I mentioned the other day about the Central Bankers Buying Gold and setting a new record doing so. I think its kind of a big deal and a little bit ominous as to what might be in store for the future, so today I wanted to have a bit of a look deeper to see WHO is buying all that gold...and can we speculate a bit more about WHY?
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I came across this cool graphic which shows the Total Gold Reserves Change over the last 10 years. Yes, 10 years is quite a long period and that includes years from before Covid and the recent inflationary problems we've been facing world-wide. However I think it shows a macro trend that is becoming very obvious.
It’s clear that Russia and China are leading the charge into Gold. This is also just the officially reported Gold Reserves and many pundits claim that China has been hiding some of its gold acquisitions so their number might be even higher. So what do Russia and China have in common with each other and might that explain why they are buying so much gold?
Well, yes. Russia and China are building a strategic alliance and both are key players in the BRICS which has been talking about launching it’s own Gold Backed Currency in recent years. Perhaps more importantly though, these two countries have had deteriorating relations with the USA which controls the US Dollar – The Reserve Currency of the World.
Both Russia and China are clearly moving AWAY from the US Dollar and Gold is the obvious choice for them to acquire as a reserve asset. Is this trend likely to continue? Personally I think this trend is really just getting started. We have an increasingly irresponsible US Monetary Policy and a belligerent US Foreign Policy toward these countries over recent years and there is little indication that the situation is going to improve. Pragmatic countries are taking precautions and diversifying into other Safe Haven Assets like Gold to protect themselves financially.