In the world of finance, one story stands out, but it's not getting the attention it deserves. Let’s cut to the chase: China has been on an unprecedented gold-buying spree, and it likely has more gold than the United States.
Why China Wants More Gold
China is acutely aware of how the United States weaponizes the dollar, leveraging its status as the global reserve currency. The recent sanctions on Russia, which involved removing it from the Swift messaging system, are a prime example. This action severely impacted Russian civilians’ wealth overnight. Observing this, China is likely strategizing to de-dollarize to safeguard its national interests and citizens' wealth from a banking system controlled by the West.
China's Gold Accumulation Strategy
Both China and Russia have been ramping up their gold reserves for years. As of now, Russia holds around 2,300 tonnes, making it the fifth-largest gold owner globally. According to the World Gold Council, China officially holds 1,948 tonnes, which is only about 3% of its foreign exchange reserves compared to the US’s 65%.
The Real Gold Holdings of China
China’s actual gold reserves are probably much higher than the official figures suggest. Here's why:
- Domestic Production: Since 2007, China has been the world's largest gold producer, mining around 6,830 tonnes of gold since 2000. Over half of this production is state-owned, and almost none of it is exported. This already casts doubt on the official figure of 1,948 tonnes.
- International Purchases: China is also the world's biggest importer of gold, with over 6,700 tonnes entering the country through Hong Kong since 2000.
- Shanghai Gold Exchange (SGE): Most gold entering China goes through the SGE. Since 2008, approximately 22,000 tonnes have been withdrawn from the SGE, indicating strong domestic demand.
When considering all these factors—domestic mining, imports, and existing stock—the estimated figure for China's total gold holdings could be around 31,000 tonnes.
Why the Secrecy?
China's reluctance to declare its full gold reserves is strategic. Declaring such vast holdings would likely surge the yuan and gold prices, devaluing its $3.2 trillion in US dollar reserves. Additionally, this would directly challenge American financial supremacy, a move China might not be ready for just yet.
The BRICS and a Return to the Gold Standard
China's gold accumulation is part of a broader strategy among BRICS nations (Brazil, Russia, India, China, and South Africa). These countries have been buying gold and discussing a return to some form of gold standard for years. Their goal is to reduce dependence on the US dollar and create a more stable, gold-backed currency system. This collective movement amplifies the potential impact on global finance, making gold an even more attractive investment.
The Implications for Global Finance
If China and other BRICS nations reveal their true gold reserves and move towards a gold-backed currency, it could disrupt global financial systems. Western currencies could lose significant purchasing power, and gold prices could skyrocket.
Conclusion
China’s discreet but relentless gold accumulation, alongside the BRICS nations' similar efforts, gives them substantial financial leverage. As the saying goes, “He who owns the gold, makes the rules.” Investors should take note—China's and BRICS' gold strategy might soon reshape global finance.
In summary, China’s and the BRICS' gold-buying spree is not just a defensive manoeuvre but a calculated move to bolster their financial independence and global influence. This is a trend worth watching—and a strong reason to consider adding gold to your portfolio now.
