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China takes advantage of low prices to beef up bullion holdings

Monday, December 14, 2015

China, the world’s biggest gold buyer, bought almost a quarter of the global annual production of the precious metal in just five months this year.

The country purchased 654 tonnes of gold bullion from June to September, and the latest figures show the country is accelerating its gold-buying to take advantage of the current low prices.

The People’s Bank of China’s data for November showed that the country added an estimated 20.8 tonnes of fine gold bullion to its stocks last month. The volume was calculated by Reuters, based on the dollar value of gold the country had bought. China has been snapping up between 14 and 19 tonnes of gold a month for much of this year, a sizable chunk of the global annual gold production, which stands at around 2,800 tonnes a year.

China revived the publication of its gold holding statistics in June and has published information every month since. The country had previously released monthly data, but stopped doing so in April 2009 during the worldwide economic downturn.

Market analysts expect the country to continue with its large-scale gold investments as the Chinese yuan is about to be granted reserve currency status by the IMF (International Monetary Fund) and China will be keen to back-up its currency with strong gold holdings.

However, it is not the only government boosting bullion holdings at the moment. Figures from the World Gold Council (WGC) show that in the second half of this year, Russia has also been adding substantially to its gold stocks. It purchased almost 30 tonnes in August and 34.5 tonnes in September.

And governments aren’t alone in using the low spot price to beef up their investments. The figures for investment in gold bullion bars and coins showed a 27 per cent increase worldwide during the July to September quarter of 2015. Canny investors appear to be building up the value of their individual holdings while prices are low.