China unlikely to buy IMF gold - Milling Stanley

In an interview with Bloomberg, the World Gold Council's George Milling-Stanley reckoned that China was not a realistic buyer of the remaining 191.3 tonnes of IMF gold for sale.

LONDON -

Contrary to much speculation among the pro-gold sector, the World Gold Council feels that China is actually "not a realistic candidate" to buy all, or any, of the IMF's remaining 191.3 tonnes of gold which is still up for sale. In an interview with Bloomberg, George Milling Stanley, the WGC's New York-based managing director for government affairs is quoted as saying "We're not surprised to see that China has not" taken up any of the IMF's gold for sale and is far more likely to "buy local gold production" with which to bolster and diversify its currency reserves.

This is effectively the same position as that taken by Mineweb's own commentators although we have also noted comments from third parties who feel that China is a natural home for the IMF gold.

For example, Jeff Nichols, in his latest commentary on gold on his website nicholsongold.com says "For some time now, we've suggested that China could be the next big buyer from the IMF, particularly if prices dipped below those paid by India for its purchases last year. Now, however, China (and other central banks) can purchase IMF gold anonymously - with less concern about looking good by acquiring metal at prices beneath those paid by the Reserve Bank of India last year. And, as prices rise, some countries may feel compelled to buy sooner rather than later to avoid missing the boat altogether."

Nichols also points out - as noted by Mineweb some time back - that China's huge sovereign wealth fund, China Investment Corporation (CIC) has bought a substantial hunk (4.5 tonnes equivalent) of the SPDR Gold Trust's gold ETF making it the biggest holder, along with such mega names as Soros and Paulson, as an indicator that China definitely remains interested in the yellow metal as a protector of its investments.

But, the fact remains that China is now the world's largest gold producer, if not yet the world's largest gold consumer - a position apparently still held by India despite a weakening of demand there with a reluctance to buy gold at higher price levels, a reluctance which now appears to be fading. With China's gold mine production passing through state hands, the country's opportunity to build up its gold reserves in a less open manner, and making these purchases in local currency and not rock the dollar boat, suggests that if it feels its gold reserves need boosting above its current relatively tiny level, this may well be the better route for so doing.

As Milling-Stanley went on in the Bloomberg interview, commenting on the IMF announcing it was opening up the sale of its remaining gold for sale to the general market - "There has been some ill-informed comment that this move tarnished the notion that governments are adding to reserves," he is reported as saying. "There are a lot of Central Banks out there that are buying local production in local currency. The IMF would have no interest in that local currency. The IMF is looking for dollars."

"China was always buying its own domestic production and it will likely to continue to do so" said Milling-Stanley.