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What Is Driving De-Dollarization?

AngelaRoberts

Written by Angela Roberts

Jun 6, 2024

According to recent data compiled by Bloomberg, China sold a record $53.3 billion worth of U.S. Treasury and agency bonds in the first quarter of 2024. On May 21, 2024, Business Insider reported that “China seems to be accelerating its step back” from dollar-denominated assets because of tense trade relations between China and the United States. 

At the same time China has been dumping Treasuries, the nation’s central bank has been accumulating large quantities of gold.  

China isn’t alone in taking these actions. And if this trend continues, gold prices—which recently broke through to new record highs yet again—may continue to rise. 

Nations around the world are rapidly amassing physical gold.

According to World Gold Council data, central banks have added around 2,200 metric tons of the metal to their reserves between Q3 2022 and the end of Q1 2024. The Wall Street Journal reports this as an increase of nearly $170 billion in gold at current prices. This may only represent a part of larger demand, as The Wall Street Journal also reports that “most gold buying from central banks isn’t reported.”

Overall, central bank net purchases account for about 20% of current global gold demand.

Gold’s appeal is bolstered by the fractured state of geopolitics. 

On May 22, 2024, The Wall Street Journal wrote, “Western sanctions on Russia after it invaded Ukraine in 2022 might have prompted some central banks to diversify away from dollar-based assets.”

With a state of heightened tensions existing in the Middle East, between China and Taiwan, and between Russia and Ukraine among others, the appeal of gold as a means of protecting a nation’s assets against influence from outside nations like the United States could easily drive continued international appeal for the precious metal.

Gold prices could continue to rise. 

As gold buying by central banks continues to increase, so may gold prices. Prices for the precious metal have repeatedly broken records in recent months, hitting a new all-time high of $2,450/oz. on May 20, 2024. If geopolitical tensions continue to rise, demand for gold among nations may continue supporting higher gold prices.

What does all this mean for you? Just as central banks are turning to gold during times of uncertainty, everyday Americans like you and I can also benefit from holding a portion of our savings as physical gold. And with prices breaking records with room left to grow, now may be the time to add physical gold to your portfolio before prices rise even higher.

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