Could China’s increasing gold purchases lead to a significant rise in gold prices?
China’s Gold Reserve added another 29 tonnes of physical gold in August 2023, increasing its year-to-date purchases of 155 tonnes in 2023. Its highest monthly total of the year.
As per reports from the World Gold Council, in June 2023, China had a total of 2,115 tonnes of gold reserves as compared to the Unites States of America which held a total of 8,135 tonnes of gold.
If, China’s growing desire of acquiring gold at the same rate continues for a year, its purchases will roughly represent 12% of the total gold mined globally in 2022, which was 3,100 tonnes.
In the past year and a half, central banks from the BRICS nations (Brazil, Russia, India, China, and South Africa) have purchased a whopping amount of gold bullion with an objective to de-dollarize for international transactions. The goal is to reduce the reliance on U.S dollar for international business dealings.
Why is China buying so much gold? What’s cooking?
Is an attack on Taiwan on the cards?
- Speculations are rife, that China may be planning an attack on Taiwan soon. With the motive of invading Taiwan, China is supporting its currency by purchasing more gold to stay strong if, Western countries impose sanctions on them in retaliation.
- Russia had a similar situation, before and after invading Ukraine, Russia had started increasing its gold imports to stabilize its currency.
- Warren Buffet’s, Berkshire Hathway liquidated its shares in the Taiwan Semiconductor Manufacturing company in late 2022 due to risks of Chinese invasion of Taiwan as it could disrupt the operations of the company.
- However, China on the other hand, might be compelled to purchase 10 to 20 times more gold if, it plans to invade Taiwan to maintain the value of its currency. At present, China has about 3.25 trillion foreign currency reserves, making gold purchases affordable.
- We all know the golden rule, “He who owns the GOLD makes the Rule”. Gold is extremely valuable and an easy option to convert into currency. China possesses massive foreign currency reserves worth 3.25 trillion U.S Dollars which can easily be traded or exchanged for gold.
With global uncertainty, seeking refuge in gold seems like the best option for China and other nations worldwide. Will this lead to a boost in gold prices in near future?
#gold #chinaeconomy #usdollar #globaleconomy #brics #dedollarization
