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China’s gold output rose again in 2011 confirming its position as global No. 1 producer, but is it surreptitiously taking all its domestic production into its reserves?
LONDON – As had been expected, China, already the world No. 1 gold producer, saw its output rise again this year. The country produced a record 360.96 tonnes of the yellow metal in 2011, a 5.9% increase, making it the world’s top gold producer for a fifth consecutive year, according to the China Gold Association.
Meanwhile, the country has been importing record amounts of gold as well with the volumes coming in through Hong Kong, which are officially reported figures, climbing to over 100 tonnes in November – and by all accounts gold purchasing in China has been booming since then, so imports are likely to have remained at this kind of level in December and January as well. Estimates have suggested that China’s total gold imports for 2011 will have been some 490 tonnes – double that of 2010, but this may well be an under-estimate, possibly a substantial one.
But because Chinese total figures on imports and demand are actually obscured nobody really knows the true situation, except perhaps the Chinese government. Export of gold is not allowed so total Chinese production (as noted above at around 361 tonnes) is going somewhere. The question is, is it going into Chinese industrial, investment and jewellery demand, or is all this being catered for by the imports?
There is thus a strong suggestion that Chinese gold production is, in fact, all going into the country’s gold reserves which are only reported sporadically, and the last official pronouncement on this was that reserves totalled 1054 tonnes – back in 2008 – and this was nearly double the amount previously reported five years earlier at 600 tonnes. If China is indeed putting all its domestic production into its reserves then these could now well be at 2,000 tonnes or more – but even this is still a small fraction of China’s total monetary reserves and there certainly has been internal discussion in China that the proportion of gold in its reserves should be much higher.
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