The truth is nobody really knows.
The Chinese now report the figure every month at the behest of the IMF, but the figure has to be taken with a large pinch of salt. I find it impossible to believe that a country that has increased it’s gold imports, solely from Hong Kong by 700% since 2010 only has 1797 tonnes of gold in its vaults. An educated guess would be closer to 3500 tonnes as reported by Bloomberg Intelligence, and even that may be well below the real figure.
So why all the secrecy around the figure? Well the main reason is the government doesn’t want their open secret – the Yuan to become the world’s reserve currency – to be undeniable. You see the Chinese need to accumulate a huge reserve of gold before they can make their big move on the dollar. In line with other major currencies of the world the Chinese need to have around 4% of their GDP in real, physical gold before the Yuan can even be considered a safe bet. However the Chinese are hovering around the 2% mark. A huge deficit.
This is why every month we are seeing huge import figures into China from every corner of the globe. This is on top of China being the world’s largest producer of gold and one of its smallest exporters.
The fear the Chinese government has is not reaching the magic number before the dollar collapses. This is due to the vast amount of US dollars they hold as foreign reserve. If the dollar devalues dramatically then potentially billions will be wiped out overnight, which is a risk they cannot afford.
All of this leads back to the secrecy surrounding the gold levels held by the Chinese. They cannot reveal they are buying and hoarding vast amounts of gold because the price would rise to the point where they could not afford to buy in the amounts required to reach the 4% they want and need. So what do they do. Manipulate the market with misinformation and secrecy to artificially lower the price.
The Chinese know they are running out of time to accrue sufficient gold before the coming economic storm. If they fail in their task they will be standing on the edge of an economic abyss with a $1.2 trillion weight around their necks pulling them in.
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