During the past quarter, China has bought more gold than the United States and has more than doubled its total gold holdings, according to an analysis by Bloomberg News. The news comes as China continues to seek alternatives to the dollar. It has rarely been so keen to find an alternative to the greenback.
Turkey and Uzbekistan have been buying gold
Despite the fact that China has been buying gold for decades, the central bank has not been revealing its purchases. The latest revelation, though, is that the People’s Bank of China (PBOC) increased its gold reserves for the first time in over three years.
During the first quarter of 2019, the Chinese central bank raised its gold holdings by a total of 32 tons. Then in September, the bank increased its reserves by another 27 tons. The PBOC did not make a statement about its gold purchases after this date. However, the World Gold Council released data about gold purchases from central banks in October.
The World Gold Council estimated that there were substantial unreported gold purchases from China. That’s a huge number. If it’s true, it would mean that China has more gold than the United States, which is the top gold holder.
The Chinese central bank may have been making a strategic move to diversify its gold reserves. It has been accumulating gold at a rapid pace for the past 20 years. But it’s not clear if it’s doing it out of necessity or as part of a deliberate strategy.
It’s not clear why the Chinese central bank is concealing its gold purchases. Many analysts believe that the bank is simply trying to keep the gold price from soaring. But if it were to buy a large amount of gold, it would threaten the US dollar’s supremacy and create an unwanted surge in the yuan.
China has more gold than the United States
Almost one year after announcing a record 57% increase in gold reserves, China’s central bank took another breather from October 2016. In January and November, China reported only 1,700 tons and 32 tons of purchases, respectively. However, the Chinese government does not release the exact numbers according to this URL. Nevertheless, the latest report from the World Gold Council shows that China’s gold purchases have been a big deal.
The World Gold Council released a comprehensive study on the demand for gold in China. Its findings suggested that gold imports were well ahead of demand from jewelry buyers. Moreover, central banks purchased a record amount of gold in the third quarter of the year.
The report also showed that central banks have purchased more than 700 tons of gold so far in the current calendar year. It noted that “unreported buying” was a major component of the monetary signal. This is a major boost for the gold price, but not a sustainable one.
The Chinese Sovereign Wealth Fund holds gold in its own right. Other state-controlled entities in China also have gold in their vaults.
It seems that China has a lot more gold than it is claiming. The country reported an official net purchase of 400 tonnes in the third quarter, the largest single-quarter buy in records dating back to 2000. The country is now in sixth place in the global gold holdings rankings. The United States, France, Italy, and Germany have the largest official gold holdings.
China’s need to find an alternative to dollars has rarely been greater
Having a slushy dollar for the best part of a decade has its downsides. For instance, you are dependent on the American financial system to a degree that most nations aren’t too keen on. Aside from this, China is the biggest trading partner of over 100 countries and territories. That’s a lot of trade offs to scrounge up. A smorgasbord, if you will. Thankfully, this has led to some clever Chinese innovations like the nihilum, a Chinese currency that’s not too fond of a dollar. As such, the nihilum could be a resounding success. Hopefully, the Chinese can show the rest of the world how to behave in the 21st century and beyond. One could only hope they can do it in style, e.g., without a nuclear bomb detonating in their backyard. This is, of course, not to mention the fact that they’ve already got a nuclear deterrent in place.