As Beijing reveals modest gold hoard, bulls cry out for more

Six years ago, when Beijing last unveiled how much gold was sitting in its central bank vaults, mainland industry figures and global gold bugs were convinced it was on the brink of a buying spree that could transform the market.

After buying a relatively meagre 454 tonnes in the six years to 2009, as the mainland economy raced ahead, the People’s Bank of China’s ultra-secret bullion buying was expected to accelerate as it spread risk away from its trillions of US dollars.

On Friday, that optimism proved to be ill-founded when Beijing gave a rare glimpse into the size of its gold stash. It said it has added 604 tonnes, worth US$22 billion at current prices, since 2009.

That means it bought only slightly more gold over the past six years than it did in the previous six. Based on the average annual pace, it would have purchased less gold in the past year than Russia.

And as the mainland’s foreign exchange reserves expanded far faster than its gold reserves, the share of gold fell to 1.65 per cent, down from 1.85 per cent before and still far below what some analysts believe is optimal in the long term.

However, most analysts remain confident that Beijing will become a bigger bullish force for bullion as it vies to position the yuan as a global reserve currency.