On January 7, 2019 China, out of the blue, announces they have added just short of 200 tons of physical gold to their monetary reserves. 194 tons for those keeping score at home. This is the second time China has made such an announcement that was simply floated into the market. The timing, of course, was for their benefit. The precious “markets” didn’t even notice but how could they since the manipulation is so thick at this point the only thing that moves the “markets” are the people that own the exchange.
The amount of gold announced is interesting as it fits perfectly with the agreement signed by China and Russia in 2016. Is this the gold China received from Russia during 2017 and 2018 that was spelled out in the agreement signed by the two nation in the early part of 2016? We will never know, but the volume of physical gold China announced fits the agreement to the letter.
Back in 2016 when the gold agreement between Russia and China was originally penned we reported the following in September 2016. The dates are important with the volumes of gold we are discussing.
Wether China is going to be making jewelry, trinkets or has other ideas we can confirm Russia will be supplying China with a lot of gold in the coming months and years – from Reuters
VTB Bank, Russia’s second-largest lender, said on Tuesday:
* VTB plans to supply 15-20 tonnes of gold to China in the next 12 months;
* VTB plans to continue increasing gold supplies to China, the exact volume of supply is subject to demand in the region;
* In April, VTB said it aimed to supply between 80 and 100 tonnes (2.57-3.22 million troy ounces) of gold to China per year;
* In the second quarter of 2016, VTB dispatched its first batch of gold to China, becoming the first Russian bank to start direct supplies of physical gold to the world’s largest buyer and consumer of the precious metal.
As you can clearly see the 194 tons of physical gold China just reported fits this announcement like a glove. Why this agreement was signed in the first place is still a mystery, but we can report with confidence that gold is moving, at least one way, between the two countries. Now it appears there is evidence to support the whole idea.
China’s gold holdings totaled 1,852 tons at the end of 2018, worth roughly $76 billion, according to central bank data. That marks an increase of about 10 tons from the previous month and the first rise since October 2016. Beijing had sharply boosted its gold reserves to 1,658 tons from 1,054 tons in June 2015 and gradually added more until the fall of 2016, after which the total had remained flat.
Meanwhile, China’s holdings of U.S. Treasury securities fell for a fifth straight month to $1.14 trillion at the end of October, down 5% from the most recent peak in August 2017, U.S. government data shows. As the country’s economic turbulence put downward pressure on the yuan, Beijing likely sold dollar-denominated assets to shore up the currency, contributing to the decline.
China has kept its total foreign-currency reserves steady at just over $3 trillion for the past two years, buying a more diverse array of assets to replace the U.S. government debt it sold. The uptick in its gold holdings was likely part of this shift.
Given the ongoing trade tensions, the country “probably wants to reduce its dependence on dollar-denominated securities in its foreign-currency reserves,” said Yusuke Miura, senior economist at Japan’s Mizuho Research Institute.
China’s State Council said this month it had designated the Guangxi Zhuang Autonomous Region, which borders Vietnam, as a special zone to link China and the Association of Southeast Asian Nations. In addition to promoting cross-border financial investment, the move aims to encourage use of the yuan in trade with ASEAN. Source
China, along with Russia and Turkey, once have been shedding treasuries over the past several months as well. Russia is leading the way with a massive purge of $87.5 billion followed by Turkey that shed $42.3 billion. China still has north of a trillion so, when China sheds a few billion there isn’t a number provided, it is simply reported as dropping by 5%.
All of these nations, and many more, are tied to the dollar in unhealthy ways. These nations are now beginning to understand the one-sidedness of having your national currency pegged to the Federal Reserve Note, world reserve currency, U.S. dollar. This is creating, and rightly so, a lot of anxiety among nations holding a lot of dollars in their foreign reserves.
Russia and China are particularly vulnerable for completely different reasons. Russia is beholding to the dollar since the Russian economy is currently dependent on the oil market to help stable and grow their economy, while China has such a massive share of U.S. debt called treasuries, she would have a difficult time moving out into other assets very quickly. These situations are like a noose around your neck. If you move too far away…well, bad things begin happening.
