Recently, Chinese have been associated with getting their money out of the country because of the weak economy and a possible debt crisis.
Those who are not getting their money out by buying Vancouver real estate or Italian soccer clubs have found another solution to the economic uncertainty: Gold ETFs.
The Chinese segment of this almost 2000 ton global market is tiny (20 tons), but those holdings doubled in the first quarter of 2016 compared to the first quarter of 2015, according to a report by the World Gold Council.
(World Gold Council)
The most popular Chinese Gold-backed ETF (Huaan Yifu Gold) increased its holdings by almost 30 percent to 13.5 tons in the first quarter compared to the end of 2015.
Globally, gold ETFs increased their holdings by 364 tons, the highest number since the first quarter of 2009 contributing the most to gold’s strongest first quarter of the year on record. Total demand was 1290 tons, up 21 percent compared to the same period in the year before.
“The noxious atmosphere of uncertainty created by global monetary policies and shifting expectations for U.S. interest rate rises were cause for concern. Investors sought the safety of gold,” the report states.
(World Gold Council)
The report also mentions the threat of a Chinese devaluation caused the spike in gold demand. Being at the epicenter of these worries, Chinese also loaded up on physical gold and increased their purchases 23 percent compared to the end of 2015. They bought 62 tons.
“I think many Chinese understand if they buy gold in China with renminbi, they are also hedged against such a devaluation, so there is no need for normal Chinese to use gold and bring it out of the country when they made their money in an honest way,” says Willem Middelkoop, author of “The Big Reset.”
Another reflection of this shift in consumer sentiment in China is the fact demand for gold jewelry actually decreased 4 percent over the quarter and 17 percent over the year (216 tons to 179 tons). 
The Chinese central bank, while defending its currency against massive capital outflows has also continued to load up on gold.
“Russia and China–the two largest purchasers last year–continue to accumulate significant quantities of gold,” states the report. China added 35.1 in the first quarter and it looks like the made a good investment. Gold outperformed all other asset classes in the first quarter:
(World Gold Council)

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Skip to 14:16 in the video to directly delve into financial system reform and China. 
China is the world’s largest producer, consumer, and importer of gold. But that’s not enough. The country is taking steps to become the dominant power in gold trading and lending as well—and it has different reasons to do so.
A year ago, Epoch Times first reported China’s ambition to take control of physical gold pricing. According to a Reuters report, we are getting closer to the official launch of a yuan-denominated physical price for gold.
“I think what the Chinese are trying to do is creating a real market that reflects supply and demand for physical gold,” said Simon Mikhailovich, managing director at Tocqueville Bullion Reserve last year.
“They are working on building an infrastructure in which the pricing mechanism of gold and silver and other commodities can be transferred from the West to the East,” said Willem Middelkoop, principal at the Commodity Discovery Fund and insider to communist party deliberations on gold.
If China launches this new pricing system, it would mark an important next step in China’s quest to dominate world gold markets. They already have a futures exchange with a new standard for 1 kilogram 0.999 purity gold bars. This rivals the New York Comex future exchange, which deals in 100-ounce contracts and where only 1 in 300 trades actually results in physical delivery according to Middelkoop.
The fix for physical would rival the London Bullion Market Association (LBMA), where a couple of banks set the price in secret twice every trading day and where rumors of price manipulation abound.
(Trading Economics)
But what are the benefits? China has official holdings of 1762 tons as of the end of 2015, but experts believe it effectively controls many more tons.
“So we know China is getting about 1600-1700 tons of gold a year. They’ve been doing this for about seven years so they have well in excess of 10,000 tons, maybe as much as 13,000 tons of gold that they’ve acquired in the last seven years. We don’t know how much of that is going to the government, how much of that is going to private consumption,” says James Rickards, author of “The New Case for Gold.“
According to him, China has now completed the lion’s share of its gold purchase program, which puts it on level terms with the United States and the Eurozone. If China controls the price for physical as well as for paper future contracts, it can control the real price of gold, which has been manipulated downward by the LBMA and the COMEX, not only according to experts like James Rickards and Willem Middelkoop, but also by a recent admission on the part of Deutsche Bank AG.
Here’s why some people speculate: The Chinese are going to launch the yuan as a global reserve currency backed by gold and run the dollar off the road. — James Rickards

Effectively China can come out and reveal the total amount of gold it holds as well as a higher price. This would be useful to increases its negotiating power with the West should there be another financial crisis and a reform of the financial system. By using gold, but also other levers like the Asian Infrastructure and Investment Bank (AIIB), China has influenced the United States to admit it to the International Monetary Fund’s (IMF) global reserve currency, the Special Drawing Rights (SDR).
“Here’s why some people speculate: The Chinese are going to launch the yuan as a global reserve currency backed by gold and run the dollar off the road. That’s possible but I don’t really see that as what they’re doing. What they are doing is hedging their position because they have about $2 trillion in U.S. dollar-denominated assets,” says Rickards.
He believes there will be a global solution and not a yuan-based solution for a new reserve currency. But even if this is not China’s goal, futures trading in yuan, as well as physical trading in yuan takes away demand for dollars and channels it to yuan. How much demand? This depends on the price of gold as much as on which trading partner can deliver the goods when push comes to shove.

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Willem Middelkoop was a journalist until 2008, but always had a good feel for financial markets.
Back in the 1990s for example, he bought as many as eight properties in Amsterdam with no money down, capitalizing on falling interest rates as well as a booming expat rental market.
Later he became interested in gold and the monetary system, correctly predicting the financial crisis of 2008 in many of his more than 5,000 appearances on Dutch television.
In the same year, he founded for high net worth clients the Commodity Discovery Fund, which specializes in gold and silver mining companies.
After writing “The Big Reset” in 2013, he became intimately familiar with China and its quest to dominate the global gold market.
A Chinese language version was published and he launched the book at the Chinese International Monetary Institute, a leading monetary think tank.
Epoch Times spoke to Willem about China’s plan to accumulate gold and store it with the people, as well as their end-game for the reform of the financial system.
If they want to send gold to $3000 per ounce, they could do so any week.

Epoch Times: How does China view gold?
Willem Middelkoop: The most important thing to understand about China’s gold strategy is that they see gold as a hedge against the financial system and the reserve holdings they have right now.
They still have $3.2 trillion in reserves and they understand the current dollar system is in its end-game. And they have been very vocal in their wish to hedge their dollar positions with gold.
Most of these statements never made it into the Western hemisphere, but if you look at all the articles in China, they say they want to achieve “the highest gold reserve in the shortest possible time.”
They had quite a bit of gold in the 1920s and 1930s but most was taken away by the Japanese, after the invasion a few years before World War II.
After the war, the Kuomintang fled to Taiwan with the rest and China’s vaults were empty until the 1990s. They have a very strong wish to grow their gold reserves now.
Epoch Times: How much do you think they have now?
Mr. Middelkoop: If you want to know how much gold the Chinese have accumulated over the last 15 years, it’s not enough to look at the official gold holdings.
The central banks gold holdings are low compared to total Chinese holdings. The official reserves are shy of 1800 tons, that’s less than 2 percent of all foreign exchange reserves.
It’s their wish to grow it to 10 percent of financial reserves, or $320 billion. Russia has over 10 percent, Europe and the United States have a much larger share. In the West, they generally have 50 percent of all reserves in gold.

(Willem Middelkoop)
There is an official Chinese program called “storing gold with the people,” it was mentioned in an article published on the People’s Bank of China’s (PBoC) website in June last year, after they updated their official reserves.
If you look at the total gold holdings in China, the physical gold holdings are well over 10,000 tons. These reserves are stored with commercial banks, with companies, and ordinary Chinese.
At least half of it is owned by Chinese citizens. The Chinese leadership has studied financial history quite well. They know that in crisis situations, the central government can confiscate gold and hand out paper money in return. Especially in a centrally controlled country like China.
By controlling the vaults you can control the gold settlement system.

The Koreans have done the same during the Asian crisis, the United States has done the same in 1933 when President Roosevelt forced all Americans had to hand over their gold holdings. Americans citizens weren’t allowed to buy and hold gold between 1933 and 1974.
It will be possible for the Chinese to confiscate gold when they need it, for example if they lose too much of their financial reserves defending the currency. Then they could call in the gold holdings of ordinary Chinese, but this is like a medicine which you can use when the situation has become quite desperate.
Epoch Times: How did they accumulate so much gold without sending the price to $5000?
Mr. Middelkoop: They don’t want to push gold prices up to high too fast, they don’t want to say openly that they use gold as a hedge against the dollar system.
So they have to pose that gold is only a small part of their reserves. They are very clever the way they play it. If they want to send gold to $3000 per ounce, they could do so any week by bringing out a release they will convert 25 percent of their financial reserves to gold.

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