Are Central Banks Accurately Reporting Gold Reserves?

Mineweb’s Lawrence Williams published an article that looks at how accurate central banks are in reporting national gold reserves to the International Monetary Fund.

He starts out by stating:

China has 1,054.1 tonnes of gold in its official reserves. Yeah right! The USA has 8,133.5 tonnes in its reserves – the world’s largest. But forgive me if I treat this figure, and those reported by some other central banks, with about as much scepticism as I treat the official Chinese figure. Much is made of the fact that China has not updated its official reserve figure since 2009 – but then the US has not updated its figure for nearly 40 years. Something similar applies to many other central banks which report identical gold volumes year in, year out.

It’s all a question of accounting and presentation of statistics. In truth the major central bank holders of gold only tell the IMF what they want the world to believe are their actual attributable gold holdings and the true amounts of accessible physical gold currently held on their own behalf are quite probably somewhat different in a number of cases.

Continuing, he points out that Bloomberg analysts have suggested that Chinese reserves are about 2,500 tonnes higher than China has said they are. While that “is not really news … it has had a strong impact this time due to speculation that China is indeed about to announce a new higher gold reserve figure.” Continuing, Williams notes:

Central banks as a rule won’t facilitate full independent audits of their gold holdings so in effect the IMF effectively has to believe what the banks tell it in publishing global gold reserve data. Perhaps most central banks, but probably not all, are completely honest in their reporting. But the suggestion is that if it wishes to do so China could well announce to the IMF it has increased its gold holdings in its reserves to around 3,500 tonnes as Bloomberg suggests, apparently putting it into second place amongst global gold holders – or perhaps it could even say it has 9,000 tonnes (whether it does or not) putting it into first place. There is no transparency here.

3,500 tonnes is perhaps a nice compromise figure. It is sufficiently high for it to make an impact and give the yuan even more global credibility on its route to becoming a global reserve currency, but perhaps not so high that it would disrupt the gold price over-much. Far higher gold prices may not be in its best interests assuming it remains in a gold accumulation phase.

However, if China was to say that it now has 9,000 tonnes in its reserves, replacing the US as the No. 1 gold holder, it would probably lead to a very substantial gold price rise.

Click here to read the full Mineweb report.