November 22 Japanese media “Nikkei Shimbun Review” article, original headline: The outside world analyzes China’s increased gold reserves to reduce dependence on the US dollar. The article states the following:
Since the beginning of this year, the central banks of many countries have increased their gold purchases and the outside world is concerned whether China will also join the ranks to increase its holdings. Analysts believe that Russia has been hit by sanctions on the Western financial system and that China and other countries need to reduce their dependence on the dollar as soon as possible.
Central banks bought 399.3 net tons of gold in the third quarter of this year, more than a fourfold increase over the same period last year, according to a report released by the World Gold Council in November. , compared to 87.7 tons in the first quarter and 186 tons in the second quarter. As of now, statistics show that central banks have imported more gold than ever since 1967.
This year, the central banks of Turkey, Uzbekistan and India bought 31.2 tons, 26.1 tons and 17.5 tons respectively. The problem is that these specific purchases total around 90 tonnes, meaning it’s unclear who bought the remaining around 300 tonnes.
Precious metals and financial analyst Koichiro Kamei expects some anonymous buyers, but “it’s unheard of on such a large scale” and speculation abounds about unidentified buyers. “Seeing that Russia’s overseas assets have been frozen after the Russia-Ukraine conflict, some countries have started accumulating gold reserves,” said Emin Ymisurazu, a Turkish economist in Japan. “China may be buying a lot of gold from Russia,” market analyst Itsuo Toshima said.
China has also taken related measures earlier. After the 2009 global financial crisis, the Chinese government increased its gold reserves by about 600 tons in 2015, and related buying records continued into 2019.
Central banks and government agencies hoarded gold reserves for a decade after the 2008 global financial crisis sapped confidence in US Treasuries and other dollar-denominated assets, prompting a rush to diversify portfolios. Emerging countries with less creditworthiness are also looking to increase their gold reserves, which are highly liquid and free of sovereign risk.
China has sold US bonds this year. Between the start of the Russia-Ukraine conflict and the end of September, China sold $121.2 billion of US Treasuries, equivalent to about 2,200 tons of gold, according to the US Treasury Department. According to Chinese customs data, Chinese imports of gold from Russia increased in July, more than eight times compared to June and about 50 times compared to the same period last year.
Nikos Kavalis, managing director of Metals Focus, a precious metals consultancy, said: “Given how gold has performed in recent years and its nature will not become ‘another country’s debt’, we think the central banks are still clearly influencing gold buyers.”
As for the current global situation, countries will not sell gold on the market, which means that the more gold they buy, the stronger the support for gold prices.
Compile/Dybala 2022-11-22
