By David Marsh
LONDON: The good news for gold enthusiasts is that China and Russia, the world’s No. 1 and No. 3 producers, are catching up to the big industrial countries in stocks of bullion in their official reserves.
The bad news is that, on present “steady-as-she goes” monthly gold accruals, it will take China and Russia — No. 6 and 7 in the world ranking of global gold reserves — about six years to draw level with the fourth- and fifth-placed countries, France and Italy.
Beijing and Moscow are building up gold stocks for a variety of reasons, ranging from unease about undue dependence on the dollar BUXX, -0.71% — particularly acute in Russia’s case, in view of U.S.-led sanctions over the invasion of Crimea — to distaste at the low or negative returns on Europe currency holdings, especially the euro EURUSD, +0.4479%.
China seems to be following a more strategic campaign to counter the weight of the dollar, embodied by its successful multiyear bid to bring the yuan USDCNH, -0.1700% the International Monetary Fund’s special drawing right. The official unit of account at the heart of world money will be enlarged to include the Chinese currency from Oct. 1, which could possibly be the precursor to the Chinese authorities attempting to strengthen the SDR — currently an artificial unit which is not traded on private markets — as a multilateral reserve currency.
Last year China lifted part of the veil over its gold reserves, breaking a six-year silence to reveal holdings of 1,658 tons as of June 2015 against the previously reported figure of 1,054 tons. Beijing also moved to a market valuation of gold, which according to latest figures are worth $70.5 billion, although this makes up only 2.1% of total Chinese international reserves (against gold reserve shares of 60% to 70% for the main industrial countries).