Will China's Statement Hit Gold Prices?


"SAFE is unlikely to impact the bullion market."

The statement of China's State Administration of Foreign Exchange (SAFE) is unlikely to impact the bullion market.

The SAFE described Beijing as a responsible long-term investor and doesn't seek the power to control recipients of its investment.

The announcement caused a minor stir in gold prices, sending bullion down around $6 or 0.8%, to $1,188.75 in the first 30 minutes after the news broke.

Analysts said this won't have a big impact. The market is under pressure for other reasons, there is a worry of a bigger pullback and there is a flight to cash.

China has increased its gold holdings by more than 400 tons in the past few years to 1,054 tons. Even if it doubled that amount, gold's share of SAFE's portfolio would increase by only one or two percentage points.

With China the leading global gold producer for the last three years, there is no point for them to buy from outside and disturb the market.

Though they are increasing their gold reserves in a slow and steady manner, those purchases have been largely internal. This news is unlikely to have any major impact on gold as China wasn't behind the gold bull.

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