Skip to comments.China's Central Bank 'De-Dollarizes', Buys More Gold
Posted on 08/07/2019 12:33:36 PM PDT by NRx
(Kitco News) - Chinese central bank continued to stock up on gold for the eighth month in a row in July amid escalating trade war tensions, according to the data from the People's Bank of China (PBOC).
The countrys gold reserves rose to 62.26 million ounces from Junes 61.94 million ounces, which equated to about 10 tons bought in July, the central banks data showed.
The bank has been purchasing gold on a monthly basis since December, increasing the value of total gold reserves as of the end of July to $88.9 billion.
The central banks move showed Chinas desire to diversify away from the U.S. dollar, BMO Capital Markets managing director of commodities research Colin Hamilton told Kitco News on Wednesday.
At the central bank level [the move] is definitely to de-dollarize, Hamilton said.
Chinas gold percentage of total reserves, however, is still very small considering that the Asian country is the number one gold producer and consumer in the world.
The central banks foreign exchange reserves were at $3.1 trillion at the end of July, according to PBOC figures.
Aside from the central bank, Chinese investors have also been very interested in gold. But, they have been buying the yellow metal for a different reason it provides the safest and easiest U.S.-dollar denominated asset they could own while their currency depreciates, added Hamilton.
With RMB depreciation investors in China want to hold U.S. dollar-denominated assets and one of the easiest ones they can get their hands on in an environment of capital controls is gold, he said.
China is among many other central banks that are increasing their gold purchases as a way to diversify portfolios, according to the latest data from the World Gold Council (WGC).
Official gold reserves increased by 374.1 tonnes in the first half of the year the largest net H1 increase in global gold reserves in our 19-year quarterly data series, WGC said in its second-quarter Gold Demand Trends report.
The council added that central banks bought a total of 224 tonnes of gold between April and June. Buying was again spread across a diverse range of largely emerging market countries, the WGC said.
It’s a smart move. Bond yields are so low as to be either flat or negative when adjusting for inflation. Globally debt levels have never been higher and central banks are cranking up the printing presses. Here in the US Trump is once again pressuring the Fed to print more money.
Inflation often comes when you devalue your currency.
“Hedge against inflation”
That, among other reasons. Gold in hand can’t be frozen by sanctions, like dollar-based accounts could be.
Also gold can be untraceable wealth for elites to flee with, or conduct malign activity.
You can’t eat rocks.
I have to display my ignorance a bit and ask a question.
So China manipulated their own currency to devalue it against the dollar. I assume this is to hold a price point from its own manufacturers to offset the taxes and market price increase here in the USA. But Im struggling to grasp how that doesnt also hurt Chinas economy.
If they artificially devalue their money, doesnt it also increase the cost of international commodities (like energy) for their investors and citizens? It seems like that would do more damage to their economy than just losing sales in one industry. Hell they are creating inflation, right?
Im sure I am missing something or am confused. A smarter FReeper is welcome to explain the China Strategy to me.
But you can void all debts owed to China from the FED and clear the debt by a few trillion. Then China holds no markers against the USA. And the US Gov will void the debt owed to the FED. Poof, instant spiral for China.
Their oil suppliers may start demanding payments in gold, silver, platinum..........
Often? Heck I would think it’s a result!........mmm?
gold crossed $1500@oz. I expect gold to be $2000@oz by year end.
That would suck............
Small cap gold stocks are going insane the past few weeks.
I said in a few posts that gold would DEFINITELY go past 1500 and I think it will cross 1650 this year.
I just didn’t expect it to cross 1500 THIS WEEK!!
14 trillion dollars out there earning negative interest in the world and the tariff issues with China as well as more rate cuts to come could send gold to 2000 again next year.
Even once an agreement is made with China, it won’t be long before they break it and and land in trouble again.
I believe eventually Trump will be successful with China but it won’t be fast and it won’t be easy.
Like some of my ex’s :)
To the extent China has been manipulating its currency, it has been doing so to support it, not depress it. In past years China did try to keep the yuan low. But it has been supporting the yuan for most of the last 5-10 years. If China let its currency float freely it would drop by at least a third.
The Chinese may be sensing that the level of global debt is reaching a tipping point beyond which it will not be sustainable. That means we could start seeing a wave of defaults and/or a wave of money printing by central banks in an effort to prop up bond markets. Long term, money printing means inflation. Gold (and silver) is the only money that is impervious to the knavery of politicians and central bankers.
The main thing is that they are not selling US treasuries, which would hurt the US.
there is a graph floating around which shows a 1-1 correlation between the price of gold and negative interest bonds. Currently all the negative interest bonds are in europe and asia. The usa is one of the few countries with positive interest bonds so money flows toward the USA. That’s why both the dollar and gold are rising.
the US has to get both the trade deficit and the budget deficit down.
So far neither has happened.
$88.9 billion for an economy with a 12 trillion GDP is hardly “de-dollarizing”, it’s more like a drop in the bucket ...
they could buy all 7.5 trillion dollars of gold ever mined in history, and it STILL wouldn’t do them much good ...
You think we’ll ever see negative interest rates here?
Are there ANY already?
These things are very hard and don’t happen overnight.
Trump is working on it, but doesn’t have support from Congress.
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