Next month could usher in a new era for the gold market. Policy makers in China have been pushing hard in their attempts to get the Yuan included in the IMF’s elite fiat currency basket, the SDR, also known as the Special Drawing Right.
This fiat currency is the king of all fiat currencies. It is exclusive to central banks and is valued even more highly than dollars, which has lead to much speculation about the future of its use.
Some experts have even gone as far to say, that it will one day replace the US dollar as the reserve currency of the world, creating one global currency.
Personally, I highly doubt that this will be the case. I have higher hopes for the world and I am optimistic that one day, gold will return to its rightful place in some way, shape, or form.
One country that has intentions of usurping the US dollar as the reserve currency of the world, is China.
China has been steadily and vigorously accumulating hard assets for decades. They have not sat idly by and have been hard at work, diversifying out of their massive stockpiles of US dollars and moving into gold, oil and just about any hard asset you can name.
Yet, China knows that to most effectively diversify out of US dollars, they must do so as secretly as possible. If not, they will explode whatever market they are attempting to move into through their diversification, and thusly lessen their ability to acquire the desired asset.
One such asset that China has been especially secretive of is gold. Since 2009, China has kept a tight lid on its total gold holdings. At that time period, it was reported that China held 1,054.1 tons of gold.
Since then, China has not updated its official numbers. We know that China is the worlds largest gold producer, yet doesn’t export an ounce. We know that China imports a massive amount of the yellow metal and is the second largest consumer of gold, only behind India. Yet, we don’t know how much they have acquired.
Bloomberg estimates that China has roughly tripled its gold holdings since 2009:
“The People’s Bank of China may have tripled holdings of bullion since it last updated them in April 2009, to 3,510 metric tons, says Bloomberg Intelligence, based on trade data, domestic output and China Gold Association figures. A stockpile that big would be second only to the 8,133.5 tons in the U.S.”
While other experts in the gold community calculate their estimates to be 5,000 tons or more!
Regardless of the true number, we know that it is significantly higher than those given in 2009. Fortunately, this cloud may be lifted soon.
The reason why this may soon occur, is the same reason discussed earlier in this article. The potential inclusion of the Yuan in the IMF’s SDR currency basket. If the Yuan wishes to be a part of this exclusive club, then they will need to FULLY disclose their reserve assets.
The announcement of China’s true gold holdings may come as soon as next month, as that is the IMF’s next scheduled meeting on the SDR! The results of which, could shock currency markets and usher in a new era for the gold market.
