You are here
Gold traders underwhelmed by China's hoard as prices don't budge
[LONDON] For six years, investors have been guessing how much gold China owns. On Friday, they found out and the results were underwhelming.
Gold was little changed at US$1,143.10 an ounce as of 7:56 am on the Comex in New York. China said it boosted bullion assets to about 1,658 metric tons, less than brokers at GoldCore Ltd and Sharps Pixley Ltd. expected.
"Prices completely shrugged this off. There was no market reaction at all," Carsten Fritsch, an analyst at Commerzbank AG, said by phone from Frankfurt. "Since it was accumulated over a long period of time, the tonnage per annum was not really massive."
China may have stockpiled gold as part of its plan to diversify its foreign-exchange reserves. The country is the world's largest gold producer and vies with India as the top consumer. The amount of metal it last reported to have held was just 1 per cent of its foreign-exchange reserves, which surged in the last decade.
"I'm shocked by how small the figure is," Ross Norman, chief executive officer of dealer Sharps Pixley Ltd., said by phone from London. "I don't think I was alone in thinking they have accumulated three times as much."
Mr Norman said that other government agencies in China may have large holdings that haven't been disclosed. The US has the biggest reserves at 8,133.5 tons, data from the World Gold Council show.
Bullion has fallen 1.3 per cent this week, set for a fourth week of losses, on concern that US interest rates will rise later this year. Higher rates cut the appeal of precious metals because they don't pay interest or give returns like other assets such as bonds and equities.