Reports out of South Korea (ROK) suggest that North Korea is selling ‘large amounts’ of gold to China because of an economic crisis within the country.
With South Korea always prepared to believe the worst of its northern neighbour, with which it is still technically at war, perhaps such claims should be viewed with a certain amount of scepticism – but with some undoubted cross border contacts the South Korean news agencies which reported the sales, may well have an inside track as to what is going on in the North – they are certainly better informed on their northern neighbour than anyone else.
While North Korea does not report its gold holdings to the IMF and thus do not appear in official statistics, reports back in 2007 suggested the country held gold reserves of around 2,000 tonnes, which would make it one of the world’s largest holders of the precious metal.
Indeed, if that figure is anywhere near correct then this is around double what China says it holds in reserves, although most people think China has been building its reserves to well above the official reported holding of 1,054 tonnes.
It is known that North Korea has a very longstanding gold mining industry – some put it as quite substantial and going back thousands of years – although what ‘quite substantial’ actually represents is uncertain.
It is believed that the country’s largest gold mine may produce around 8 tonnes of gold a year and there are thought to be a number of smaller operations, but data is scarce.
If North Korea is indeed selling its gold to China then this could be considered quite significant – perhaps not quite the economic collapse that some South Koreans would wish on their northern neighbour, but certainly signs of economic difficulties in perhaps maintaining its military might and weapons development programmes, let alone feeding its people.
There have been times in the past where North Korea has been known to sell gold – back in 1983-1993 around a ton a month of gold was sold through the LBMA and in 2006 there was a known gold and silver sale to Thailand, but otherwise the secretive nation has largely kept to its founder, Kim Il-sung’s declaration that the country should not sell any of its gold reserves.
North Korea is thus yet another Asian country with a strong belief in the value of its gold holdings as a key element in potentially supporting its global position. If indeed it is selling gold out of reserves, perhaps in addition to newly mined gold, it does suggest that all is not well within the country on the economic front.
As such sales, if they are happening as reported, are likely to be government to government, then this could be another indicator that China is building reserves without reporting this to the IMF.
Such sales are not an illogical proposition given that China’s continuing support is vital to the North Korean regime, yet the Middle Kingdom finds Korea’s often aggressive actions something of an embarrassment in its dealings with world leaders, so could be driving a hard bargain with the North Korean leadership to help underpin the regime.