China may have bought 300 metric tons of gold in the first half of this year to diversify its foreign-exchange reserves, the world’s largest, according to Philip Klapwijk of Precious Metals Insights Ltd.
China hasn’t announced any changes to state gold reserves since authorities in 2009 said bullion holdings totaled 1,054.1 metric tons.
The probable purchases by China, the second-biggest gold user, may have limited price drops, said Klapwijk, who has monitored precious metals for 25 years. Bullion is 12 percent above the 34-month low it reached in June, while still on track for the first retreat since 2000. The metal accounts for 1.3 percent of China’s foreign-exchange reserves, compared with 73 percent of the U.S., according to the World Gold Council.
“The probability is that there’s some form of official purchases that have not yet been reflected in the monetary gold reserves,” Klapwijk said, referring to bullion declared to the International Monetary Fund. “Undoubtedly, that’s provided support for prices, which could have been weaker.”
Gold for immediate delivery was little changed at $1,319.34 an ounce by 2:37 p.m. in Singapore. The precious metal entered a bear market in April and fell 23 percent in the second quarter, the steepest drop since at least 1920.
China, which held $3.66 trillion in foreign-exchange reserves as of September, has 1,054.1 tons in gold holdings, the fifth largest by country after the U.S.’s 8,133.5 tons, the biggest, and Germany’s 3,390.6 tons, the council’s data show.
In 2009, China said reserves increased by 454 tons, or 76 percent, since 2003. The gain came from purchases that were initially earmarked as non-monetary holdings, Hong Kong-based Klapwijk said.
“Purchases since end-2008 could be quite substantial, especially in calendar 2013 to date,” he said. “It remains to be seen if China will decide at some point to re-position some or all of this bullion in the monetary reserves and publish a new figure for its official gold holdings.”
The probable purchases by China contrast with recent moves by some other emerging countries. Russia reduced reserves for the first time in a year in September as Mexico cut holdings for a 17th month, according to the IMF. Central-bank buying may total 350 tons in 2013, the WGC predicts, after they added 534.6 tons last year, the most since 1964.
Net imports of gold into China, set to overtake India as the biggest consumer, more than doubled to 826 tons in the first nine months of this year, according to Bloomberg calculations based on Hong Kong customs data. Demand for the full year may total a record 1,000 tons, according to the WGC.
Klapwijk’s estimate was based on trade flows, local supply and usage. He led Thomson Reuters GFMS Ltd.’s global metals until February before setting up Precious Metals.