This week we learned that China has increased its gold holdings by a massive 57% since 2009. That’s an average increase of around 10% a year which is more than I have increased my gold holdings. Similarly China’s total gold holdings are much bigger than mine as well (really Barry?) currently weighing in at around 1,722 metric tonnes. That means that China has overtaken Russia and now has the sixth largest physical gold holdings behind the U.S., Germany, the IMF, Italy and France.
Of course, it has to be said that none of these statistics stand up to scrutiny.
When the music stops, who’s got the gold?
The U.S. may be listed as number one in the gold reserves charts with over 8,000 tones but their gold reserves haven’t been audited since I wore short trousers. No one has any idea how much is really there. Then there’s Germany. Germany is in second place but it doesn’t actually have the gold in it’s hand because it is held in the U.S. (see note 1 about is the gold really there or not). Germany has demanded its gold back from the U.S. and has been told to go away. For some reason there is a five year waiting list if you want your gold back. How very odd. How can you be in second place when you don’t actually have the gold and you can’t get it back either?
China may be listed in sixth place but the figure mentioned above is only what is held (or should I say declared) in the People’s Bank of China (P.B.O.C.). The amount of gold entering China through Hong Kong and Shanghai is massive – and none of this appears in the figures quoted above. China has other gold reserves that have been purchased through the China Investment Corporation (C.I.C.) the figures for which remain undisclosed. Don’t forget that China is also the largest producer of gold in the world – none of that gold ever leaves the country. Add all this together and you come up with a much bigger number than 1,722 tonnes.
How much gold does China have now?
Officially China increased its gold holdings by 19 tonnes in July, 16 tonnes in August and 15 tonnes in September. That brings the official total to 1,722 tonnes. That works out at around $61 billion at the end of September – or 2% of the value of China’s total foreign exchange reserves ($3.53 trillion). Even if my estimates for the true value of China’s gold holdings are correct, that would still put China’s total gold reserves at only 4% of foreign exchange reserves. I expect that figure to continue to rise in the months ahead as fears of a monetary collapse grow even stronger.
You are probably wondering why all these banks hold such massive amounts of gold when it is such a “barbaric relic” right?
The answer is simple enough. When the fiat currencies explode it is only physical gold and silver that will have any value.
How much gold do you have right now?
Of course the amount of gold that China holds has little impact on your future wealth. What matters is whether you’re following China’s example and protecting yourself by building up your own little precious metal stockpile. I personally consider physical gold AND silver the best way of protecting your wealth when things turn nasty and it’s not a bad little exercise to work out the total value of your assets and the total value of your physical gold and silver assets to see what percentage you have.
I will repeat my claim that I believe a 10% allocation of wealth in physical gold and silver is about the right kind of balance. Most of my readers have far less than this. Most people have more money invested in the metal that is sat on four wheels on their drive than they do in metal that will protect them in the future. Rusty metal won’t be much use when the fiat currencies blow up. “Oh, and why would that happen Barry?” Well, history tells us it happens every time. Fiat currencies have a 100% failure rate – how much convincing do you need?
Articles like this one will invariably result in a string of emails from readers asking me if gold certificates and things like Bullion Vault qualify as “physical gold”.
It’s simple – if you don’t hold the gold in your hand then it’s not physical gold. If all you have is a piece of paper – well good luck.
You need to know that for every single ounce of real gold in existence there are over 100 pieces of paper held by people who think they all own the same lump of gold. Be afraid – paper gold is not the same as real gold. Hold it at your peril.