Chinese Gold Holdings Up Again; Other Countries Also Hoarding the Metal

China continues to increase its central bank gold holdings, and other countries are following suit.

The world’s largest bullion consumer upped its stash of the precious metal another 1% in August. Bloomberg reports the hoard rose to 54.45 million troy ounces in August from 53.93 million ounces a month earlier, according to data released by the People’s Bank of China (PBOC).

It was the third straight month Chinese officials have release information on the amount of gold it owns. In July, the Chinese central bank announced its gold holdings had grown by 57% to about 1,658 tons. It was the first official update to China’s gold reserves since 2009. That lifted the nation above Russia to become the fifth largest holder of gold in the world.

Many analysts believe that China is stockpiling gold to stabilize its yuan currency in the eyes of the international community. That would explain the sudden increase in transparency Bloomberg noted in its report:

China has joined Russia and Kazakhstan in increasing gold assets and is reporting its position monthly, showing a shift toward greater transparency as the country improves data quality, increases its presence in commodities trading and promotes the international role of the yuan. The nation devalued its currency last month and announced a move to a more market-driven exchange-rate mechanism.”

Last week’s announcement that investors withdrew a record amount of gold from the Shanghai Gold Exchange over the past year also signals a more general and steady increase in demand in China.

China isn’t the only Asian county buying up gold. Demand continues strong in India, the world’s second leading consumer of gold.

Gold imports spiked in India in August, building on a year-long trend. According to the Times of India, 15.78 metric tons of gold were imported into the Asian nation last month. That compares to 7.2 tons of gold imported in the same period in 2014, an increase of 119%.

While gold jewelry drives Indian demand, as we reported last week, the country will soon have its own gold coin.

As the Bloomberg report notes, many other central banks continue to stash gold despite the fact it no longer backs fiat currencies:

Bullion remains a large part of many central banks’ assets, decades after they stopped using it to back paper money, and nations have expanded holdings in the past few years, a reversal from two decades of selling.”

Russia has more than tripled its holdings since 2005, and Kazakhstan has increased its stash of gold every month for nearly the past three years.

Chief economist at trader Australian Bullion Co., Jordan Eliseo, told Bloomberg he expects the Chinese to keeping adding to its gold holdings:

China’s accumulation of physical gold is likely to continue. At present, they have an extremely low allocation to gold as a percentage of forex reserves, especially compared to many developed market nations.”

Central bankers understand that gold provides stability and historically preserves wealth over time. This is precisely why countries around the world continue to hold and increase their supplies of the precious metal, and why wise investors also buy gold.

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