China has been the biggest producer and consumer of gold for some time now and with the new tariffs by the U.S, or the trade war waged by the western superpower against this Asian economy China has been diversifying its investments and buying more gold.According to the People’s bank of China, the country has added 100 tons of gold to its reserve since December 2018. In the last month alone, the People’s Bank of China has increased its gold holdings from 62.35 million in July to 62.45 million ounces in August. This means that on a monthly basis China managed to add 5.91 tons of gold to its reserves. This brings the total acquisition of gold in the past 9 months to 100 tons.
The country’s renewed interest in gold is not only fuelled by its trade war with the U.S. but also by the massive global rally of gold prices.
Gold has had an impressive run in the past 9 months rising up by $200 an ounce since the beginning of the year. There have been some losses during this nine month period but they were not significant enough. The yellow metal has managed to rally to a six- year high, reaching $1,500/ ounce in August.
China has not been open about its gold reserves or purchases in the past. Only in 2015, it came out with a surprise announcement that its gold reserves had risen by 57% but we still didn’t know how much gold they actually had. This announcement came out of the blue. It turns out it was the first announcement that the People’s Bank of China had made in six years. However, it turns out that China was not the only country increasing its gold reserves. According to the World Gold Council (WGC) central banks across the globe increased their gold reserves by buying 651.5 tonnes of gold in 2019. This was the highest since 1971. There is a definite increase in the demand for gold from central banks across the globe. Everyone is buying more gold than they are selling. It feels like these countries are preparing for something but the rest of us don’t know what it is yet.
What we do know is that geopolitical tensions, currency weaknesses and the rhetoric from countries like Malaysia and Russia to have the economy de-dollarized have been the main contributors to the rising price of gold. The uncertainty in the current market and the problems that emerging markets have been experiencing are accelerating the rise in the price of gold. Countries like Russia, Kazakhstan, Turkey and China itself have been at a great pains to diversify their portfolios, the ideal is to live in a world where not only one paper currency determines so much.
The biggest purchases of gold in so far were made by two countries, China and Russia which are superpowers in their own right. Russia revealed that it added 96 tonnes of gold to its reserves since January to date. In fact, the Kremlin’s gold reserve rose from 2%to 19%. According to the World Gold Council (WGC), acquisitions of gold by central banks will stay above 650 tonnes a year.
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