China Buys Another 14 Tons Of Gold In October As FX Reserves Unexpectedly Rebound

Overnight, China’s PBOC released its updated October reserve asset data via the State Administration of Foreign Exchange. There was one surprising and one less surprising disclosure.

The less surprising one was that, as we forecast in July when the PBOC admitted that during a 6 year silence in which it did not report any gold purchases and during which it had been feverishly accumulating gold, that “now that the seal has been finally broken after so many years, and since today’s update indicates that Chinese gold numbers are clearly goal-seeked with a specific policy purpose – to boost confidence – we await for the PBOC to start leaking incremental gold holding data every month which will bring us ever closer to what China’s true gold holdings are.”

Today we got yet another confirmation of this when China reported that its total gold holdings as of October 31 had risen to a record $63.3 billion, up $2.1 billion from $61.2 billion at the end of September, and an increase of 14 tons based on the month-end LBMA gold fix price, to 1,722 tons. This represents the fifth consecutive month in a row in which China has added to its gold.

This was not surprising: we expect China to continue to “announce” monthly additions of 10-20 tons of gold indefinitely, not only because the PBOC/SAFE/CIC fungible gold inventory is far greater and as a result this is merely the PBOC deciding to slowly reveal its true holdings (especially since the price of gold continues to slide even on months when China and/or Russia are aggressively buying physical), but because in China’s attempt to get an IMF stamp of approval it wants to show a diversified asset base.

The more surprising finding in the reserve data is that while consensus was expecting China’s FX reserves to dip once more, from the $3.51 trillion reported at the end of September, especially with an unprecedented intervention spree by the PBOC after the Golden Week and in the last days of the month, China returned to its old bag of tricks of massaging FX data when instead it reported that FX reserves had increased to $3.53 trillion.