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Singapore gold analyst agrees with GATA: Official Chinese data may be false
6:42p ET Wednesday, June 19, 2024
Dear Friend of GATA and Gold:
In analysis today for Think China magazine in Singapore, the co-founder of Singapore research firm Plenum, Chen Long, echoes your secretary/treasurer's longtime assertions that no official gold reserve data is reliable, including China's, an assertion repeated in your secretary/treasurer's discussion last week with Soar Financially's Kai Hoffman, brought to your attention yesterday:
https://www.gata.org/node/23262
Your secretary/treasurer's comments were drawn from commentary published June 11:
https://www.gata.org/node/23251
Long's analysis, headlined "The Mysterious Gold Buyer in China," cites contradictions in Chinese gold purchase and reserve data, concludes that at least $200 billion in Chinese gold purchases are "missing" -- that is, not accounted for in official figures -- and makes some points made by your secretary/treasurer in his discussion with Hoffman.
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Those points are boldfaced.
Long writes the "missing" $200 billion in gold "is so much that it is unlikely that one mysterious buyer holds all of it. There are several possibilities that could explain where it has gone.
"The first possibility is that the People's Bank of China is buying more than it is disclosing. In this scenario, if the PBoC has massively increased its gold position, it may want to withhold a full disclosure in order to avoid shocking the market. It is in the PBoC’s interest to diversify its $3.4 trillion reserves away from the U.S. dollar, given the confrontation between the U.S. and China. It is believed that the U.S. dollar still accounts for over half its official reserves.
"The PBoC has not always disclosed its gold reserves on time. In June 2015 the PBoC disclosed a one-off increase of 621 tonnes. Nobody believed that it bought that much gold in one month, and most assumed the figure represented a delayed disclosure of previous purchases. If the 2,700 tonnes of missing gold from the past two years all belong to the PBoC, that would double its stated gold reserves to nearly 5,000 tonnes.
"The PBoC just announced that its gold reserves stayed flat in May, the first month it has not increased since October 2022. It is possible that the gold reserves did not increase last month because prices have gone up so much, and the PBoC has bought a lot anyway. It is also possible that it wanted to send some negative signals to bring down the price of gold so that it can buy more at lower prices.
"The second possibility is that there are other buyers we do not see. For instance, it is not inconceivable that the sovereign wealth fund may have also bought some gold, following the PBoC's lead. After all, the sovereign wealth fund may not want to put all its money in U.S. dollars either, but the China Investment Corp. does not disclose how much gold it owns.
"The third possibility is that the banks' reduction of gold holdings has been overstated and households' purchases of gold have been understated. While the domestic banks have reported a big reduction of gold assets, some investors may have turned to the foreign banks that also have gold import licenses. They may have increased their gold holdings without making disclosures, although we doubt that such increases could completely offset the decline of gold holdings at the Chinese banks."
Long's analysis comes perilously close to qualifying him for a tinfoil hat autographed by the members of GATA's Board of Directors. Fortunately for him, his analysis, like GATA's, will be ignored by mainstream financial news organizations, in thrall as they are to governments and central banks, and so he may escape censure for his political incorrectness. But he better be careful.
Long's analysis is posted at Think China here:
https://www.thinkchina.sg/economy/mysterious-gold-buyer-china
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
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