China Is Buying Gold, Sending Prices to Record Highs – Generic English

Beijing is buying up gold to diversify its reserve funds and reduce its dependence on the U.S. dollar, long considered the most important currency to hold in reserve. China has been reducing its U.S. Treasury holdings for more than a decade. As of March, China had about $775 billion worth of U.S. debt, down from about $1.1 trillion in 2021.

When China increased its gold holdings in the past, it bought domestically using renminbi, said Guan Tao, global chief economist at BOC International in Beijing. But this time, he said, the bank is using foreign currencies to buy gold — effectively reducing its exposure to the U.S. dollar and other currencies.

Many central banks, including China, starting acquiring gold after the U.S. Treasury Department took the rare step of freezing Russia’s dollar holdings under sanctions imposed on Moscow. Other American allies imposed similar restrictions for their currencies.

Mr. Guan said the sanctions had shaken the “foundation of trust for the current international monetary system” and forced central banks to protect their reserves with more diverse holdings. “We can see this wave of gold’s rise may be different from the past,” he said.

Although Beijing has been buying up gold, the metal accounts for only about 4.6 percent of China’s foreign exchange reserves. In percentage terms, India holds nearly twice as much of its reserves in gold.