Back in December, as always happens every year for the past 3, a margin call driven liquidation wave pushed the price of the gold to multi-month lows, providing merely yet another lowball buying opportunity (for which let’s all thank John Paulson, again). One buyer who certainly would love to thank whichever marginal seller was liquidating their gold, is none other than China, which as was reported a few hours ago, imported an all time record 114.4 tons of gold in the month of December, or more than all the gold held by the Greek central bank (assuming it hasn’t been confiscated by ze Germans or the ECB, or deposited in G-Pap or Venizelos’ private HSBC safe in Geneva yet: a very aggressive assumption).
This means that for all of 2012, total China imports of gold have hit a staggering 834.5 tons, double the 431 tons in 2011, and that the PBOC’s determination, whose official holdings are still a laughable 1054 tons, when in reality they are likely 3-4 times greater, to convert to a commodity-backed currency the day it decides to become the world’s reserves currency, as we predicted back in 2011, is as steadfast as ever. Recall from the December 2009 edition of China Youth Daily, which we reported previously that State Council advisor Ji was saying “that a team of experts from Beijing and Shanghai have set up a “task force” last year to consider growing China’s gold reserves. “We suggested that China’s gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years,” the paper quoted him.”
This was in 2009. It is safe to say that the official (not reported) Chinese gold holdings are now around 4-5,000 tons, or 4x-5x more than the IMF number.
In the meantime, China’s 2012 gross gold imports alone (ignoring its massive internal production, which happens to be the world’s largest gold producer), have surpassed all of Japan’s official gold holdings, and were just shy of Russia’s and Switzerland’s total official gold.
More from Bloomberg:
The imports in December compared with 90,764 kilograms in November, and were more than double the 38,650 kilograms a year earlier, according to the data. Net imports, after deducting flows from China to Hong Kong, were 84,687 kilograms in December from 61,787 kilograms a month earlier. China doesn’t publish such data.
China was expected to displace India as the world’s biggest gold consumer last year, according forecast in November from the producer-funded World Gold Council. Rising consumption in the country may help to offset concern that the metal’s bull run may be coming to an end as the global economy recovers. Spot gold is little changed so far this year, while the Standard & Poor’s GSCI Index of raw materials has risen 4.4 percent.
The increase in gold imports last year “was largely a result of income growth,” Jiang Shu, a senior analyst at Industrial Bank Co. Ltd., said from Shanghai before the data was released. “The Chinese are becoming more wealthy.”
Economic growth in China, the world’s largest gold producer, has boosted the country’s consumption of everything from copper to energy and farm commodities. The nation, which snapped a seven-quarter slowdown in the final quarter of last year, is the world’s largest base-metals user, the biggest importer of soybeans and the top crude-oil consumer after the U.S.
“We see demand continuing to be robust into 2013,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “The economy will recover, albeit slowly, while real interest rates will remain low and central banks will continue to accumulate. These are all bullish for gold.”
And all this with inflation in China still supposedly tame. Just wait until the trillions in new money created in 2013 finally find their way to the Chinese market and send inflation through the roof as happened in early/mid 2011, and when gold exploded. Once the increasingly more affluent Chinese middle class decides to once again lock up its wealth in the form of gold, then and only then, will gold finally cross the so far insurmountable $2000 resistance level.
[VIA Zero Hedge]