China gold reserves: Expert warns the U.S. is losing control

A prominent numismatics expert has warned an unprecedented, and in-part covert, gold hoarding program being undertaken by the Chinese central bank has seen China seize control of the global gold market.

In February, China’s gold reserves increased for the 16th month straight according to Government data. The stretch includes the 2023 calendar year in which the country’s offical datas shows it increased reserves by a record 225 tons.

The Government data now shows China has 2,257 tons in its national reserves, which is equivalent to around 4.4% of the nation’s exchangeable foreign reserves.

China Gold

But many experts believe China gold imports and reserves are far greater than the official data suggests.

China gold hoarding

Jan Nieuwenhuijs, a respected expert in the field of numismatics (the study of currency) believes the actual volume of gold imported by China in 2023 was closer to 735 tons.

In additional, he notes China’s private sector net imported 1,411 tonnes of gold in 2023, and then 228 tons alone in January this year.

“Covert PBoC gold purchases can be computed by comparing the WGC’s (World Gold Council) data with what is officially reported by central banks,” said Nieuwenhuijs in a detailed report published this month.

China Gold

“The difference between WGC’s estimated buying and reported buying, arising from the fact that the WGC’s numbers are based on field research, is largely created by the PBoC. To compute what the PBoC secretly acquires every quarter I take eighty percent of total unreported purchases. Then, I add what the Chinese central bank reports to have bought.”

He now estimates China’s central bank now holds 5,358 tons of gold. That’s 3,108 tons more than the official Chinese data suggests.

A threat to the west

The China gold buying surge began following the onset of the Russia-Ukraine conflict when western countries such as the United States and the United Kingdom became net sellers of Gold and China became a net buyer.

Some, such as Francis Hunt have suggested the onset of the movement of gold from west to east in 2022 was a “manufactured gold window” that allowed China to buy gold at a discount.

Regardless, the buying spree has since handed control of the global gold market to China, according to Nieuwenhuijs.

“They (China) have taken over control over the gold price from the West,” he says.

“China’s massive gold buying over the past two years has fundamentally changed the gold market.

“Before 2022, Western institutional supply and demand was driving the price of gold and the price was more or less stuck to the “real yield” (10-year US TIPS interest rate). Ever since the war (in Ukraine) gold has been less sensitive to real yields and follows its own path.

“This divergence created by China has become one of the main driving forces of the gold price.”

“We will know more when trade and supply and demand statistics for Q1 2024 are released. Quite possible, the Chinese are flexing their muscles once again, forcing gold into the next stage of the current bull market.”

Theories on why China is importing so much gold

There are a wide range of views on the big question of why China is buying so much gold.

The most common is that China (having seen how the west used the financial system to attempt to impose sanctions on Russia in 2022) has accelerated a de-dollarization program in order to sure-up its reserve currencies with a tradable and un-seizable store of value.

Others have suggested it’s part of a global trend of declining confidence in the U.S. dollar.

Then there are intriguing theories about China increasing its gold reserves in order to launch a gold-backed central bank digital currency.

“How do you get people to show confidence in a new system if you are the BRICs (Brazil, Russia, India, China and South Africa)? Well, you’re going to resort to something that’s timeless, that’s physical, and China’s already been stacking as America’s been holding open the discount window for the Asians to move it over,” said veteran global markets analysts Francis Hunt in a previous article on Asia Markets.

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