The world is finally taking notice of China buying gold at record rates. The CCP’s continuous and exponential surge in gold accumulation sends a clear message: the US dollar’s hegemony is under attack. China has been openly scheming to topple America as the global ringleader, and this shiny metal might be the golden ticket to realizing that goal.
China’s Gold Buying in Numbers
China buying gold isn’t a new development. In fact, it comes amidst a surge of record-shattering central bank gold buying. However, the combination of a sharp uptick in gold purchases and the country’s aggressive posture towards the US dollar places the CCP in the spotlight. Putting China’s gold buys into numbers can demonstrate the sheer scale of their consumption.
China is the second-largest buyer of the past two decades.
The topic of increased China gold buying might have recently entered geopolitical discourse, but history reveals a decades-long trend. Between 1999 and 2021, the CCP’s gold purchases accounted for 23% of global demand. With purchases totaling 1,552 tons, China was the second-largest gold buyer over the past few decades. Emerging countries such as Turkey, Russia, India, and Saudi Arabia dominated the top 10 buyers list too, but the US is nowhere to be found. Notably, most of the BRICS nations have led gold purchases in recent years.
China was the second-largest gold buyer in 2022.
In 2022, the topic of China buying gold started garnering major attention from economic leaders and retail investors alike. Within the year, China became the second-largest net buyer of gold, falling just behind Turkey. Beijing scooped up 62.21 tons of gold during this time, bringing total reserves into record-breaking territory. In contrast, America’s gold reserves remain relatively unchanged with less than half a percent change in value. This wouldn’t be so alarming if it were an isolated event, but 2023 has revealed otherwise.
China’s buying is ramping up in 2023.
China is keeping its foot on the gas with gold purchases reaching just over 554 tons in the first half of 2023, marking a 16.37% rise year-over-year. It seems that momentum will only pick up in the second half of the year with July marking the country’s ninth straight month of gold buying, adding an exclamation point to the regime’s record-setting spending spree. The People’s Bank of China reportedly topped their growing reserves by 23 tons which places total reserves at an impressive 2,136 tons.
China is the world’s largest gold producer.
In an increasingly competitive global order, gold supply is just as crucial as gold demand. Unfortunately for the US, Beijing also dominates gold supplies. China, by orders of magnitude, is the world’s largest gold producer – a title it has held firmly since 2007. It accounts for 10% of the globe’s gold production. This stranglehold on supply gives China outsized influence on where physical gold is allocated. Recently, the CCP announced the discovery of the country’s largest gold mine holding an estimated 592.19 tons of gold worth roughly $28 billion. This buried treasure effectively increases China’s gold reserves by over 27% if the product remains within the country.
Why is China Buying Gold?
Promote economic independence.
It’s common practice for developing nations to hold vast amounts of their wealth in foreign reserves. As the world reserve currency, the US dollar offers greater stability and security than local currencies such as the yuan. However, this strategy comes with the trade-off of remaining dependent on the dollar. As a rising global power, China is now eager to be independent of American influence by converting its dollar reserves to gold holdings. With the potential collapse of the US dollar, the CCP obtains arguably greater stability by going for gold.
Undermine the US dollar.
China’s economic and geopolitical ambitions don’t stop short of its ever-expanding borders. The US dollar has been in Xi Jinping’s crosshairs as the Communist leader directly challenges US hegemony. The process of de-dollarization is much bigger than any single country, but the CCP is accelerating the shift away from the dollar at every turn. The sharp increase in China buying gold underscores Beijing’s intention to undermine the US dollar by opening dollar-free trade with other countries and building an alternative global economy that side-steps Western dominance.
The recent trend of China buying gold coincides with an onslaught of sanctions against Beijing. The international community has ramped up the pressure as Xi Jinping cozies up with Russia amidst the Kremlin’s invasion of Ukraine. Gold’s inherent value, universal recognition, and price stability allow China to operate outside the Western-led global economy, nullifying the impact of sanctions. Russia is ramping up its gold purchases for the same reason, betraying an unintended consequence of these largely ineffective sanctions.
Promote the yuan.
China’s drastic increase in gold buying also serves to promote the dominance of its domestic yuan currency on the world stage. With a strong foundation of gold reserves, China can make an effective argument for the yuan’s dependability and stability.
“China…wants the Yuan to be broken free of the dollar.”
–Precious Metals Advisor John Karow
While Beijing is gnawing away at the dollar’s dominance, it’s simultaneously providing the world economy with a viable alternative. This is evidenced by China’s promotion of the petroyuan among oil-producing countries and its support of a gold-backed BRICS currency.
Investors Find Protection in Precious Metals
China’s massive and prolonged spike in gold buying is happening amidst the backdrop of de-dollarization. This could spell disaster for investors who have built their entire portfolios on dollar-backed assets whether that’s stocks, bonds, or even real estate. Savvy investors are taking moves out of the playbooks of the central banks by pouring into precious metals for protection. Gold and silver have shown to be reliable hedges against inflation, especially during periods of economic uncertainty.
If you’re interested in learning more about diversifying your portfolio for optimized protection, request a FREE copy of our Precious Metals Investment Guide.