Saturday, July 18, 2015

China Announces Increased Gold Reserves

The interesting part of this announcement by China of an increase in its gold reserves is not the new announced total. Everyone knows China has been buying gold. The interesting part is that the new total reserves figure is so low. Most mainstream media were expecting China to announce at least 3,000 tons of reserves (up from 1054 tons). Those who have been promoting the idea that China would announce a huge new number (10,000 tons or more) in advance of backing the Yuan with gold are probably quite surprised yet again.

Below are a few quotes from this Bloomberg article on the news followed by some added comments.

"China ended six years of mystery over how much gold it’s hoarding, revealing a 57 percent jump in reserves and overtaking Russia to become the country with the fifth-largest stash of the metal.
“The market has been speculating on the size of China’s gold reserves for years and the central bank has always been reticent until now,” Fu Peng, a portfolio manager at Lianzhan Global Macro Fund Management Co., said by phone from Beijing.
China boosted bullion assets to 53.31 million troy ounces, or about 1,658 metric tons, the People’s Bank of China said in a statement Friday. That’s up from 1,054 tons in 2009, when it last updated the figures. The U.S. has the biggest reserves at 8,133.5 tons, data from the World Gold Council show.
Gold prices were little changed in reaction as the gain was much less than some had reckoned. Bloomberg Intelligence this year estimated a possible tripling to 3,500 tons, based on domestic output, and China Gold Association and trade figures.
“People were expecting that they have bought a lot more,” Mark O’Byrne, executive director of Dublin-based brokerage GoldCore Ltd., said by phone. “That’s why we haven’t seen much of a movement so far today. The big question is whether they now continue buying.”
My added comments:

This news confirms once again why we feature Jim Rickards predictions here instead of many others. In recent months many have been predicting that Greece would leave the Euro and trigger a new global crisis. Many of the same analysts have been proclaiming that China would "shock the world" by announcing huge new gold reserves in advance of a move to back the Yuan with gold. 
What can I say? They got it all wrong once again while Jim Rickards got it right. Jim predicted in an article earlier in May this year that China would understate their true gold holdings when they announced the new reserve total. He said that China is trying to gain approval at the IMF to get a seat at the table with the other major powers and badly wants the SDR basket to include the Yuan. He said China would agree not to announce any huge increase in gold reserves in order to maintain good relations at the IMF. Today he repeated that on his twitter feed.
Jim also correctly called that there would be no Grexit even as many in the mainstream media were predicting one just a few days ago. 
These two examples illustrate clearly why we continue to feature Jim here. He does not get every prediction right (no one does), but he does get a high % of predictions right. 
Because Jim is predicting that we will see another major financial crisis (worse than 2008) and he does get a lot of forecasts right, it is essential that we follow his articles and interviews here. His most important forecast is his call for another major financial crisis that will result in the IMF taking the lead to fix things. It's too early to know yet if he will hit that one. But because the impact would be felt by all of us if he is right, we must continue to follow that here as one of our two big questions.

Added note 7-20-2015: New blog article on media reactions to the Chinese announcement can be found by clicking here.

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