Two months ago, when China stunned the world in announcing it had officially “bought” 604 tons of gold for the first time since 2009 (this was untrue: China merely admitted to the world what we had reported for years, namely that it had been patiently accumulating gold via untraceable accounts and only now decided to reveal a fraction of its total holdings), we said that, contrary to the wrong “one-and-done” pundit assessment, China would continue “adding” to its gold holdings. To wit:
… now that the seal has been finally broken after so many years, and since today’s update indicates that Chinese gold numbers are clearly goal-seeked with a specific policy purpose – to boost confidence – we await for the PBOC to start leaking incremental gold holding data every month (and especially in months when the market crashes) which will bring us ever closer to what China’s true gold holdings are.
One month ago, we were proven correct when China indeed announced it had “added” another 19.3 tons of gold in July – even as it was dumping record amounts of Treasurys at the time as we previously reported.
Then, overnight, we got a second confirmation when the PBOC announced that China’s official gold holdings had risen again in August, increasing by 520,000 troy ounces, or 16.2 tons (which is more than 3 times the entire registered gold inventory in the Comex vault system), and bringing the new total to 54.5 million ounces, or 1,694 tons of gold. In dollar terms, Chinese gold holdings rose from $59.2 billion at the end of July to $61.8 billion.
However, even as China is “buying” gold, it is still doing so at half the pace of neighbour Russia, which as reported several days ago added 1,000,000 ounces or about 31 tons in the same month, bringing its total to 42.4 million ounces, or 78% of China’s holdings. Between China and Russia, some 47 tons of gold were purchased in the open market in past month.
Naturally, as has been the curious case for the past several months, the confirmation that China keeps buying gold merely served to push gold lower, and as of this moment gold was down to $1,117/ounce: the lowest level in two weeks.
A Commerzbank analyst had this to say about China’s ongoing gold buying spree: “Given the size of Chinese currency reserves and the extent of its domestic gold production, even higher gold purchases might have been assumed. That said, the decrease in currency reserves may have put the brakes on buying interest of late, in August, currency reserves declined to a two-year low of $3,557.4 billion.”
This is almost correct. The real message here is that in a month in which China (together with its Euroclear-held Belgium holdings) sold a record $83 billion in Treasurys…
… it had no qualms about rotating the sale proceeds into gold. Or at least that’s what it was eager to telegraph with its “data.”
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