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 country’s gold reserves rose to 62.26 million ounces from June’s 61.94 million ounces, which equated to about 10 tons bought in July, the central bank’s 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 bank’s move showed China’s 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.
China’s 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 bank’s 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.
China has a few advantages. Xi doesn’t have to run for re-election. Trump does. They are not a debtor nation. We are. They can take an economic hit and, at least in the near term, shrug it off. There is a limit to how much pain we can take before people will start to question Trump’s policies. If we slip into a recession over the next 12 months, Trump could lose the election. My guess is that this is China’s near term objective.
As for what is going up, or might... I’ve been nibbling in silver for most of the last year. Historical silver:gold price ratios suggest silver is cheap relative to gold.
If you adjust for inflation, bond yields are effectively negative across much of the yield curve.
the great fear is that US interest rates could turn nominally negative. We’re still a long way from there.
But.
The fed has a mandate to keep the economy moving. If the trade war pushes the USA into recession—then the fed will be forced to cut interest rates. And cut them again. The fed just lowered interest rates for the first time since 2008. That significant considering a look out the side window shows the US economy booming.
How far this will go is anyone’s guess.
The world is awash with unprecedented levels of debt, particularly government debt. It seems a no brainer that the only way out for the politicians is to inflate the debt away.
So, those guys on the radio who have been arguing that gold is the smart buy for the last six years have finally been proven right?
untraceable wealth for elites to flee with,
= = =
I did some research.
Gold is about 1.7 times the density (weight) of lead.
Put some in your saddle bags and ride off.
Silver is DEFINITELY cheaper relative to gold right now and there could be a run in that also.
Platinum was lower than gold for the first time in a long time and that could move.
“Their oil suppliers may start demanding payments in gold”
Might be a rainy day insurance policy. Lots of reasons to move into gold when bad times threaten.
Get some silver.
They are giving it away at the current prices.
A monster box of eagles is less than 10,000
It’s an insurance policy....
China only holds about one trillion in Treasuries. It is not worth damaging confidence in Treasuries, for one trillion dollars.
We have lots of other tools to use.
If tariffs go to 100% then both budget and trade problems would be resolved.
Gold’s up to 2013 levels... something’s up...
If the Chinese think they can attack the dollar as reserve currency they’re wrong. ‘They’ve already sold a lot of our debt so their old leverage is gone... and we can ride this out longer than they can.
We should work out our trade problems and stop this insanity. They’ve ripped us off long enough... who wants to fight for the right to be a crook? No they can NOT steal from us anymore.
Why wouldn’t China ramp up its dumping of US treasuries now?
They could buy more gold or use it for a war.
Don't count on it. Gold (and silver) are commodities, nothing more.
Look at other commodities, like oil. They are going down at a pretty regular pace.
Expect gold and silver to correct downward in the coming year.
I wouldn’t be surprised if the Chicoms banned private gold holdings for this very reason.
China dumping US treasuries would contribute to a weakening of the US dollar - which would bury China.
China wants a strong dollar so that they don't need to devalue as much, due to the trade tariffs.
But if China is gearing up for war, they wouldn’t mind weakening the dollar, treasuries and destabilizing the US financial system. Both countries appear to be decoupling trade relations.
China is a dictatorship and public opinion matters less.
It helps the export businesses. But it means that a 10% devaluation means that the slave child needs to make 11 widgets to make the same money as 10 yesterday.
It would still be very risky for them. They are still a developing nation economically - part of the BRIC (Brazil, Russia, India, and China). Brazil and Russia have natural resources they try to sell. China and India are factory nations with extremely cheap slave labor.
China needs external consumers. They also need to import a lot of food just so their people have something to eat. They can't even produce enough rice.
China is still not at the point where they can move massive numbers of troops to other places that would threaten the US. They could go nuclear - but it would be a matter of minutes before their country was made into glass. Their navy is still undersized to seek domination over a superpower.
Having said all of that - China has an enormous population of disposable men. Their one-child policy has created a country where girl babies are aborted in favor of boys. This has created an environment where millions of Chinese men will never get married and have a family. They become fodder for a Chinese war effort.
China can’t project power over a long distance, but Taiwan is probably doable. They have an advanced economy and ethnically could be assimilated.
I would think that China would wait for the U.S. to be tied up elsewhere such as the ME or mired in domestic problems and civil strife (election chaos especially if Trump loses and before leaving office) before they strike. We all know that the Dems have a history of being rather chummy with China (Feinstein, Clinton, Reid, Gore).
China might think that war can work. The Prussians got away with wars against Austria, Denmark and France between 1866-70. They came away with Alsace Lorrain, Southern Denmark, and parts of Austrian empire (lots of ethnic Germans, strategic resources). No one really intervened, Britain just watched.
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