Telegraph notes research on China's huge gold demand by GoldMoney's Macleod


China 'Has More Gold Than Official Figures Show'

By Olivia Goldhill
The Telegraph, London
Wednesday, April 9, 2014

China could be holding even more gold than previously realised, according to Alasdair Macleod, a researcher at online precious metals trader GoldMoney.

Official figures from China Gold Association (CGA) show that the Asian superpower consumed 1,176 tonnes of gold in 2013, 41 percent higher than in 2012.

However, about 500 tonnes of gold from Chinese mines and scrap is unaccounted for by the CGA.

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Mr Macleod believes the country holds more gold that the stated figures suggest, and in fact consumed 4,843 tonnes in 2013 alone. He raised his estimate after researching Chinese Gold Reports, where he said he found details of the amount of gold vaulted. He said the quantity of vaulted gold has been increasing steadily.

"Nobody had really any idea how much was going into the vaulting figures," Mr Macleod said. "The changes in the level of vaulted gold has been increased on a fairly consistent level almost at exactly the same rate as the increase in deliveries."

Increased levels of gold held by China match with the country's politics, according to Mr Macleod.

"It fits in with what appears to be China’s geo-political strategy when it comes to gold," he said. "China, by having control of a large amount of gold, has leverage in the financial relationship with the West. Owning gold gives power to China over America," he said.

Martin Arnold, director-research analyst at ETF Securities, said that estimates of China's store of gold may well be too low.

"The evidence suggests that China is a very big consumer of gold with a gap in reporting for the last several years. It does point to some build up of stocks.

"China is the world's biggest producer of gold. Not only do they consume all the gold that is mined in the country but are also a net importer. 2013 was a record level -- we're talking several million ounces, to the extent where we're looking at about 35 million ounces in terms of the net gold import," he said.

Mr Arnold said that by owning gold, China diversified its reserves and so is less dependent on US treasuries.

"The US dollar over the past decade or so has been in a period of structural decline so when the public sector invests their holdings, they don't want to hold it all in US treasuries, which are necessarily dollar-based," he said.

China is one of the biggest holders of US treasuries in the world.

"China have got a large foreign exchange reserve with over L3.5 trillion invested around the world and so necessarily a large part of that goes into US treasuries," said Mr Arnold.

Owning a lot of gold to diversify investments means China is not beholden to the political decisions or monetary policy decisions from the United States, he said.

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