Koos Jansen
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Koos Jansen
Posted on 1 Oct 2015 by

Chinese And Russian Central Bank Continue To Add Gold To Official Reserves: 16 & 31 Tonnes In August

The People’s Bank Of China (PBOC) has added 16 tonnes of gold to its official reserves now totalling 1,694 tonnes in August 2015. The gain in August is the third monthly increment in a row after a period of silence by the PBOC since 2009. The change in reporting, the amounts reported and the fact the gold is mark-to-market is a clear sign of a strategy not merely aimed at SDR acceptance. More so to prepare for a post-dollar international monetary system.

China is joining Russia in increasing its official gold reserves on a monthly basis. Russia added a whopping 31 tonnes in August, the highest since March and the fourth highest in recent history. These two countries are by far the largest official gold buyers globally, which can only be seen in the greater scheme of things. China and Russia both form a threat to US dominance by the size of their economies (Russia is tenth largest economy, China is the second largest economy), the multilateral collaborations organized around the Eurasian continent, bold statements about the necessity of gobal de-dollarization and gold accumulation in anticipation of a new international monetary order.

The threat to the US dollar hegemony is underlined by adjustments in purchases of US government bonds (US Treasury’s – USTs) by China and Russia. US bonds have been the central pillar of the international monetary system for decades, but are not able to serve this purpose indefinitely. Issuance of USTs, to supply international reserve assets, gives the US an exorbitant privilege in funding to the detriment of all other nations. Furthermore, massive global demand for USTs lowers its coupon interest rate, feeding into to bubbles that eventually contaminate the world economy.


China’s USTs holdings have been steady since 2010, while its total foreign exchange reserves have mushroomed by $890 billion over the same period, from $2,761 billion in October 2010 to $3,651 billion is July 2015. Clearly the PBOC has diversified reserve assets worth hundreds of billions of US dollars. What the PBOC exactly has bought remains unknown – though we do know it has purchased physical gold.

In the next chart we can see that Russia lowered its foreign exchange (FX) reserves by $200 billion in 2008 , while it was not selling USTs or gold. In contrast, we can see that from the moment the Ruble came under pressure in 2014, Russia decided to sell USTs, while continuing to add gold. Additionally, the mixture of Russia’s FX reserves in January 2015 was 46.1 % euros and 39.6 % dollars, while in January 2014 it was 41.5 % euros and 44.8 % dollars.

Russia's International Reserves

In recent months China has followed a similar path. Downward pressure on the renminbi lead to a sell-of in foreign exchange reserves by the PBOC – possibly USTs were sold through a proxy – while it continued to add gold to its reserves. China and Russia signal the world they much rather prefer gold over US dollars.

China's international reserve assets

Although, in my view China’s approach in increasing its official gold reserves differs from that of Russia. Many clues suggest the PBOC has more gold than it discloses. Recent research has pointed out the PBOC is able to purchase vast quantities of gold abroad ‘of the radar‘. These gold flows do not commingle with non-monetary gold flows, visible in customs data from Hong Kong, Switzerland or the UK, that in the Chinese domestic gold market are sold through the Shanghai Gold Exchange to the private sector.

The reason for under stating its official gold reserves is that China is the elephant in the room, being the second largest economy in the world and having the largest FX reserves. China must covertly buy gold not to disturb the gold market or shock the international monetary system, as it needs more time to mature its domestic economy. The increases in China’s official gold reserves in July (19 tonnes) and August (16 tonnes) can be viewed as carefully weighed steps pushing for a post-dollar international monetary system. Gold being the US dollar’s Kryptonite.

Considering all mentioned above I don’t think the PBOC is honest in its reporting on official gold reserves. Very likely the People’s Bank Of China currently has more than 1,694 tonnes of gold stored locally and has not purchased 16 tonnes in August, but “16” was the figure they saw fit to disclose within their strategy.

Examples of the multilateral collaborations organized by China and Russia are the Eurasian Economic Union (EEU), the Asian Infrastructure Investment Bank (AIIB) and the BRICS Forum – projects that eventually will be interconnected. These institutions are meant to pave political and economic infrastructure, whereas gold is used to apply a shift in reserves and change currency management. The intensions from these newly industrialized nations are not hard to read. If they will succeed in coming years is secondary.

Koos Jansen
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  • Troy Ounce

    “Considering all mentioned above I don’t think the PBOC is honest in its reporting on official gold reserves.”

    Reason to believe that the next reserve currency holder will also be divisive, manipulative, predatory, violent, suppressive, lying, authoritarian, secretive, grandiose, narcissistic. Just like the present one.

    This is the world we live in. Buy more gold, I guess

    • http://PeterPalms.com/banking Peter Palms

      If the BRIC becomes the next reserve currency owner it could be a multi-national holder

      • Troy Ounce

        What puzzles me that it all has to do with “trust”:
        South Africa
        Now where is the “trust”?

  • joey

    There’s no doubt that China’s annual acquisition of Gold is more than what they say have in total. Rickards states he has evidence to show China’s hoard is closer to around 10,000 tons and McLeod believes it’s double that? Why did China come up with this paltry 1600 tons? Some say it’s a stroke of genius? Do they take us for fools?? No wonder they were stopped out of the SDR.

    • http://PeterPalms.com/banking Peter Palms

      Would’nt stopped out be the result of having less not more gold in their possession

  • http://roacheforque.blogspot.com Roacheforque

    I would probably add India into this calculation. There is no doubt the BRICS represent our best chance to restore working class prosperity globally – without working class wealth and disposable income, the global economy will continue to collapse. And yes, the redenomination of gold (historically and today) held by “third world nobodies” is the key.

    • http://PeterPalms.com/banking Peter Palms

      The total amount exhumed in the history of the world is approximately 183,600 tonnes, or 5.9 billion ounces. If we take that figure and multiply it by the closing price on June 16, $1,181 per ounce, we find that the value of all gold comes within a nugget’s throw of $7 trillion. Most of it owned by savers not traders.

      This is an unfathomably large amount, to be sure, yet it pales in comparison to
      total global debt. The world now sits beneath a mountain of debt worth an
      astonishing $200 trillion. That’s greater than twice the global GDP,
      which is currently $75 trillion.

      More surprising is that if gold backed total global debt 100 percent, it would be
      valued at $33,900 per ounce. So Gold’s price, upon which the settlement of
      these debts ultimately relies is vastly understated compared to the debt that
      held against a fiat currency that contains no gold or any other real money

      This debt is before adding the 1.2 quadrillion amount of derivatives outstanding
      which Congress states cannot be regulated

      • cartier112

        Yes, but you are including PAPER GOLD and how much value would that have if it was undeliverable. How do you price paper gold as compared to real gold? $100,000.00 of fiat money in my opinion when things start to rock and roll will bot buy $100,000.00 of the hard asset real gold. A few years out when we price gold we will be pricing gold not paper gold and I think everyone will be surprised at the value of real gold and the shortage of it.

      • http://roacheforque.blogspot.com Roacheforque

        Those figures could be roughly accurate, in dollar terms … but dollar terms are changing. The workout will be political, more so than mathematical, I think. And this includes war, which is difficult to denominate. Do we calculate the cost of war in dollar terms?

        Not to be unequivocal, but I do believe many surprises lie ahead among the many varied and opposing predictions.

  • cartier112

    The reason why China and Russia are buying and storing gold is not a secret it is out of belief that the US dollar will weaken. And there is this little game, China and Russia buy and store gold and then provide the world with a false statement as to how much they are holding, and, of course, the media and shockingly the gov’s say, “Oh China and Russia are not telling the truth, — bad people.” Well if they are not why doesn’t the real world do something about it and tell it’s citizens to own more gold. Example: If there is a shooter the WH says, “Get rid of your guns,” they don’t mind air time to get that message out which I disagree with. But where’s the message to the world if there’s a potential currency crisis coming? And, of course, gold is going to go up and everyone will awake one day and say, “Should have bought gold when it was cheap at under $1500.00 an ounce, I thought I should but there was no support for me to think that way,” well your support to own gold is in China and in Russia, but be patient.

    • http://PeterPalms.com/banking Peter Palms

      India does tell it’s population that any savings of currency they manage to make should be exchanged for gold with Shanghai Gold Exchange. The PBOC
      does not buy gold through the Shanghai Gold Exchange (SGE).
      PBOC purchases/shipments are not disclosed in global customs reports.

      As a consequence, everything we can see going into China (exports from other countries to China which are required to be sold through the SGE) and domestic mine supply (whichis mainly sold through the SGE) are being added to private gold reserves and does not end up at PBOC vaults.
      According to the China Gold Association (and global trade data), mainland
      net gold imports from 2010 until 2014 accounted for 3,967 tonnes and domestic
      mining output over this period totaled 1,979 tonnes; a combined 5,964 tonnes.

  • Wings

    Where is the USA gold? Does anyone believe it’s still in Kentucky? Does anyone outside of the insiders really know?

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