China’s PBOC Buys 600,000 Ounces Of Gold In July – Annualised 225 Tonnes Per Year

August 14, 2015

China’s Central Bank Buys 600,000 Ounces Of Gold In July – Annualised 225 Tonnes Per Year

  • China Preparing for Resumption of Currency Wars and an International Monetary Crisis
  • Obama and Kerry Warn Dollar May “Cease To Be the Reserve Currency of the World”
  • Remember Bloomberg Intelligence’s $64,000 Gold Price Target?
  • Reuters Global Gold Forum Interviews Alistair Hewitt  of World Gold Council
  • Gold Trade Turns Bullish on China Currency War in Bloomberg Gold Survey

In a surprise announcement, China’s PBOC announced an increase in their gold reserves by 1.1% in July. The People’s Bank of China, now the world’s biggest gold buyer, increased its gold reserves by over 6000,000 troy ounces to 53.93 million fine troy ounces by the end of July from 53.32 million ounces a month earlier, according to data released by the central bank.

Gold and Foreign Exchange Reserves (PBOC)

The country last month ended six years of mystery over how much gold reserves it has been accumulating when it revealed a 57 percent jump in reserves over the 2009 to 2015 period – from 1,054 metric tonnes to 1,658 metric tonnes.

The Chinese gold purchases of 19 metric tonnes was more than double the net monthly average that was bought between 2009-2015. During that six years, the PBOC accumulated around 8.4 metric tonnes per month – over the 72 month period. However, as noted by Jan Harvey in the Thomson Reuters Global Gold Forum we do not know if that PBOC buying was “slow and steady, or in chunks.”

The surprise was not the number per se as many had expected such a number but rather the announcement itself as there was a lack of clarity as to whether the PBOC would announce publicly on a monthly basis through the PBOC or would they do it through the auspices of the IMF as most central banks do.

It is possible that China’s rebuff in terms of not being allowed by the IMF to include the yuan in the basket of currencies that comprise the IMF’s reserve assets that are known as special drawing rights (SDR) may have led to then deciding to become more ‘vocal’ and public about their monetary gold reserves.

China seems likely now to adopt the Russian position and strategy of being very public in announcing their gold reserves as they attempt to position the yuan as an alternative reserve currency to the world’s current reserve currency the dollar. China  has overtaken Russia to become the country with the fifth-largest gold reserves in the world.

It is important to remember that this is just the increase in gold reserves of the People’s Bank of China (PBOC). We have long pointed out two other entities, besides the PBOC, have also been buying gold – the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation (CIC).

These potentially sizeable sources of demand are not included in the World Gold Council and GFMS figures.

Therefore, it is likely that the Council and GFMS underestimate global gold demand. It is important to note this lack of transparency regarding total aggregate Chinese central bank and sovereign fund demand.

China appears to be preparing for a coming currency reset, a resumption of currency wars and a likely coordinated devaluation of leading currencies versus gold. They are also likely hedging the increasing risk of financial and monetary uncertainty, volatility and possibly an international monetary crisis in the coming months.

Their yuan devaluation this week gives them an initial competitive advantage ahead of a coming currency reset.

- Obama and Kerry Warn Dollar May “Cease To Be the Reserve Currency of the World”
U.S. Secretary of State John Kerry warned Tuesday the U.S. dollar’s status as the global currency could be threatened if Congress blocks the nuclear deal with Iran.

The nation’s chief diplomat doubled down on President Barack Obama’s comments last week that scuttling the deal would damage the continuing status of the dollar as the reserve currency, a sentiment “already bubbling out there,” Mr. Kerry said.

President Obama was continuing his push for the Iran nuclear deal, gave a speech at the American University earlier in the week, when he warned

“Moreover, our closest allies in Europe or in Asia, much less China or Russia, certainly are not going to enforce existing sanctions for another five, 10, 15 years according to the dictates of the U.S. Congress because their willingness to support sanctions in the first place was based on Iran ending its pursuit of nuclear weapons.

If, as has also been suggested, we tried to maintain unilateral sanctions, beefen them up, we would be standing alone.

We cannot dictate the foreign, economic and energy policies of every major power in the world. In order to even try to do that, we would have to sanction, for example, some of the world’s largest banks. We’d have to cut off countries like China from the American financial system. And since they happen to be major purchasers of our debt, such actions could trigger severe disruptions in our own economy, and, by way, raise questions internationally about the dollar’s role as the world’s reserve currency. That’s part of the reason why many of the previous unilateral sanctions were waived.”

Mr. Kerry, speaking at a Reuters business event in New York, said if Congress prevents the U.S. from implementing the deal it could put the U.S. at odds with European allies, China and Russia.

“That is a recipe very quickly for the American dollar to cease to be the reserve currency of the world,” Kerry warned business leaders at the event.

Those countries helped broker the agreement, and could resist or reject efforts by the U.S. to impose Iran-related sanctions, potentially threatening the U.S. dollar’s status as the global reserve currency, Mr. Kerry said.

Remember Bloomberg Intelligence’s $64,000 Gold Price Target?

Reuters Global Gold Forum interviews Alistair Hewitt  of World Gold Council (August 13, 2015)

Global_Gold_Forum  Jan Harvey  thomsonreuters.com  A World Gold Council report showed earlier today that gold demand hit a six-year low in the second quarter, as sluggish price movement and the prospect of better returns in equities curbed interest in the metal. Demand fell 12 percent to 914.9 tonnes, with declines in China and India accounting for nearly half of the drop, the WGC said. Globally, jewellery buying fell 14 percent, investment slid 11 percent, and central bank buying was 13 percent lower.

Gold Trade Turns Bullish on China Currency War in Bloomberg Gold Survey
Gold traders and analysts are bullish for the first time in five weeks after China devalued its currency and roiled global markets and saw a flight to safety push gold higher. Indeed, the trade turned the most bullish in three months on the yuan surprise.

We were bullish for the first time in many weeks and a higher close this week will make us positive for next week. The Bloomberg Gold survey results for this week were: Bullish: 18 Bearish: 6 and Neutral: 8.

DAILY PRICES
Today’s Gold Prices: USD 1,116.75, EUR 1002.11 and GBP 715.29 per ounce.
Yesterday’s Gold Prices: USD 1,117.35, EUR 1005.54 and GBP 715.56 per ounce
(LBMA AM)

Gold in USD – 1 Week

Gold and silver fell on the COMEX yesterday – down 0.6% to $1,115.20 and 0.7% to $15.41 per ounce respectively.
This morning, gold is 0.4% higher to $1,120 per ounce. Silver is 0.5% higher to $15.60 per ounce.
Platinum and palladium are 0.2% and 0.8% higher to $998 and $625 per ounce respectively.

Gold reached a 3 week high yesterday as speculators and investors moved back into gold. Short covering and traders going long was seen on the COMEX and investors bought the most gold through ETPs since June this year.

Gold is headed for the biggest weekly gain in three months after China’s weakening of the yuan roiled markets globally, saw sharp falls in stock markets and led to concern of widespread currency devaluations and currency wars.

Prices remain near a three week high today after China’s PBOC announced that it had bought another 19 metric tons of bullion last month. China has added more than 600 tons of gold to its reserves since 2009 to help diversify its foreign-exchange holdings as it seeks to position the yuan as reserve currency.

China’s decision on Tuesday to devalue the yuan sparked concern that a slowdown in the huge and globally important Chinese economy, now the world’s second-largest, is deepening.

Following the biggest monthly drop in two years, gold has risen almost every day so far in August.  Gold is up 2.1 percent since the Friday close, ending a seven-week stretch of losses.

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  Courtesy of http://www.goldcore.com/

Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth. 

The volume of all the gold ever mined can occupy a cube 63 feet on each side.

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