Gold and silver prices are down in early trading Friday morning as another huge dump takes place in the “paper” gold markets. With global instability and poor economic numbers, someone decided to sell 1.4 billion in gold futures hammering precious metals prices. Gold last reported a.m. is $1136.90 and silver is $14.93.
China has reportedly increased its gold holdings by 57 percent in one month in first official update since 2009.
According to Zero Hedge:
The reason why everyone has been so focused on Chinese official gold holdings is that there has been no official update to the gold inventory of the world’s biggest nation, which have been fixed at 33.89 million oz since April 2009, a little over 1000 tons. In other words, the PBOC’s gold inventory has been “unchanged” for over 6 years which is in stark contrast to the ravenous buying of physical gold China has been engaging in for the past 5 years.
As we further noted in April, “with China disclosing so little about its hoard, finding out how much the central bank has in its vaults is of increasing interest to traders. Confirmation of bigger holdings would signal the importance of the metal as a reserve asset and boost market sentiment, TD Securities’ Melek said. At a time when prices are languishing, the buying could give support, said Suki Cooper, director of commodities at Barclays Plc in New York.”
In a rare comment on gold, Yi Gang, the central bank’s deputy governor, said in March 2013 that the country could only invest as much as 2 percent of its foreign-exchange holdings in gold because the market was too small. The press office of the People’s Bank of China in Beijing didn’t respond to a fax seeking comment sent on April 14.
Well, the long awaited moment has finally arrived and this morning, after a 6 year delay when, China finally admitted that it had been misrepresenting its gold holdings for a very long time, when it announced that its gold holdings had increased from 38.89 million to 53.31 million troy ounces, a 57% increase in one month.
The amounts to a new grand total of 1658 metric tons, an increase of 604 tons from the 1054 reported last in 2009 and which according to the PBOC was also the May 2015 total.
What is surprising about this release are three things:
First, while we welcome some long overdue “transparency”, the number is well below official expectations. This is what Bloomberg said previously: “The People’s Bank of China may have tripled holdings of bullion since it last updated them in April 2009, to 3,510 metric tons, says Bloomberg Intelligence, based on trade data, domestic output and China Gold Association figures. A stockpile that big would be second only to the 8,133.5 tons in the U.S.”
Second, China has finally admitted that its official gold numbers were fabricated (alongside all other official data released from the communist country) as it is impossible the PBOC could have bought 600 tons of gold in the open market in June when the price of the yellow metal actually dropped by 2%.
PBOC SAYS GOLD RESERVE INCREASE AIMS TO ENSURE SECURITY
And from the PBOC:
Gold as a special asset, with multiple attributes financial and commodities, together with other assets to help regulate and optimize the overall risk-return characteristics of international reserves portfolio. From the perspective of long-term and strategic perspective, if necessary, dynamically adjusted international reserves portfolio allocation, safety, liquidity and increasing the value of international reserve assets.
In other words, China had to wait until its stock market was crashing to present the “systemic stability” bazooka: gold.
Because in revealing a surge in its gold holdings, the PBOC is hoping to finally provide that final missing link that will boost investor sentiment, and get people buying stocks all over again.
And 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.
China is increasing gold holdings because it knows physical gold can and will defeat fiat currency, primarily the U.S. dollar. The Chinese know they don’t have to win a military war, just destroy the dollar and it’s game over for Washington.
Give us a call at 1-800-577-3195 Ext. #1 to begin the process of protecting your assets.
Gold Goliath is not your typical gold dealer.