China’s Consistent Demand for Gold
China continues to dominate the gold market, with the People’s Bank of China purchasing 21 tonnes of gold in June, bringing their total gold reserves to 2,113 tonnes. This marks the eighth consecutive month of buying, demonstrating China’s commitment to increasing its international credibility and promoting the use of the yuan.
Analysts believe that China’s gold buying is part of a larger strategy to de-dollarize and reduce reliance on the US dollar for trade. As China strikes trade deals with major commodity suppliers around the world, they prefer to settle in renminbi, further diminishing the need to hold dollars.
China’s Growing Gold Reserves
Currently, China holds the fifth largest gold reserves in the world. However, experts predict that China’s gold buying spree has just begun. In comparison to the US, which holds 8,133.46 tonnes of gold, China would need to significantly increase its holdings to become the second-largest holder and align itself as a reserve currency.
The central bank gold buying trend extends beyond China. The central bank of the Republic of Uzbekistan recently purchased eight tonnes of gold, while the Czech National Bank added approximately three tonnes to its reserves. Additionally, Poland has also shown an increase in gold purchases, with an estimated 13 tonnes bought in June, bringing their total gold reserves to approximately 276 tonnes.
Central Banks Diversifying Away from the US Dollar
The consistent gold purchases by central banks provide solid support for the precious metal amidst market uncertainties. Central banks are looking to diversify their reserves away from the US dollar as the nation’s debt continues to grow. With the US government’s spending out of control, foreign central banks see gold as a valuable asset to protect their wealth.
Central bank gold buying is expected to continue as part of a larger trend of reducing reliance on the US dollar and seeking alternative reserve currencies. As more countries add to their gold reserves, the precious metal remains an attractive investment amidst ongoing global economic challenges.