People's Bank of China "Buying Gold", Says FT

THREE YEARS after Beijing last updated the world on its gold reserves, a gap between Chinese demand and supply could be explained by the People's Bank Buying Gold, according to market-leading analysts quoted today in the Financial Times.

"There is absolutely a discrepancy" between China's gold mining, import and domestic demand figures, the FT quotes Marcus Grubb, managing director investment at market-development organization the World Gold Council.

"The obvious inference is that the central bank is [ Buying Gold ]."

The World Gold Council this week released its latest Gold Demand Trends report, the global gold market's key data and analysis resource.

Based on figures supplied by Thomson Reuters GFMS – the gold industry's dominant data provider for more than 40 years – demand from China to Buy Gold rose 20% to 770 tonnes in full-year 2011.

To meet that demand, China's while domestic Gold Mining output rose almost 6% to 361 tonnes according to the China Gold Association, while Gold Bullion imports through Hong Kong alone were 428 tonnes according to city officials – tripling from 2010.

That already leaves a near-30 tonne surplus, even before other import routes are included, and re-export cannot explain the gap. Because China currently blocks export of Gold Bullion.

"It could be that the apparent surplus in the domestic market due to the scale of imports reflects official sector purchases," says GFMS director Philip Klapwijk, whose consultancy compiled the demand data.

Using the State Administration of Foreign Exchange (SAFE) to Buy Gold, the People's Bank of China last reported gold reserves growth of 130% for the six years ending March 2009, accumulating a hoard of 1054 tonnes

The world's sixth largest official holdings, China's central bank gold holdings are less than one-eighth the size of the United States' hoard, however.

In the last 3 months of 2011, notes the Financial Times, Hong Kong gold imports to China totaled 227 tonnes, while domestic Gold Mining output was reported around 100 tonnes.

Demand to Buy Gold in the form of jewelry, bars and coin totaled just 191 tonnes.

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