Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Will China Be THE Big Player In The Gold Market Over The Coming Years?

Published 11/20/2014, 11:31 AM
Updated 07/09/2023, 06:32 AM

China and Russia appear to be the names on most precious metal investors' lips when it comes to predicting who'll have the most say (and sway) in the global markets for precious metals, in particular gold, both in the medium and long term. There are various predictions regarding China's ambitions for their 'people's currency', the renminbi, to eventually challenge the dollar as the globe's preferred reserve currency. The majority of views appear to suggest that, once fully floated, the Chinese government wants the currency to be (in some ways) underpinned by gold reserves, not quite a de-facto modern day gold standard, but along similar lines.

Alan Greenspan, a former Federal Reserve chairman, recently penned an article discussing gold and its possible role in China, the world's second largest economy, or actually first by certain metrics. He suggested that China had a risk free opportunity to challenge the USA hegemony, if China converted only;

"a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country's currency could take on unexpected strength in today's international financial system. It would be a gamble, of course, for China to use part of its reserves to buy enough gold bullion to displace the United States from its position as the world's largest holder of monetary gold. But the penalty for being wrong, in terms of lost interest and the cost of storage, would be modest."

The People's Bank of China has often declined to officially disclose changes to its gold holdings. In 2009 China announced a boost in its gold reserves by 454 tonnes, representing a seventy six percent increase in its gold reserves. China 'officially' has 1,054.1 tonnes in reserves, but it's speculated to have around 2,000 to 3,000 tonnes. However, others put the 'unofficial' figure much higher and recently a revered gold expert made some startling announcements regarding China's potential aims...

In the opinion of Song Xin, President of the China Gold Association, General Manager of the China National Gold Group Corporation and Party Secretary, China should accumulate 8,500 tonnes in official gold reserves, this would be significantly greater than the USA's reserves. He revealed this in an editorial published earlier this year. The suggestion was that in the short term the Chinese will not back the renminbi with gold, but support it with gold, in order that it has credibility for the world to accept it as a potential reserve currency.

It's a fascinating power play as many regard China's geographical isolation from major gas and oil reserves as its Achilles' heel and it's fascinating to note this mentioned elsewhere. The previous President of the China Gold Association (CGA), Sun Zhaoxue, was also the General Manager of the China National Gold Group Corporation. He stated back in 2012;

"The state will need to elevate gold to an equal strategic resource as oil. Currently, there are more and more people recognizing that the gold is uselessstory contains too many lies. Gold now suffers from a smokescreendesigned by the US, which stores 74% of global official gold reserves, to put down other currencies and maintain the US Dollar hegemony. Going to the source, the rise of the US dollar and British pound, and later the euro currency, from a single country currency to a global or regional currency was supported by their huge gold reserves.

"Individual investment demand is an important component of Chinas gold reserve system, we should encourage individual investment demand for gold. Practice shows that gold possession by citizens is an effective supplement to national reserves and is very important to national financial security."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.