China Claims To Already Have the Third Largest Gold Reserves in the World

It should be noted that this report is sourced from 'ScrapMonster.' I have found it on the webpage for the Shanghai Metals Market. The numbers in this article do not agree with the latest reported number for China from the World Gold Council, which by the way is hopelessly out of date. 

More importantly, there is no IMF report that I have been independently been able to find that discloses this information.   If this story below is true, then it is quite the news piece, since details on China's gold holdings are of great interest to many. The number in the story below is credible, which first sparked my interest in it.

Let's see if the Chinese confirm or deny this, or more likely, continue to say nothing and buy.

Here is a recent news item about this controversy from Bloomberg:

"After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons [central bank holdings plus private gold holdings]. When taking away gold uses for jewelry, industrial and other categories and adding implied bar demand to central bank holdings, the figure is likely closer to 2,710 mt.

"China would need 10 years for its gold holdings to catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions. Based on run rates during 2013, China may have added 622 metric tons of bars to its central bank holdings, after adding 380 mt in 2012."

This news item below is purportedly what China is willing to 'officially report,'` that they have expanded their official gold reserves by 76%, to 2,710 tonnes.   If this is accurate then China is now just behind the US and Germany, which say that they hold 8,133.5 and 3,391.3 tonness respectively.  China has already surpassed Italy and France. 

Given the 2,710 tonne figure I have to wonder if the author of the Scrapmonster piece picked it up from Bloomberg and then ran with it.  It would make some sense, although Bloomberg does not mention anything about the IMF.

There is some controversy regarding the disposition of Germany's gold, much of which is held outside that country, as you would know if you frequent this café.  More on that later.

 Privately there is a great deal of speculation that the heavy flows of gold through Shanghai are not merely going to the public market in China, but are also helping to fill their central bank reserve vaults even further than they will admit. 

As you may recall, China is encouraging its people to place some portion of their personal wealth in precious metals.

It is easy to sneer at goldbugs, those who find a refuge from abusive monetary policy in the traditional safe haven of precious metals, but it quite another thing to tell the 800 pound gorillas in the global market, China and Russia among them, that they do not understand anything about risk and money. 

Agree with them or not, they are making their case for what they think will happen in the future of global money, and are putting some of their own sizable wealth down on the table to back it up.  And if the models of a few academic economists do not agree with them, they really do not care.  They have their own economists, and their own interpretations of history, and their own needs and agendas.

And there are other countries who are now desperately seeking to bring their gold home from the custodial storage in New York, which is an artifact of World War II and the Cold War.  And some of them, like Germany are finding that it is not so easy to persuade the New York Fed to return it.  We can only wonder why.

These are central banks, who seem to be managing their national affairs with quite an informed and determined outlook towards the future. To completely ignore the implications of this, which to me seem quite clear, is nothing short of willful blindness.  If we just shut our eyes and say no, then the change will not affect us.  Except that the smart money is already on the move behind the scenes.

There is an ongoing debate happening now among the nations' bankers about the suitable replacement for the de facto Bretton Woods II arrangement which bases global trade settlements on the fiat dollar, no longer tied to gold since Nixon made a unilateral decision to shut the gold window.   They have made public statements about what they would prefer to see adopted, and Russia made this discussion a formal topic during its G20 chairmanship last year.

It has been a long time coming. But change is going to come. It always does.  And it may wash over those who stubbornly refuse to even admit that it is happening.

Shanghai Metals Market
China Expands Gold Reserves, Surged Past Italy & France in Ranking
By Paul Ploumis
Jan 15, 2014 08:36 GMT

BEIJING (Scrap Monster) : Claiming to have vaulted France and Italy in terms of gold reserves, China has announced that they have expanded their gold reserves by 76 %, thus becoming 3rd largest gold reserves in the world. According to the voluntary reporting system of IMF which monitors international gold reserves, China’s gold reserve have increased from the last reported holdings of 1,054 Tons in 2009, April to 2,710 metric tons currently.

China claims to have surged past Italy which has current holdings of 2,451.8 tons of gold reserves followed by France having 2,435.4 tons. The accurate reports released by the World Gold Council Data has placed US at the first position of world ranking for holding largest gold reserves which is 8,133.5 tons. The percentage of foreign reserve in gold in US is 75.1 %. Germany holds the second position with 3,391.3 tons of gold reserves.

In order to acquire the position, the Central Bank of China had added 622 tons of gold last year which was a massive boosting from the 380 tons of 2012 estimate. China had surged several nations to become the largest producer of gold. It has boosted its gold reserve without purchasing gold from global bullion market. While most of the major gold producing nations are reporting the decline of production, China remains to increase the production.

Comex Warehouse Potential Claims Per Deliverable Ounce Rises to Historical High 112 to 1

"The false man is more false to himself than to any one else.  He may despoil others, but himself is the chief loser. The world's scorn he might sometimes forget, but the knowledge of his own perfidy is undying."

Horace Mann

An almost shocking decline in deliverable (registered) gold has taken the ratio of open interest to deliverable gold to 112 to 1.

This is not a default scenario since the supply of eligible gold in the warehouses remains adequate and at historically manageable levels as shown in the last chart below.

Rather, it suggests that higher prices will be required to persuade more bullion owners to place their inventory up for delivery.

That higher price, of course depends on who those owners are, and how motivated they might be by profits from their metals trades.  For some interested parties it is enough to be the very close friends of the Central Banks, with benefits that make them incredibly rich, self-satisfied, and occasionally audacious to the point of over-reaching.

But of course, it is well to remember that the Comex has become the tail wagging the dog, as the gold bullion markets have shifted to the East.

February may be an interesting month, in an interesting year.

Weighed, and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - JPM Holds the Whip Hand on the Comex - Buy Signal

About 89,757 ounces of gold bullion left the deliverable category at Brinks, and a similar amount showed up in the eligible inventory at JPM yesterday. 

I do not know who owns the registered gold, since title can be transferred fairly easily.  But it remains fairly clear that JPM was in the driver's seat in stopping most of the deliveries, and now likely holds the 'whip hand' on the Comex in terms of gold.

This brings the overall number of deliverable gold ounces down to 370,137 which is a shockingly low number considering that we are coming into the normally heavy delivery month of February in a few weeks. 

Along with a few other indicators this triggers a 'buy signal' for gold in the intermediate term.  This is the first buy signal that I have issued since gold broke out of its cup and handle and ran to its all time high.  This is a 'structural' buy signal that must be confirmed by price and the chart formation.   The price signal will remain active unless gold sets a lower low on price.

I will post something about potential claims per ounce later tonight. 

There is sufficient gold in the eligible categories at the bullion banks, and while we do not know who actually 'owns it,' there is a high probability that it will take higher prices to pry that gold into the delivery process in February, at least from profit motivated holders. 

Take a look at the distribution of all categories of gold on the Comex.   Brinks and Manfreda have been 'cleaned out,' and the three bullion banks, JPM, HSBC and Scotia Mocatta are the big holders.  This market is now made up of big holders and bag holders.

There is some strong overhead resistance at 1260 which any number of analysts have noted, and there does seem to be an effort to hold the line on price here.

I have marked the most important resistance level, at least from my charting perspective, on the chart in red, just under 1,350 dollars per ounce.  A breakout through 1350 will confirm the buy signal.

February is shaping up to be an interesting month.   The various indicators have come together to signal a buy here but one might wish to wait for confirmation if you wish.  After all, it is a manipulated market.  There might be a rocky road before the precious metals finally break out.

I am now holding a full allocation of trading account gold and am considering adding more on pullbacks.    There are likely to be some vicious pullbacks since the Banks will not wish to have small spec company during the initial leg of this bull market move.  They are just like that. 

If the specs jump on the metals here with leverage they are going to get their teeth knocked out.   I was of two minds in writing this, because I do not wish to see amateur traders throwing themselves to the sharks.  But on the other hand sentiment is so bad that perhaps now they will stand aside and take a more measured approach to investing rather than speculating.

It's been a long time coming.  But change is going to come.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - SP 500 Back to December Record Close - Dog Tease

Stocks continued their move higher today as the SP regained the ground it had given up from the end of year tape painting, closing around the record high it set in December.

VIX has fallen back to relatively complacent levels. The economic news is just peachy.

The Fed is completely culpable for the bubble in financial assets, along with the compliant regulatory climate under Obama and his Wall Street friendly Congress. This will not end well, but there is no telling when it will end, so be careful about fighting the monied interests with money by shorting the market.

I hold no short positions here, except for longs in precious metals, which in some ways are a short on the appearance of recovery versus the reality of financial malpractice and policy errors.

Have a pleasant evening.