There China? He is buying gold “as if there were no tomorrow“, wrote the New York Times in a curious article. The US newspaper thus analyzed the latest trend detected beyond the Wall. Supposedly increasingly wary of the nation’s real estate sector and stock market Chinese citizens – simple consumers but also investors – are purchasing the precious metal at a record pace. With the result that the global price of gold has reached its highest value ever.
Gold rush
Considered a safe investment during the periods of geopolitical turbulence and economic, the price of gold has increased dramatically following the Russian offensive in Ukraine and the war in Gaza. However, gold’s rise to highs above $2,400 an ounce it’s lasting longer thanks to China. Or rather: thanks to its citizens.
In fact, Dragon consumers have flocked to gold since, wrote the NYTtheir trust in traditional investments – like real estate or equity ones – would be faltering. At the same time, the central bank of the country has steadily increased its gold reserves, while reducing its holdings of US debt. Adding further fuel to the fire are the speculators.
In any case, China already held considerable influence over the gold markets. However, its influence has become more pronounced during this latest bull run, where an almost 50% increase in the global price of this metal has been detected from the end of 2022 to today. The price of gold, by the way, has continued to reach new heights despite some factors making this investment less attractive than others: higher interest rates and a strong US dollar.
What’s happening in China
Simply put, China is literally driving the price of gold. According to the China Gold Association, gold consumption in the country increased by 6% in the first quarter compared to the previous year. The reason is soon to be said. Investments in the precious metal have become more attractive as traditional investments have lost their appeal. After all, the real estate sector China, destination of the savings of the majority of national families, is still in crisis, while investor confidence in stock markets of the country has not fully returned.
On one side there are consumers, on the other the country’s central bank. In March, the People’s Bank of China increased its gold reserves for the 17th consecutive month. Last year, the institution bought more gold than any other central bank in the world, adding more to its reserves than it had in nearly 50 years. Why? Simple: Beijing is buying gold to diversify its reserve funds and reduce its dependence on gold American dollar.
Speaking of the greenback, let’s remember that China has been reducing its holdings of US Treasury securities for over a decade. And which in March Beijing held approximately 775 billion dollars of US debt, down from around 1.
$100 billion in 2021.
