PBoC gold holdings up 2,000-3,000 tns since 2009 – Mitsubishi

Otmane El Rhazi from The Bullion Desk.

The People’s Bank of China (PBoC) has probably been an active buyer of gold even though International Monetary Fund (IMF) statistics show that the nation’s official holdings have been stagnant at 1,054 tonnes since 2009, Mitsubishi said.

“Speculation had mounted recently that China would make a disclosure on gold ahead of the 5-yearly IMF review of the Special Drawing Rights (SDR) currency basket next month in order to include the yuan into SDRs,” the bank’s precious metals analysts said in a Tuesday repor.

That this has not happened suggests the PBoC may wait until the IMF makes a second assessment in October or that China is instead developing a SDR-type currency basket via the Asian Infrastructure Investment Bank (AIIB), which could be a rival to the IMF.

Nevertheless, a basic supply-demand analysis indicates that it is quite possible for China to have increased its holdings two- or three-fold since 2009, the bank said.

“China has mined over 2,300 tonnes since 2009, while recycled supply has amounted to just under 1,000 tonnes. Imports of gold from Hong Kong, one of the largest and more visible routes into China, have totalled over 4,000 tonnes in the last five years, giving a total supply of 7,300 tonnes,” Mitsubishi said.

On the demand side, the China Gold Association estimates total demand at about 4,700 tonnes since 2009, leaving an implied surplus of metal in China of 2,619 tonnes, some of which could have been absorbed by the PBoC.

“Putting all this together, the PBoC’s gold holdings have possibly increased by around 2,000-3,000 tonnes in the last six years since holdings were last reported. This would represent a theoretical maximum of around 4,000 tonnes of gold held by the PBoC,” Mitsubishi said, suggesting that the central bank could be the second- or third-largest holder of gold after the US and Germany.

Further purchases of gold by China are possible, would support physical demand and would help put a floor under prices, the analysts said.

“China will disclose its gold holdings some day and when it does the market may get an immediate upside surprise, but given that it will probably only disclose holdings once it is done being a net buyer, further upside may be limited,” Mitsubishi said.

 

(Editing by Mark Shaw) 

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