The Mystery of the Missing Gold

More than 900 tonnes of gold has gone missing.

I mean, it’s not “missing” missing. It entered the system; we know that. But then… poof!

We also know it’s missing in China.

And therein lies a message for us Americans: Something squirrely is going on in the world, and whatever it is bodes ill for the dollar-centric system.

Here’s the issue: China’s government bought about 80 tonnes of gold in the first eight months of this year. We know that. That stuff’s widely reported by way of central bank missives and World Gold Council data collection.

We also know that China imported more than 1,000 tonnes. That stuff’s widely reported through China’s customs agency.

So a bit of mental math and… roughly 920 tonnes of gold crossed China’s border without landing in the central bank’s vault. Where did it go?

Some of it is probably (highly likely) quietly hiding in China’s central bank. Rumors have long persisted—and some reporting seems to confirm—that the Chinese government owns far more gold than the official count… like, 2x to maybe 5x more. No one’s sure.

Beijing has history here.

In 2009, the Chinese government revealed six years’ worth of purchases it somehow forgot to mention. In 2015, it did it again, unveiling 604 additional tonnes that just appeared on the state register out of nowhere. And this week, Goldman Sachs estimated that China’s central bank really bought 35 tonnes in July, not the 20 tonnes China reported.

So that 15 tonnes, assuming Goldman is spot on, is some of our missing gold.

Just maybe Beijing has been importing 15 or 20 tonnes extra every month and forgetting to report it. Maybe it has bought 920 extra tonnes?

Or, more likely, Chinese families are going street-rat crazy for gold because they know what’s what.

These are the options Chinese savers face at the moment:

• Real estate, a traditional family piggy bank in China that has been sinking since the 2021 property crash.
• The stock market is down this year and still more than 20% below its 2021 peak.
• Bank deposits and government bonds pay close to the lowest interest on record.

Every door leads a Chinese saver into a room where money shrinks.

Gold is the best option, and gold rarely leaves China, since exporting the metal means jumping through near-impossible approval hoops.

So, it’s very likely that Chinese families are following their government’s lead and gobbling up boatloads of gold.

Clearly some of the missing 920 tonnes went into Chinese gold funds. They’ve added about 44 tonnes this year, an 18% jump.

Worldwide, gold fund flows are roughly flat, with China as the exception.

I was with a young husband and wife in a Ping An bank branch in Changsha, China years ago as they were buying $25,000 worth of Chinese gold Panda coins because “we don’t trust government inflation numbers; this is for our family’s future.”

That, I’m betting, is where a lot of the missing gold landed: Families packing away small gold bars and gold coins that function like a savings account. And I’m betting some of it has landed on insurance-company balance sheets because last year Beijing allowed 10 of the country’s biggest insurance companies to put up to 1% of their assets into gold for the first time.

Add all that together with secret government buying—and there’s the missing 920 tonnes of gold.

The message for Americans: The Chinese—from the government down through the typical family in a typical city like Changsha—are grabbing gold by the tonne because they see that the dollar-based global system is facing a change (and they want an asset that’s going to hold its value and gain in value, rather than paper currency).

Americans tend not to see that because we grew up inside the system. We benefited from the system. And when your currency has been king of the world for 80-plus years, you just assume the concrete has set and nothing changes the foundation now.

History is littered with those same shattered assumptions.

Gold isn’t up 1,500% so far this millennium because it’s a great investment. It’s up because those who are buying gold see that the dollar can no longer continue playing the role of king. That role, while good for America in the second half of the last century, is now a big reason US manufacturers have relocated overseas and why the American middle class is hollowing out.

The Chinese see it because they’re outside the system.

So, I guess the point here is this: Act more Chinese; it’s good for your wealth.