China officially revised its gold reserves upward for the first time since 2009 on Friday. The People’s Bank of China (PBOC) stated on Friday that it had added 604 tonnes of gold to its official reserves last month.
Gold is no longer used to back paper and digital money of today, however it remains an important part of monetary reserves internationally. This can be seen in the People’s Bank of China’s (PBOC) announcement of an increase in their gold reserves.
China’s official reserves are now almost 1660 tonnes of gold. Analysts, including Bloomberg and ourselves, had been expecting a sharp jump to at least 2,000 tonnes and possibly as high as 3,000 or 4,000 tonnes.
It is clear by the secrecy surrounding China’s reserves that they view gold as a vital strategic asset. Chinese gold reserves increased by 57% and China’s holdings have now surpassed those of Russia to become the fifth-largest. The U.S. is believed to have the biggest reserves at 8,133.5 tons. The current official holdings rank them as the fifth largest holder of gold in the world (see chart).
Many analysts believe this figure to be an understatement given the enormous volumes of gold that have been passing through Hong Kong – and through Shanghai in more recent years – and the large amounts that have been produced and bought domestically.
It is important to remember that as 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).
Although if the combined holdings of the PBOC, SAFE and CIC were added together, China may well be the second largest holder of gold bullion – after the U.S. – assuming that U.S. gold reserve figures, which have not been publicly audited in over 60 years, are accurate.