A few weeks ago, the People’s Bank of China revealed the contents of their gold reserves for the first time since 2009. The report, indicated that China’s gold holdings had increased by 1,943,000 ounces in the month of June. This increase of roughly 600 tons put total Chinese gold holdings at 1,658 tons.
Firstly, it is obvious that such a massive increase couldn’t have happened in a single month because such an increase in such a short amount of time would have caused a major disruption in the market. Secondly and more importantly, this misleading number is merely a side story for what is really happening with China’s gold supply. After seeing that the PBOC had given the world fraudulent data, one would appropriately ask the question “who knows what else they are lying about?” Now, I’m attempting to avoid venturing too deep into the subject of who’s lying about what, but I am going to make a statement that most of the world would agree with: China has a lot more gold than 1,658 tons. Why? Read this. How much does “a lot more” signify? I don’t know, and neither does anyone as of know (well, except for the PBOC). However, this is not the point I am seeking to address. There is a saying that everything happens for a reason, and this applies in this case. I say this because there is a very good –good for China, that is– reason for concealing data concerning their gold. As I previously stated, if the PBOC were to suddenly disclose the fact that they are holding over five thousand tons of gold, then the price of the precious metal would surge to incredibly high levels. An event of this sort taking place is inevitable, but it is likely that it won’t take place very soon. China knows all of this and is using the calm before the storm to its advantage by secretly expanding its gold reserves while hoping to not draw too much attention to itself. Once the country has generated a large enough supply, it will drive up the price of gold by revealing how much of it they have amassed and in doing so will have generated massive profits and will encourage people to put their faith into bullion rather than fiat currency.