China Joins Russia’s ‘Gold Party’ as U.S Dollar Sinks

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BEIJING – The world’s second largest economy has increased its gold reserves over four consecutive months. What does this step mean for market participants?

In her article for Bloomberg, analyst Ranjeetha Pakiam says China’s decision to accumulate more gold raises optimism that central banks around the world will continue to increase their reserves of precious metal.

She stressed that in March, the People’s Bank of China (central bank) increased gold reserves by 0.36 million ounces. That is, last month Beijing bought 11.2 tons of gold. In addition, in February, January and December 2018, China acquired 9.95, 11.8 and 9.95 tons of gold, respectively. In March, Chinese reserves reached 60.62 million ounces.

Today, China is the world’s largest producer and consumer of gold. Its economy shows signs of slowing down despite Beijing and Washington agreeing on their trade talks.

The latest data from the People’s Bank of China show that Beijing is increasing gold reserves at a steady pace, as it did between the second half of 2015 and October 2016.

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“Should China continue to accumulate bullion at the current rate over 2019, it may end the year as the top buyer after Russia, which added 274 tons in 2018.,” Pakiam said.

The analyst recalled that there have been long periods in Chinese history when Chinese authorities did not disclose information about the increase in gold reserves. For example, in the second half of 2015, the Chinese central bank announced for the first time in six years the increase of 57%. That year, reserves were 53.3 million ounces. Another pause in the disclosure occurred between October 2016 and December 2018.

International investment bank Goldman Sachs expects the gold rush to continue and in the next 12 months the price of precious metal reaches about $ 1,450 per ounce.

As for Russia, the country also continues to increase gold reserves. According to analysts, the upward trend in Russian precious metal reserves is an indication that the country continues to make “rapid progress in its efforts to diversify assets at the expense of US assets.”

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