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Central banks are buying a lot of gold, and China is leading the pack, according to the World Gold Council.
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This gold-buying frenzy is part of a broader shift away from dollar reserves and is fueled by inflation and economic uncertainty.
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The Council predicts that the total amount of gold purchased by central banks this year could surpass last year’s record.
Central banks worldwide are currently engaged in a gold-buying spree, with China taking the lead.
The bullion binge is part of a broader effort by countries in 2023 to diversify their reserves away from the US dollar. This includes conducting transactions in local currencies to de-dollarize trade relationships.
“With central bank demand resuming its voracious pace after a slower Q2, we expect the annual total to approach last year’s record, and there’s an outside possibility it will exceed that figure,” states the World Gold Council in its third-quarter report.
According to the Council, central banks have purchased 800 tonnes of gold so far this year, representing a 14% increase compared to the same period last year. China alone accounts for a whopping 181 tonnes, with a total of 2,192 tonnes held by its central bank.
Last quarter, central banks purchased the highest amount of gold in 2023, adding to the already booming year for gold buying.
Demand for the yellow metal has been rising as central banks seek to diversify their reserves away from the US dollar. This trend, combined with countries attempting to de-dollarize their trade relationships, has led to a significant shift away from the greenback in 2023.
Since the US imposed sanctions and restricted Russia’s access to the SWIFT system and frozen billions in foreign reserves following its invasion of Ukraine, many countries have taken notice and are striving to reduce reliance on the US currency.
China has been a strong advocate for de-dollarization, increasing currency swaps and non-dollar agreements with other nations. Additionally, Beijing has been slashing its holdings of US Treasurys.
However, the hunger for gold extends beyond geopolitical maneuvers to challenge the dominance of the US dollar. Gold is considered a safe haven asset that retains its value over the long term, so investors turn to it during times of uncertainty, such as recessions or wars, to safeguard against inflation and currency depreciation.
China, in particular, is rushing towards gold as a response to domestic turbulence, including a slowing economy, a weakened yuan, and struggles in the stock market.
This year, the demand for gold has increased due to soaring global inflation, which further contributes to the rising demand for gold.
Most recently, the escalating conflict in the Middle East has driven up gold prices by 10% within just two weeks. Spot gold prices briefly exceeded $2,000 per ounce on Friday, reaching the highest level since mid-May.
Read the original article on Business Insider
