Yahoo Finance China and Russia Are on a Gold-Buying Spree: Why?
The Massive Sale of U.S. Treasuries and Global Gold-Buying Spree
Central banks are on a gold-buying spree
Central banks in developing economies have gone on a gold-buying spree, with China and Russia leading the pack. According to IMF (International Monetary Fund) data, China and Russia account for nearly 85% of gold purchases by central banks over the past two years. It was a move to diversify reserves as demand from other central banks declined.
According to the World Gold Council, Russia’s gold reserves increased by 45.8 tons in 1Q16. That was 52% higher than 1Q15. China bought 35.1 tons of gold from January to March of 2016. That was in addition to the 103.9 tons it purchased in the second half of 2015.
During the past 15 months, China (ASHR) has increased its gold (GLD) (DGL) reserves by 70% to 1,700 tons. That puts it in sixth place for the country with the world’s largest gold reserves. From 2009 to 2015, China was buying 6-8 tons of gold per month. But in the summer of 2015, it doubled its appetite for the precious metal.
Russia’s gold reserves have increased 21% to 1,460 tons. The country started buying gold in 2015, increasing purchases on the back of falling oil prices (APC) (NFX) (DVN).
Gold as an investment
China and Russia probably want to feel more secure by buying gold since they have massive dollar debts and want to reduce their dependence on the US dollar. Buying gold also makes sense to them in a world of perpetually low and even negative interest rates coupled with rampant economic uncertainty and a looming recession.
In the final part of our series, we’ll see how China is tightening its grip on gold.
Browse this series on Market Realist:
