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China's gold hoarding hinders price suppression scheme, Hong Kong analyst says
Wall Street Concerned over China's Gold Hoarding
By Huang Shu-rong
China Times, Taipei
Monday, June 2, 2014
http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1203&MainCatID=...
The People's Bank of China, China's central bank, is the world's biggest gold hoarder and the bane of Wall Street traders, reports the Chinese-language financial news website BwChinese, citing a Hong Kong financial analyst.
Leung Hai-ming told the portal that China's central bank took advantage of the U.S. Federal Reserve's quantitative easing program in 2013, when the price of gold fell by 27 percent. The bank bought more than 1,000 tonnes of gold, representing almost a third of the world's 3,756 tonnes last year.
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There is reportedly less than 180,000 tonnes of gold reserves left, and only 20 percent of that remaining gold is tradable. This means that the People's Bank of China will likely keep hold of the gold, limiting the gold trading volume -- a concern for both the U.S. government and Wall Street traders.
Leung said that the U.S. Federal Reserve loans gold to investment banks such as Goldman Sachs, Citibank, JPMorgan Chase, Morgan Stanley, and others every year to trade in the market. The amount of gold ranges between 400-500 tonnes and the move acts to artificially suppress gold prices. When the prices are in their favor, these investment banks buy back the gold and return it to the Fed.
But this measure is absolutely useless because China is hoarding the gold and does not follow the rules, Leung said. When it sees that gold prices are going down, the first thing it does is buy gold, and China does not sell when prices continue to fall. It seems that Wall Street cannot do anything to counter China on this, according to Leung.
The analyst said that the People's Bank of China is putting pressure on Washington and Wall Street as the US dollar has been linked with gold prices since its rise as the leading global currency. The Fed hopes to manipulate gold prices in its favor, Leung said, but the Chinese central bank is standing in its way.
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