This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

China Puts Gold Where Its Money Is

By 2011, China's gold imports had already soared to more than 800 tons per year (excluding the Hong Kong region). However, while India produces practically no gold of its own, China is the world's No. 1 producer. Clearly, China's mined-gold is the government's gold.

This brings us to some number-crunching. In 2001, China reported an increase in its national gold reserves from 394 tons to 500 ton. Then in 2003, it announced the increase to 600 tons. By my calculations, from the beginning of 2002 China has produced approximately 3,600 metric tons of gold. However it has reported only a total increase in its "official" gold reserves of roughly 650 tons.

Even if we assume that some of that remaining 3,000 tons of gold production leaked into its own domestic market (despite the best efforts of China's government), there is a vast amount of mined gold in China that has not been accounted for, and we must strongly suspect that most/all of that gold is securely stored in government vaults.

In other words, instead of having only 1,054 ton of gold reserves, it's quite possible that China could have as much as four times that amount: 4,000 tons. This would make the previously announced goals of China's national "task force" still attainable.

Note that this 4,000-ton figure could be a reality even assuming China had not accumulated any gold internationally. In other words, it could have actually bought gold directly and "broke the rules" in not reporting it, or simply had one or more of its government-directed proxies accumulating (and holding) gold on its behalf.

Thus it is possible that even the 4,000-ton estimate is conservative. This makes recent remarks attributed to no less than the vice governor of the People's Bank of China (its central bank) "inconsistent," to say the least.

The vice governor of the People's Bank of China (PBOC) Yi Gang said Wednesday that the country's gold reserves now stand at 1,054 tons, adding that a massive increase is unlikely in the near future.

What's of interest here is China's choice of mouthpiece for this suspiciously contradictory statement. They chose a central banker; individuals with a long history of pathological lying when it comes to gold.

3 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs