China has dropped dollars in astronomical quantities on the markets and it is not about to end.
Published on 20.12.2022
October 2022, China cowardly of the dollars in astronomical quantities on the markets and it is not about to end. Result : the US dollar is worth less, rising inflation since base prices are in US$. the winner: Putin.
Gold has always been an exciting subject. But events are currently unfolding in a hurry. In a context of recession, inflation and war, gold presents itself as a safe haven for small and large investors and States. Although investors have recently moved away from gold exchange-traded funds (ETFs), physical gold is in high demand.
According to the industry association World Gold Council, the world’s central banks bought the most gold in the third quarter, totaling nearly 400 tons. However, the buyer or buyers of more than three quarters of this gold remained anonymous. So which countries are behind the historic gold rush?
China’s central bank injected 840 billion yuan ($116 billion) into the banking system this week to meet increased demand to fund tax payments and also to reinvigorate battered sentiment.
The largest officially reported purchases of gold came from the central banks of Turkey, Uzbekistan and India, which totaled 31.2 tonnes, 26.1 tonnes and 17.5 tonnes respectively. In total, the sum of gold purchases declared by central banks amounts to approximately 90 tons. It remains unclear who purchased the remaining approximately 300 tonnes of fillet.
In November, Tokyo-based Nikkei Asia magazine published a report that China’s central bank is currently a major buyer of gold and is likely behind the historically high third-quarter buying. Because not only does China have the means to buy such a quantity of gold, but it also has very good reasons to do so.
Analysts suspect that this year’s Western financial sanctions against Russia played a crucial role in this context. For as part of these sanctions, the West immediately confiscated or “frozen”, as it was officially called, Russian currency reserves of around $300 billion.
The West, on the other hand, was unable to confiscate the huge reserves of Russian gold, which the country had been steadily accumulating over the past few years and which, with wise foresight, were all stored on Russian soil. . China obviously wants to avoid a theft as extreme as that inflicted on Russia by the West.
Speculation on unknown gold buyers among central banks is high. “Since Russia’s foreign assets were frozen after the invasion of Ukraine, anti-Western countries are keen to hoard gold assets,” said Emin Yurumazu, a Turkish economist based in Japan.
“China probably bought a significant amount of gold from Russia,” said Japanese market analyst Itsuo Toshima. The People’s Bank of China likely purchased some of the Central Bank of Russia’s gold holdings totaling more than 2,000 tonnes, Toshima said.
That the mystery buyer of gold in the third quarter was China is also supported by the country’s non-transparent actions in the past. In 2015, for example, China announced to everyone’s surprise that it had increased its gold holdings by around 600 tons, after having kept a low profile since 2009.
Additionally, China recently exited on a large scale from US government bonds. According to the US Treasury Department, between the end of February – immediately after the first Russian attack on Ukraine – and the end of September, it sold $121.2 billion worth of US Treasuries, the equivalent of about 2 200 tons of gold.
The unusual events of the current year show how important gold continues to be and what value it can have for a country in times of need and upheaval. Thus, as we report in this magazine, new monetary systems based on gold are currently being prepared in both Europe and the United States.
For many years, the world’s central banks continued to build up their gold reserves, in part because confidence in US Treasuries and other dollar-denominated assets was badly shaken by the 2008 financial crisis. . The financial sanctions against Russia finally destroyed what was left of confidence.
TV5 Monde reports : Recession fears drag Wall Street down.
The New York Stock Exchange fell on Thursday, the indices ending deep in the red, worried about the risks of recession after the positions taken by central banks.
The Dow Jones index lost 2.25% to 33,202.22 points, the tech-heavy Nasdaq plunged 3.23% to 10,810.53 points, the broader S&P 500 index dropped 2.49% at 3,895.83 points.
The market struggled to digest “a hawkish decision by the Fed’s monetary committee and a series of indicators that reinforce the argument that the economy is heading into a recession,” commented Edward Moya analyst for Oanda.
The US Central Bank (Fed) raised interest rates again on Wednesday and published more gloomy forecasts for the economy. The European Central Bank (ECB) and the Bank of England have done the same.
Even if these 50 basis point rate hikes are smaller than the previous ones, the messages from the central bankers of the Fed and the ECB in particular show their determination to continue to tighten the monetary screw in the face of persistent inflation.
“In addition to the rate hikes, Fed officials signaled a higher final rate in 2023,” above 5%, which has chilled investors, noted Art Hogan of B. Riley Wealth Management. The continuation here
The euro and the dollars US lost to the new global financial system proposed by Russia, the China, India and several other countries have joined via the BRICS. Now what will happen? Impossible to know…
” I interviewed Jean Goychman, columnist for the Letter from the Strategists, on the major geopolitical developments of the moment, and in particular on the “trajectory” of the dollar since the Bretton Woods conference, then the abandonment of convertibility into gold… then the sanctions against Russia after the invasion of Ukraine . Here is what he told us… an essential interview to place the advent of digital currencies in their historical context”. – Eric Verhaeghe