China joins global central bank gold rush as its foreign exchange reserves stabilise

South China Morning Post/Zhou Xin and Karen Yeung/2-11-2019

“Yi Gang, the current central bank governor, said in 2013 when he headed the State Administration of Foreign Exchange (SAFE) that Beijing was unable to diversify significantly into gold because the gold market is too small for China’s US$3 trillion foreign reserves. But things may start to change – though it remained to be seen whether the modest gold purchases in the last two months represented a fundamental shift in China’s attitude towards the precious metal, analysts said.”

USAGOLD note:  I mentioned this South China Morning Post article in yesterday’s Daily Market Report, but I did not pass along or comment on the portion highlighted above, which may be the most interesting aspect of Xin and Yeung’s report. To give you an idea of China’s dilemma with respect to gold, and perhaps an inkling of just how undervalued gold is at current prices, consider that all the gold ever mined, according to World Gold Council data, is worth about $7.5 trillion at a $1250 gold price. China, in other words, could buy 40% of all the world’s gold with its $3 trillion in reserves.

The market value of the 8,133.5 tonne U.S. gold reserve at $1250 per ounce is $335 billion. Thus, China could buy America’s gold reserve almost ten times over, or put another way, could swap its entire dollar reserves for the stockpile at $12,500 per ounce.

If by this time you have come to the conclusion that something is critically out of joint in this mathematical construct, you are correct.  It is the price of gold.

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