Gold is very difficult to predict. Who knows how much gold USA have at the moment? Russia wanted to know for some time ago, but didn`t have access. What about China? How much gold do they have?
This is a big mystery right now.
Last time we heard something from China was back in April 2009, when they said that it owned 1,054 metric tons (mt) of gold. That is only 1% of its official foreign reserves, but it makes China the world`s sixth largest holder of official gold reserves, after the U.S, IMF, Germany, Italy and France.
What about the U.S? Do they have any gold left at all? Wait and see, because IMF (International Monetary Fund) will probably reveal the secret later this year.
Some gold is missing and where is it?
(Picture: Change in US Gold Reserves 1993 – 2014)
It can be stored in different banks in China who have licenses to store them, and their gold stocks are not publicly disclosed. Second, it can be «on loan» to jewelry factories located around Shenzhen. This is how they did it in 2013 when the price of gold dropped 28 percent.
IMF and China are negotiating to have yuan or renminbi to be part of the IMF`s menetary reserve denominator. The Special Drawing Rights (SDR). I think that the IMF will come out with some news very soon that will make some investors nervous.
If China want to be a part of the elite club (Dollar, yen, pound and euro), they need to reveal how much gold they have as part of their reserves, and that is very important information investors have been wondering in many years.
Some people guess that China has about 3,000 mt, while others say 6,000 mt. China has replaced India as the world`s largest consumer of gold. They are the biggest importer, and the world`s biggest producer. One way to figure it out is to look at their trade data, domestic gold and numbers from China Gold Association.
As of March 2015, The biggest gold holder are the U.S with 8,133,5 tons. Nr. 2 is Germany with 3,384,2 and Nr. 3 is IMF with 2,814 tons of gold. Central banks stands for 17,2% of the world gold holdings. Investment (bars, coins) stands for 19,26%, while jewellery stands for 49,2%, according to United States Geological Survey (2011).
(Picture: US gold reserves and gold price)
The Federal Reserve hold the U.S gold, if they still has some left, but some gold lovers belive that the gold once backed the U.S currency is long gone. The gold has not been audited since 1953. But why are gold so important to China?
China want the world to see a stable renminbi, which means they need to back their balance sheet by gold than other fiat currencies. This is more actual now than never before, because all the central banks are «printing» money like crazy, making it unstable.
China`s currency renminbi is following the U.S dollar, but if their currency becomes a free-floating currency that will change. They will no longer follow the U.S dollar and their currency will not move on news from the Federal Reserve policy.
Renminbi has already surpassed the euro to become the second most used currency in international trade. China`s goal is probably to have all its trade settled in their own currency. As it stands now, every time the U.S dollar moves so does renminbi.
China`s GDP Growth rate expanded to a record low of 1,30 percent in the first quarter of 2015 over the previous quarter, according to the National Bureau of Statistics of China. China`s GDP annual Growth rate expanded 7 percent in the first quarter of 2015.
I expect more stimulus from China in 2015 despite better than expected results in Q4. The deflationary pressure persists and the slowdown in the estate market is expected to continue. China have more than enough to think about.
The higher the dollar goes, the lower renminbi goes. That`s good for the U.S consumers because they can buy cheap from China, but what about the rest of the world. What about Europe? Of course they will not buy so much anymore, because the prices are in dollar.
China`s export will drop and that`s not China`s goal. This is probably why they want more control over their currency? And here is where the gold comes in. What are China thinking about gold and their own currency? IMF will probably give us the answer very soon?
If everything goes to plan, China will reveal its gold holdings later this year and that will move the markets. The first IMF meeting will take place now in May and the second meeting later this year. The gold price will move up or down, but it depends on the news.
The financial system of the West CAN be destroyed overnight. It will be very expensive if the gold goes up. Can we afford it?
Next meeting is in Q4 2015.
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