People Bank Of China Promotes Participation In Gold Market

The latest Bloomberg headline about gold  in 2013 said “China Gold Imports From Hong Kong Fall 53 Percent as Price Drops.” At first glance, the headline seems to reveal some sort of collapse in Chinese gold demand. However, the article simply compares the November gold imports from Hong Kong to China with the figures from the month before. Sure the data are correct, but it is relative as the October import data were the third highest ever.

The article goes on to quote a senior analyst from Industrial Bank Co. in Shanghai: “As bets on higher prices diminish, Chinese investors’ appetite for bullion seemed to be waning. Anecdotal evidence from retailers here also presented the same picture that sales in the second half of this year weren’t as brisk as in the first half.” Well, talking about anecdotal evidence, Bloomberg’s article was published almost at the very moment of a true gold rush in Shanghai. This article provides an overview of the facts (with a clear reference to the sources).

It surely smells like anti-gold propaganda. That’s nothing new, however. In Bloomberg’s article for the September import data, their headline mentioned a “slowdown” in Chinese demand. After a quick analysis of the figures, we wrote “China Imports 0.7% Less Gold Than August, Bloombergs Says Slowdown” with the following quote:

It is quite astonishing that Bloomberg reads a “slowdown” in these data. The facts are that, since the year 2000, only two months saw significantly higher imports than September, i.e. March and July of this year. August and September (with a minor difference of 0.7%) were the third best months ever when it comes to gold imports to China through Hong Kong.

The recurring pattern of this type of headline is truly remarkable. It certainly proves the anti-gold sentiment. It is typical for most mainstream media.

Regardless, the truth about gold in China is that they are hoarding the yellow metal at an epic rate, through formal and informal channels. The big difference with the West is that the government is stimulating and promoting gold. Mind the difference in these two examples:

  • Ben Bernanke publicly stated a couple of months ago: “No one really understand gold prices and I don’t pretend to really understand them either” (source).
  • The Chinese central bank People Bank Of China concludes their latest monetary policy report with several actions, one of which being: “The diversity of participants on the gold market will be promoted, and product innovation will be encouraged while risk monitoring, early warnings, and risk prevention will be strengthened to promote the stable development of the market.”

Try to imagine Ben Bernanke discussing the gold market and stimulating participation. There is no room for that in the midst of his epic money printing obsession.

China’s central bank, however, devotes much more attention to their (local) gold market. In their latest “Monetary Policy Report” (edition Q3 2013), they released a chapter to their gold market with some interesting data:

The gold market operated in a stable manner and traded briskly. In the first three quarters of 2013, the turnover of all sorts of precious metals on the Shanghai Gold Exchange saw a large increase, while during the same period the turnover of gold and silver hit historical highs. The total trading volume of gold was 8,564.4 tons, an increase of 81.9 percent year on year, and its turnover posted 2448.61 billion yuan, an increase of 54.4 percent year on year. The trading volume of silver was 344,376.6 tons, an increase of 126.2 percent year on year, and its turnover posted 1,619.51 billion yuan, an increase of 65.6 percent year on year. The trading volume of platinum was 65.1 tons, an increase of 37.5 percent year on year, and its turnover posted 20.17 billion yuan, an increase of 30.0 percent year on year.

The intention of our article is not to analyze in detail China’s monetary policy, but we advice readers to scan their monetary policy report and compare their vision with the one in the West (including gold’s role in monetary policy). Download People Bank’s of China “Monetary Policy Report Q3 2013” (skip to the last pages with conclusions and actions).

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