China Aims to Reshape the Global Gold Storage Landscape
Shanghai is seeking to compete with New York, London, and Zurich to become a new foreign gold reserve storage location. China is actively promoting other countries to purchase gold bars and store them within China. This move could help China enhance the status of the renminbi as a reserve currency, hedge against the influence of the US dollar, and build a new financial system parallel to the Western one. Currently, China has decided to challenge the world's main gold storage centers, aiming to become the custodian of foreign gold reserves.
According to sources from Bloomberg, the People's Bank of China has been actively proposing to other central banks over the past few months through the Shanghai Gold Exchange: purchasing gold bars and storing them within China. At least one Southeast Asian country has shown interest in this proposal.
These gold reserves will be stored in custody warehouses associated with the international board of the Shanghai Gold Exchange (SGE). The SGE's international board was established by the People's Bank of China in 2014 and serves as the core platform for domestic and international participants to conduct gold transactions. According to the sources, such additional purchases will be counted toward the relevant countries' foreign exchange reserves and will not be deducted from their existing reserves.
After the United States and the European Union froze Russian reserves in 2022, central banks around the world increased their gold purchases to strengthen their own reserves.
Historically, three major global gold storage centers have formed: the United States, the United Kingdom, and Switzerland. The main storage facilities are located at the New York Federal Reserve Bank, the Bank of England, and several commercial banks in Zurich. The United States holds over 8,000 tons of gold (with more than 4,500 tons stored alone at Fort Knox); the Bank of England holds over 5,000 tons of global gold reserves, valued at nearly $60 billion; and Switzerland's gold storage is slightly over 1,000 tons.
Alexei Vyazovskiy, vice president of "Gold Platform" company, said: "After World War II, New York became the global gold trading center mainly because the United States was not affected by war, had strong economic power, and after the signing of the Bretton Woods Agreement in 1944, the US dollar became the main reserve currency. Many countries stored their gold in the US, seeing it as a form of security. Additionally, New York is a major liquidity center where physical gold does not need to be transported across oceans to complete transactions quickly. Moreover, the US was pushing for the recovery of Europe, and some loans were issued using gold as collateral."
He added that London is also a global financial center, and the local gold trading and storage system has great credibility. For convenience, many countries still choose to store their gold in London.
Vyazovskiy further explained: "Switzerland attracts countries to store gold due to its century-long neutrality policy and banking confidentiality tradition, which can be seen as 'Europe's safe.' Switzerland has never been invaded by foreign forces, even during World War II, when fascist forces did not enter the region. In fact, fascists also stored gold in Switzerland. Even after the Nuremberg trials and the condemnation of fascism, these gold reserves were never recovered, and some Nazi gold remains in Switzerland to this day. In addition, there are four gold refining plants in Switzerland that can refine gold to the highest purity."
However, in recent years, trust in these traditional storage centers has gradually declined, and many countries have moved their gold back to their home countries. Russia's experience has shown that assets, including gold reserves, can be frozen or seized at any time.
In fact, problems related to this had already surfaced before 2022. Before the Russian incident, there were cases where countries could not recover their gold stored abroad. For example, Germany has long tried to recover its gold stored in the US. Vyazovskiy recalled: "The most typical case was Venezuela — the country once stored its gold in London, but after a change in government and the new government not being recognized by the US and UK, its gold was frozen. To this day, Venezuela is still trying to recover these assets through legal channels."
Moreover, there has always been suspicion about the actual amount of physical gold held by the United States compared to official records. As early as 2009, media reports indicated that the 70 tons of gold bars sold to China by the US were actually tungsten-core gilded bars. In 2012, similar scandals were exposed in the US: some premium customers purchased "gold" that turned out to be tungsten products with the imprint of the Federal Reserve System (FRS).
In February 2025, former US President Donald Trump repeatedly stated that he would audit the US gold reserves, and Elon Musk even planned to live-stream the audit process. However, this plan ultimately failed.
"I don't think there is only tungsten and no gold in the US storage facilities. It is more likely that gold does exist, but checking the reserves and liabilities might reveal some tricky issues — such as part of the gold being used for pledged loans or swap transactions (i.e., the holder of gold pledges it to obtain RMB or other currencies, with an agreement to redeem it later). Auditing the largest gold storage facilities in the US and the UK is obviously necessary, but external auditors have never been allowed to enter. These situations undoubtedly weaken the trust of countries in storing gold within their jurisdictions," said the vice president of "Gold Platform" company.
Why do many countries still choose to store their gold overseas rather than in their own countries? The reason is simple: not all countries have completely independent political and economic policies. In the past, the US attracted a large inflow of foreign gold by providing loans. Now, China may be following a similar path.
Vyazovskiy explained the possible mechanisms: "Ghana is one of the world's major gold producers, and it has close cooperation with China, using Chinese loans to promote various projects. In fact, China has been very proactive in its layout in Africa. If other countries want to obtain Chinese loans, introduce Chinese technology, or conduct gold swaps, then storing part of their gold in China as collateral is likely to become part of the cooperation agreement."
Why is China determined to become a global gold reserve storage center? This not only aligns with its strategy to reduce dependence on the US dollar. According to the interviewee, "The more gold a country has, the stronger the credibility of its currency. Why is the US dollar the global reserve currency and accounts for 70% of global trade settlements? The core reason is that the US has the largest gold reserves in the world — over 8,000 tons. If China wants to challenge the US, it must make comprehensive efforts in all areas, including economy, industry, finance, and gold reserves."
Vyazovskiy believes that if China wants the renminbi to become a major global reserve currency, it needs to achieve two goals: first, significantly increase the scale of gold reserves; second, establish a large-scale, highly liquid bond market (especially the treasury bond market) — while China still has significant shortcomings in this area. The US has both the largest gold reserves in the world and the most reliable and liquid treasury bond market globally. China needs to continue making progress in these two directions.
As for Russia, considering the lessons learned in 2022, even if the partner is China rather than the US, Russia should not easily participate in such offshore storage plans.
Vyazovskiy advised: "Russia should not join this initiative, but instead increase the proportion of gold in its foreign exchange reserves from the current 30% to 40%-50%, and prioritize purchasing domestically produced gold. Russia produces over 300 tons of gold annually, which is sufficient for self-sufficiency and should not worry about sanctions."
Meanwhile, China is fully capable of finding "gold clients" in other regions — for example, in Africa, Vietnam, Pakistan, and other countries that have close cooperation with China and need Chinese financing support.
Currently, the trend of central banks increasing their gold holdings continues. China once held over $1 trillion in US Treasury bonds, but this amount has now been reduced by a third to below $700 billion, with part of the funds now directed towards gold investment. This strong demand combined with the uncertainty of the global situation has driven gold prices to new highs. Vyazovskiy predicted: "The current price per ounce of gold has rapidly risen to $3,800, and it is expected to break $4,000 by the end of the year, possibly reaching $4,500-$5,000 per ounce next year."
Due to the rise in gold priced in US dollars and the depreciation of the ruble against the US dollar, the price of gold in rubles has also risen sharply. He said: "The ruble price of gold has reached a historical high, exceeding 10,000 rubles per gram, an unprecedented level. It is expected to reach 12,000-13,000 rubles per gram by the end of the year, and may even rise to 15,000 rubles per gram."
Original: https://www.toutiao.com/article/7554317056233996841/
Statement: This article represents the views of the author. Please express your opinion by clicking on the [upvote/downvote] buttons below.