Central Banks of the world are loading up on gold. The figures in the chart above do not include China, because China has a huge domestic gold mining sector which feeds its central bank reserves directly. China also has a program that actively encourages its citizens to load up on pysical gold. Current estimates are that the Chinese government holds about 30,000 tonnes of gold, and the Chinese private citizens own another 23,000 tonnes.
Now, there are a lot of China haters out there right now. I don't understand hatred as a strategy. China is a competitor, but a rational one. Which means they don't have to be an enemy. If we react rationally in a competitive way, there is plenty of world out there in which everone can prosper. The question is why do they have such a different view of gold than the USA?
It is because the dollar as reserve currency is in a precarious position. And there's no reason for other advanced economies to have to use it to buy oil, or copper, or rare eaths - or gold etc.
Any Central Bank move away from the dollar as a reserve currency must involve gold.
And any move away from the dollar as a reserve currency will benefit China.
And it seems all the Central Banks of the world are now preparing for this move.
That's what the buildup in Gold reserves is all about.
As this happens it is invitable that gold priced in dollars must rise in value.
On top of the rise as a protection against inflation.
On top of the rise as a hedge against geo-political uncertainty.
On top of the rise as a hedge against the incipient liquidity crisis that is inevitably provoked by rising rates.
There are so many reasons why over the next several years gold must rise.
But Central Bank diversification out of the US dollar is the chief reason.
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