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« Getting back to the gold standard | Main | A Gold Price Forecast of $7000.00/oz by James Rickards »

China's Gold Imports: Do We Really Know the Quantities?

The chart above gives us a clear picture of just how China has changed from being an exporter of gold to an importer of considerable amounts of gold in a few short years, however, is this the full story?

The Hong Kong Statistics Department reported that China imported 102,779 kilograms of gold from Hong Kong in November, an increase from October’s 86,299 kilograms. This is usually a reliable source of information regarding transactions between the two party's. However, are we to assume that Hong Kong is the one and only supplier of gold to China. Do we really expect that the Chinese, who are intent on building up their gold reserves, would go to just one shop? We doubt that very much, hence the cloak of secrecy surrounding Beijing when it comes to much matters. China is not known for indicating its intentions in advance and to this day keeps its cards close to its chest. And why not, why would you want to drive up the price of a commodity that you desire to own.

Its a strategy that other sovereign states and large investors should take heed of, it would have served Gordon Brown well before he bumbled on with his gold auctions a decade ago. That single act alone cost the United Kingdom billions when compared with today’s prices, but even back then adopting a low profile approach to gold sales would surely have served him better.

Now that the Chinese government allow and indeed encourage the people of China to own gold and the wealth of the Chinese individual is on the increase, we envision a time when demand will outstrip the level of supply that Hong Kong can deliver. Its been reported that Beijing’s technocrats, at the end of last month, shut all of the countries gold exchanges other than two of them in Shanghai. This tells us that despite the dramatic increase in imports as shown above and China's valiant efforts to mine gold, the demand is insatiable.

If this is the case, then other avenues of gold procurement and importation would be sort and may already be in place.

So dear reader the question is:

Who is supplying the additional, yet unrecorded quantities of gold to the Chinese market? Is it a covert operation with Russia, South America, an African State, or indeed any number of the illustrious banks domiciled in the west? We can only suspect that there is someone out there being economical with the truth.

Your thoughts are of course most welcome.

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Its nice to bag a couple of winners before January ended and hopefully 2012 will continue in a successful manner. We do have a number of ideas on the drawing board which we are looking to execute shortly, but only when the risk/reward environment is firmly in our favour.

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Reader Comments (1)

Dear Bob Kirtley,

I read your article "China's Gold Imports: Do We Really Know the Quantities?" and would like to share with you my opinion on the question you raised - "why would you want to drive up the price of a commodity that you desire to own?"

Because a strong gold price is of the interests of China's economy.

Apart from the intention of diversification of our reserves. I believe higher US doller priced gold will offset the appreciation pressure of renminbi, as the Chinese currency is affixed to the dollar. It benefits Chinese exports.

I am thinking China is buying gold from some of the eurozone countries or their banking system. Because unlike China or Russia, who have large amount of state owned properties that may be sold to pay off their debt if neccesary, the western countries have not much to sell except for its gold reserve. By doing so, it helped the debt criss countris to regain the cash they need at a reasonable price. Europe is the largest export market of China after all, we have to do something in our own way, a safer way. To end my mail, I quote Vice President Xi Jinping's recent words, "China will continue to support the efforts of the European Union, the European Central Bank and the International Monetary Fund (IMF) in its own way to solve the debt problems in Europe."

Have a nice weekend.

February 24, 2012 | Unregistered CommenterZQ

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