February 6, 2023

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Who collects gold… | capital

Posted by Costas Stopas

who collects gold…

During the July-September quarter, central banks seem to be engaged in a race to increase gold reserves. According to the World Gold Council organization, central banks bought about 399.3 tons of gold, which is an amount three times more than the same period last year.

This quantity is also a big jump compared to the quantities they bought in previous quarters, as they totaled about 186 tons in the second quarter and about 87.7 tons in the first quarter.

According to the data of the same organization, in the year 2022 – so far – central banks have purchased the largest quantities of gold since 1967 onwards.

Based on the available data, the buyers were the central banks of Turkey, Uzbekistan and India, which purchased 31.2 tons, 26.1 tons and 17.5 tons respectively.

However, the reported purchases are only over 90 tons, which means that no one knows who bought the remaining 300 tons. The suspicions of those watching this particular market focus on China.

Estimates of why the world’s second-largest economy has made such an emphasis focus on factors related to geopolitical rivalries.

Analysts estimate that “given how Russia is affected by financial sanctions from the West, China and some other countries should hurry to reduce dependence on the dollar.”

“Looking at how Russia’s overseas assets were frozen after its invasion of Ukraine, countries hostile to the West are eager to accumulate gold reserves,” Emin Yoromazu said, according to the NIKKEI Asia platform.

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We see: China thought it was hoarding gold to reduce dependence on the dollar

China has taken similar steps in the past when it surprised the markets in 2015 by revealing that it had boosted gold reserves by about 600 tons. Then, from September 2019 onwards, he has not reported any relevant activity.

Precious metals market analyst Etsuo Toshima recently said that the People’s Bank of China has most likely purchased part of the gold reserves of the Central Bank of the Russian Federation in the amount of more than 2,000 tons.

On the other hand, China sells US bonds. Between February, after Russia’s invasion of Ukraine, and September, China “unloaded” $121.2 billion in US bonds, which amounts to 2,200 tons of gold.

These moves indicate that despite President Biden’s recent meeting with Xi Jinping in Indonesia, the East continues to distance itself from the West, preparing for a confrontation that begins in the economic field and no one knows how far it can go.

If at some point the West is forced to impose measures similar to those that it imposed on Russia, on China, then the shock to the world economy will be many times due to the embargo imposed on Russia.

Big US companies like Apple are already starting to take action, moving some of their production out of China. Microprocessor development companies such as Intel’s manufacturing units in the US and Europe do not even rely entirely on Taiwanese units…

The one who remains blind to geopolitical risks is Germany, and with it Europe. Germany’s dependence on China was equal to, and perhaps greater than, energy dependence on Russia until recently.

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Movements like this reflect a state of secret rivalries that will inevitably emerge at some point…

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