PBOC Disperses Its Forex Risk With Gold Purchases

More talk of diversifying reserves by insiders and industry experts.

黄金连续走低 中国央行或增持分散外储风险

Along with Goldman Sachs as the representative of institutional investors once again sing the empty gold, gold prices plummeted again.

April 15, gold plunged to crash ushered in the anniversary. Because the April 15, 2013, the international price of gold in a single day drop of 9.13 percent to the highest in nearly 30 years, the largest single-day decline.

With the continuous decline in the price of gold in recent months, drew outside of China's central bank holdings of gold reserves conjecture. Recently, some foreign media reported that China has begun to allow direct import of gold by Beijing crossings. Previously, the market forecast China's central bank will increase its gold reserves, may also be issued an official statement this year. However, as of press time reporter, the central bank did not make a statement on this.

A central bank insider told the "China Business" reporter: "China is a big country, the central bank increasing gold holdings is a normal phenomenon, on reason is that they don't want to put all their eggs in one basket, but another is is the need to disperse its Forex risk. An industry insider agrees with this view, if the central bank increases holdings of gold reserves, it can help to optimize the structure of China's foreign exchange reserves and disperse risk.

Central bank holdings of gold or

It is said that China has begun to allow imports of gold by Beijing, but at the moment is not particularly large number of imports. In the industry view, if the import channels open Beijing, will help China with a low-key way to improve the official reserves, but also help promote China to further purchases of gold from the international market, but also to broaden the investment channels for the people.

"With the continuous improvement of comprehensive national credit, making the currency banknotes and metal can with monetary value, which is normal trading gold, so even if the central bank holdings of gold is a normal phenomenon." Above the central bank insiders told reporters analysts said.

Reporters noted that Chinese gold demand is relatively strong in recent years, especially in China's demand for physical gold soared. Only in April 2013 outbreak prompted China to grab gold wave on consumption of 706.36 tons of gold. We can say that China's Aunt promote Chinese demand for physical gold.

There are publicly available data, in 2013 in Hong Kong to the mainland for a total of up to $ 53 billion in gold. January this year, China's gold imports from Hong Kong amounted to 83.6 tons, compared to January 2013 imported 19.6 tons, an increase of 326%. And last year, China's gold imports surged 28%, which led to market speculation.

World Gold Council believes that the People's Bank of China want to choose investment products outside the U.S. Treasury, and therefore may be increasing their gold reserves. Although no official statement confirmed, but the industry respondents believe that, compared with developed countries, China's official gold reserves is low.

Meng Yu, general manager of Jinpeng Futures on gold has studied the country, told reporters that the Chinese government is still low compared with developed countries on the gold reserves. In his view, gold is a scarce resource, but also the strategic resource. China's official holdings of gold, if appropriate, in favor of economic development.

CITIC Construction Investment Research topics when the group leader Xiamin Ren told reporters concur, "the central bank holdings when appropriate low gold prices, you can optimize the structure of China's foreign exchange reserves, dollar hedge downside risk."

Although the structure of China's foreign reserves had not been made clear announcement, but industry estimates, the foreign exchange reserves mainly in U.S. dollars configuration, dollar assets may account for about 60% to 70%.

"This is mainly from a trade point of view, many of the world's resources are priced priced in U.S. dollars, mostly trade but also in U.S. dollars, thus reducing the exchange rate risk." Xiamin Ren told reporters analysts said.

However, the official also has its own considerations. For China's foreign exchange reserves in the past why not a lot of gold holdings to diversify risk, the central bank had a senior person, in March last year to respond to media reports, because the gold market is very small, risk diversification up only 1% to 2%, plus a large number of official gold holdings will push gold higher, so people into trouble, whether it was a difficult decision holdings of gold problem.

Scattered outside the reserve risk

It seems that the industry respondents, central banks in the gold reserves are configured practice. China's central bank holdings of gold reserves if and when appropriate, help to optimize the structure of China's foreign exchange reserves, against the risk of foreign exchange reserves.

Reporters noted that in recent years, most countries are looking to diversify foreign exchange reserves of central banks in the past few years have holdings of gold. According to data provided by the IMF, central banks buy gold in November 2012 1,020,000,000 ounces, compared to November 2011 increased by 1.4%. In February 2014, Russia's official gold reserves from 1,034.7 tons in January increased to 1,041.9 tons, overtaking Switzerland was promoted to the world's sixth largest gold reserves of the country.

In fact, Russia has been increasing in recent years, gold reserves, particularly in recent months, the Russian central bank gold holdings is to increase the intensity. "This is mainly to avoid the impact of the U.S. dollar and the euro." Xiamin Ren analysis. Some analysts said, because the Ukraine, Russia's central bank holdings of gold to reduce the impact of U.S. financial sanctions that may arise on the Russian economy.

However, according to the World Gold Council data show that China's gold reserves data change little. Since April 2009 released 454 tons of gold holdings since China holds a total official gold reserves have remained at 1,054.1 tons.

And a recent global central bank gold reserves data domestic media obtained from the World Gold Council also showed that there is statistical in 100 countries worldwide, regional or official organizations, the total gold reserves of 31,829 tons. Before five ranked reserves are the United States, Germany, IMF, Italy and France, China ranked sixth, followed by Russia, Switzerland, Japan, the Netherlands. "Central banks of different preferences for gold, there are differences on the configuration." Xiamin Ren told reporters.

However, Yu Meng told reporters the country, "resources are not only gold, as well as crude oil, copper and other commodities are the future of China's economic development needs in these low commodity prices may be appropriate to buy some of the strategic reserve."

Reporters noted that the recent weakness in the gold price, gold ETF holdings in the doldrums, the continuous reduction of the current gold ETF holdings fourth week. And because the price of gold fell nearly 30 percent last year, out of which a large number of gold ETF is considered to be one of the reasons behind it. Meanwhile, Goldman Sachs, as the representative of institutional investors began to sing again "short gold."

Respondents believe that the short-term decline mainly to alleviate the problem in Ukraine and the United States economic data make gold price pressure is expected in the short-term gold price of U.S. $ 1275 to 1300 shock is a high probability event.

"Short-term ups and downs are still a large part of the normal fluctuation." Yu Meng country that, from U.S. monetary policy and the gold supply and demand, the future price trend is still unclear.