Will China’s Upcoming Five Year Plan Unveil Plans To Buy More Gold?

China economic growth


The eyes of the entire world will be focusing on China in the final few days of October. The Central Committee of the Communist Party will meet in Beijing from Oct 26-29 to discuss a new five year plan for the country’s economy which will be enforced between 2016 and 2020.

This will be a very important event considering the Chinese won’t want to lose their face and it’s unlikely they will reduce the growth targets. Keep in mind when the previous five year plan was revealed, China promised the markets it would double the size of its economy by 2020, and this would mean it cannot lower its growth target of 7% per year.

China Gold 5


Source: tradingeconomics.com

But, will the country be able to achieve that target? The economy has been losing momentum and even though the country reported a huge trade surplus of approximately 60 billion Dollar (or approximately $12B more than anticipated), but the import numbers for goods entering China fell by a stunning 20% and the sales numbers

So, yes, China will have to do ‘something’ to keep its economy going and one of the few instruments the policy makers can use are obviously the interest rates and make more money available to improve the access to cash in the financial system.

But what intrigues us even more is the question whether or not China will continue to buy gold. Even though its economy is no longer what it used to be anymore, China continued to purchase more physical gold to store it in its vaults. In September, the country added almost half a million ounces gold to its foreign currency reserves at a total purchase price of approximately $600M. That doesn’t sound like a lot of money (and the run rate is just $7-7.5B) per year, but there’s more to this story than just the headline numbers. In the third quarter of this year, China has added approximately 1.65 million ounces of gold to the vaults and remains on track to acquire more than 5 million ounces during the entire year.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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