China extended its gold-buying spree to the 7th consecutive month in May, signaling greater central bank dedollarization

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  • China extended its gold buying streak through May, adding another 16 tonnes.

  • It is not alone in increasing its gold holdings, as central banks have reduced their dollar reserves.

  • China’s foreign currency holdings fell in May to $3.18 trillion.

The central bank’s increased demand for gold has yet to abate as China hoarded more of the yellow metal in May, Bloomberg reported, extending its buying spree into the seventh month.

The country’s central bank bought 16 tons of the reserve commodity last month, continuing a trend that began in November. In the previous six months, China acquired 144 tons of gold and has now amassed 2,092 tons.

China is not the only country to stimulate demand for the precious metal. The World Gold Council previously reported a massive increase in buying over the past year; in the first quarter of this year alone, central banks bought 228.4 tonnes of gold, setting a new quarterly record.

Foreign efforts to increase metal inventories follow a growing move away from the US dollar as a reserve currency.

This movement accelerated after the greenback became a weapon against Russia following the invasion of Ukraine, a punitive measure that caused other countries to rethink their dependence on the American currency.

According to a May WGC survey, half of central banks expect the dollar’s share of reserves to continue to decline, representing 40-50% over the next five years. Meanwhile, gold is expected to rise over the same period.

The same survey revealed that a quarter of central banks intend to increase their gold holdings over the next year.

China ended May with $3.18 trillion in foreign exchange reserves, up from $3.20 trillion in April, according to data from the People’s Bank of China.

In the first quarter, it was the second biggest buyer of gold, after Singapore.

Read the original article on Business Insider

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