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JOHANNESBURG (miningweekly.com) – China’s announcement on Friday of “incredibly small” official gold holdings – at a level less than half of the market consensus – has been met with scepticism.
China put its official gold holdings at 1 658 t, compared with the last reported April 2009 figure of 1054 t.
“We don't believe the figure, but we struggle to understand the motivation for down-playing it,” London bullion broker Sharps Pixley commented.
On declaring its official gold holdings for the first time in six years, the surprise was less that the Asian giant had done so and more at the “incredibly small figure which is less than half the market consensus”, Sharps Pixley’s Ross Norman wrote in a note.
The 1 658 t official gold reserve puts China five places behind the US, which holds 8 133 t of gold, Germany at 3 383 t, Italy at 2 451 t and France at 2 435 t.
Consensus was that China’s gold reserves were considerably higher that Germany’s and Sharps Pixley’s contention is that the under declaration might be related to China’s seeking a place at the top table in financial markets by having its currency accepted under the International Monetary Fund’s special drawing rights rules at a meeting to be held in October.
Such acceptability would have the Chinese Yuan included by global central banks as a reserve currency.
“As part of this process, China would need to fully declare its gold reserves; in that sense the timing is as expected - its just the amount that makes no sense,” Norman elaborated.
With its equity market in freefall, a higher gold reserve declaration would have put more confidence into domestic investors, which has led others to speculate that the 1 658 t might reflect the actual gold reserve position.