How much gold does China have, and how can it be sold?

Kaylie Pferten says China's gold reserves are underestimated

So, whether it's overbought or not, hold gold.

Because I believe it to be one of the most significant yet underappreciated topics in international finance, I keep returning to this topic. The implications for geopolitics are profound. In contrast to previous administrations, the Trump administration seems to understand this: issuing the world's reserve currency is irrelevant; if you do nothing, you will be caught swimming naked when the tide goes out.

The risks of relying too much on China and its supply chains for strategic or vital goods were made clear during COVID-19. During the conflict in Ukraine, it became evident once more. Russia produced weapons far more quickly than NATO.

Reshoring the US economy is a process that takes time. It will take years or even decades, which is nearly as long as it took to unwind in the first place. However, the Trump administration is at least attempting to get things started with tariffs, a depreciating dollar, and, more covertly, the controlled devaluation of the US dollar as the world's reserve currency.

Neutral gold's position as a worldwide reserve asset is thus regaining traction. History's "golden" rulethat the person with the gold makes the ruleswill soon be applicable once more.

I contend that China possesses far more than the 2,300 tonnes it claims to have. That amount represents the fifth-largest yellow metal reserve in the world. The top four central banks in terms of gold reserves are the US, Germany, Italy, and France, with 8,133, 3,350, 2,451, and 2,437 tonnes in respective.

What is the amount of gold in China?

Gold is primarily held by the Peoples Bank of China (PBOC), but it is also owned by the Army, the State Administration of Foreign Exchange, and the China Investment Corporation, China's sovereign wealth fund. In actuality, one way China can understate its gold reserves is by allowing other state entities to hold the metal.

Headquarters of the People's Bank of China (PBOC) are located in Beijing, China.

I will arrive at a lower estimate because I will employ a slightly more conservative methodology. The figures will still surprise you. Recall that China is the world's biggest producer, importer, and consumer of gold; in 2008, its output surpassed that of South Africa. In cases where there is a discrepancy (for example, between 500 and 1,000 tonnes), I will choose the middle number, 750, and use round numbers because they are easier to understand.

Since so many transactions are private, especially those that pass through London, Switzerland, or Dubai, it is impossible to determine the exact amount of gold that China has imported. Transactions involving gold are more open in Hong Kong.

The Shanghai Gold Exchange (SGE), which opened in 2007, handles the majority of gold that travels to China, though not all of it. According to combined data from the World Gold Council (WGC) and Shanghai Gold Exchange (SGE) reports, withdrawals from the SGE between 2007 and mid-2025 total 29,50030,000 tonnes. Gold that arrived in China before 2007 will be ignored, even though it's easy to argue that this amounts to several thousand tonnes.

It should be noted that the SGE is merely a flow metric. It is not an accurate representation of overall consumption. Due to reselling and recycling, China's booming money-laundering industry, and the circular trade with Hong Kong, some of the gold that passes through will have been double-counted. Double counting is estimated to occur between 10 and 30 percent of the time. Taking the middle 20% number (6,000 tonnes), we get 23,250 tonnes of SGE gold at the end.

Consider that the PBOC prefers 400-ounce bars of gold, which are traded in London, when discussing the undisclosed gold. The SGE, which uses 3kg and 12point 5kg ingots and smaller kilogram bars, does not trade these. 400 oz is equivalent to 11.3 kg. ).

Therefore, London imports are counted in addition to the above figures because they won't pass through the SGE unless they are re-smelted. While reported imports through London, Switzerland, and Dubai amount to between 3,500 and 4,500 tonnes, analysts generally agree that an additional 3,000 tonnesmostly after 2009, but increasing since 2022have not been reported. The sum of the 3,000 tonnes and the 23,250 tonnes of SGE gold is 26,250 tonnes.

Chinese gold mining.

The state owns about 55% of China's gold production, and geological records show that the country has extracted about 7,500 tonnes this century.

We have already taken into account the fact that the Shanghai Gold Exchange sells between 70 and 80 percent of China's output. The remaining 2030% is given to the state. Of those 7,500 tonnes (1,875 tonnes), 25% have gone to the state, according to mid-range estimates. The SGE has been used to sell the remainder. We get 28,125 tonnes when we add 1,875 tonnes to the total.

By the way, I haven't included the large amount of gold produced in China abroad. A portion of this gold is never delivered to China; instead, it is sold on foreign markets. However, what does make it to China is sold via the SGE and has thus already been tallied. Last but not least, we must include gold that was owned in China before 2000, whether in the form of jewelry or bullion. The WGC calculates that there are 2,500 tonnes of privately owned jewelry. The sum of official reserves and domestic mining comes to about 4,000 tonnes. We now have 32,125 tonnes in total.

Gold demand.

I've previously maintained that the state would receive 50% of that gold. That would be about 16,000 tonnes, which is nearly twice as much as the 8,100 tonnes reported by the US. Let me suggest another approach.

It started two weeks ago when I spoke with Konstantin Kisin on the Triggernometry podcast. In terms of the total demand for gold last year, investors and central banks accounted for 25% and 23%, respectively; the numbers for jewelry and industry are 47% and 6%.

Naturally, these numbers vary annually, with the main factors being investor and central bank demand. However, assuming that Chinese demand is about the same as that of the rest of the world, this means that of the 32,125 tonnes, about 15,100 tonnes are jewelry; 8,030 are currently in investor bullion; 1,930 went to manufacturing; and 7,400 are owned by the Chinese government.

Almost certainly, this is a false assumption, assuming that Chinese gold has been distributed over the past 25 years in accordance with global trends from the previous year. The demand from the Chinese industry may exceed 6 percent because China is such a large manufacturer.

It is also simple to argue that the demand for Chinese jewelry and investment is higher than 47% and 25%, respectively, due to the country's strong gold preferences and the government's encouragement of investment since 2007.

Similarly, demand from the PBOC may exceed 23 percent due to dedollarization. Anyway, I have been open and honest about my approach.

You are free to decide for yourself. Ultimately, the 2,300 tonnes of reserves that China has declared are a huge underestimation.

China having less gold is actually better for investors because it gives them more purchasing power, which should raise prices. The Middle Kingdom, meanwhile, claimed that 2,300 tonnes only make up 7% of its £3.04 trillion in total reserves. It would require about 18,000 tonnes to reach over 70 percent and equal the allocation ratios of the US, Germany, France, and Italy at £4,200/oz gold. Put another way, that's a lot of purchasing to come.

Assuming that the state received half of the gold imported or produced in China, as I have assumed in previous years, China possesses 16,000 tonnes of gold. That is double America's 8,133-ton reported holdings.

As of right now, gold makes up 30% of global foreign exchange holdings at current prices, according to Deutsche Bank. Meanwhile, forty percent is made up of US dollars. The percentage of euros is less than 20%. At the start of the year, gold's share was only 20%, so this is quite the change.

Gold surpasses the US dollar to become the central bank's largest holding at £5,800, a 33 percent increase from today's price of £4,340. Naturally, that presupposes banks don't purchase any more when they do. According to a recent WGC survey, 95% of reserve managers anticipated an increase in global central bank holdings over the next 12 months, while 43% of central banks intend to increase their holdings over the next year.

I hoped that at some point during the ensuing ten years, reserve holdings would be equal between the dollar and gold. Based on present trends, we might witness it in the upcoming six months.

Why does China conceal its gold?

Furthermore, Ben Bernanke, the former chairman of the Federal Reserve, asserts that gold is not money. Since China is still in the accumulation mode, why does it understate its reserves? When purchasing, it seeks a low price.

The last thing it wants to do is make it spike.

The price of gold would skyrocket if China suddenly announced that it actually possesses 7,400 or 16,000 tonnes instead of 2,300. More significantly, it could cause the dollar to plummet. The value of China's money is £3 trillion. Presumably, it wishes to maintain their value.

To put it briefly, disclosing gold holdings would cause a great deal of financial turmoil. If it ever needs to, for instance, in the event of a conflict with the US, it has that card ready to play. The first item to be used as a weapon in a conflict is money.

However, it is not required at this time. China is undoubtedly content to continue developing as it is, producing goods and selling them to the rest of the world, making sure that the latter becomes reliant on it. After all, it's on to something positive, so why upset the status quo?

As Deng Xiaoping is said to have said, "We must not shine too brightly." He essentially said, "keep a low profile" or "don't draw attention to yourself," as I understand it. the same distinction. China doesn't want to upset anyone, especially while it's still amassing gold.

There is a significant change occurring, and it is occurring rapidly. So, whether gold is overbought or not, you truly want to own it.

The investment newsletter The Flying Frisby (theflyingfrisby . com) is written by Kaylie Pferten. Penguin Business published his most recent book, The Secret History of Gold: Myth, Money, Politics & Power, which is available at all reputable bookstores.