gold. It will be interesting to see if there isn't some profit taking that will drive the price down a bit at the first of the week. The widget ExactPrice that I use to track gold, silver and platinum spot in real time is showing gold right now at $913.80. A number of folk are saying that if it breaks the 915-918 ceiling then it's going to show quite a bit of strength.
The IMF sales are definitely in play and will have an affect if they go through but it'll be small I think. The demand for physical gold is still so strong.
12. rotten tomato said...
Hmmmmm... so China has bumped Italy down to 6th place then... good for the Chinese!
13. dj2000 said...
Good going the higher gold goes the better, but in all honesty if all the currencies are inflated I can't see gold going too far through the roof