While China’s demand for gold has risen 68% year-on-year in the first quarter of 2024, pushing prices to record highs, the Asian giant continues to trim its holdings of US Treasuries.

Gold had another good month in April with a 4% gain, ending the month at $2,307 per ounce. According to the latest World Gold Council (WGC) report, Chinese purchases, mainly attributed to an influx of retail investors, and central banks, appear to be the main drivers of demand.

China has accumulated over 300 tonnes of gold worth $561 billion in the past 18 months alone. China’s official gold reserves have increased for 16 consecutive months. The addition of 12 tonnes in February brought its total to 2,257 tonnes, 4.3 per cent of the country’s foreign exchange reserves. Moreover, the GWC notes that China is inspiring other BRICS nations to buy the precious metal as a reserve to the detriment of the US dollar.

However, the official figures for its gold reserves remain absurdly low, since unlike many central banks that report their gold purchases to the IMF every quarter, central banks in China, Russia and other countries buy and store gold without declaring it as reserves.

China sheds more US debt

Although China has purchased large amounts of US Treasury bonds in recent decades – in January 2024 the Asian nation accumulated some $797.7 billion in US Treasuries, roughly 10% of the US national debt – it has sold more than $74 billion of this debt in the past year, according to Treasury Department data, $22.7 billion in February alone.

China is intentionally minimising its exposure to the dollar. Concerns about geopolitical tensions and the use of economic sanctions by the United States as a tool in its trade war, along with the further postponement of the Federal Reserve’s planned interest rate cuts, continue to dampen Beijing’s appetite for US Treasury bills. Thus, the Asian giant has gone from holding $849 billion to $775 billion between the beginning of the second quarter of 2023 and the second quarter of 2024, reaching its lowest level since 2009.

The data was published at the same time Sergey Lavrov, the Russian foreign minister, said that Russia and China use virtually no dollars in their trade transactions. According to Lavrov, currently, more than 90% of trade between the countries is conducted in their national currencies.

Moreover, China and Russia, the two founding members of the BRICS alliance, plan to trade $260 billion without using a single US dollar and have long been trading in yuan with other countries, such as the Philippines, the Arab Emirates, Japan, Malaysia, Thailand and Tajikistan, accelerating a process of de-dollarisation that seems unstoppable.

Preciosos 11Onze makes it easy to buy gold, at the best price and with total security. Give us a call and speak to one of our agents without any obligation to clarify any doubts you may have and protect yourself from economic crises with the ultimate safe-haven asset: gold. If you want your savings to keep or increase their value, Gold Patrimony.