In 2018 China launched a yuan-denominated oil futures contract backed by gold. Other commentators however probe a little deeper.Īn article in Zero Hedge written by the site’s Tyler Durden points out that two weeks ago, the IMF reported the global share of US dollar-denominated foreign exchange reserves fell to 59% in the fourth quarter of 2020, matching a 25-year low set in 1995.ĭurden asks: Is this just the next stage in China seeing the writing on the wall for the US dollar as global reserve currency… and paving the way for a gold-backed yuan? Reuters explains the reason for China wanting more gold is its recovering economy hiking demand for gold jewelry, bars and coins, driving domestic prices above global benchmark rates and making it profitable to import bullion. Chinese customs data shows since February 2020, the country has only imported roughly 10 tonnes a month. That is a dramatic turnaround from the past few months. Quoting anonymous sources, Reuters stated on April 16 that Beijing has given the okay to bring in 150 tonnes of the precious metal, worth $8.5 billion at current prices, expected to arrive in April and May. China back into bullionĬhina reportedly has just given domestic and international banks permission to import large amounts of gold, which could help support gold prices after months of declines.Ĭhina and India are the world’s two largest gold consumers, accounting for some two fifths of annual demand. Six months later, the tables have turned. Bloomberg reports the sell-off was profit-taking among gold producing nations who wanted to exploit near-record prices (gold hit a record $2,030 an ounce last fall) to soften the blow from the coronavirus pandemic. ![]() In October 2020 central banks sold gold for the first time in a decade. Gold, on the other hand, has gone from $35 in 1970 to $1,750 in 2021, a 50X increase! Due to an increase in inflation every decade except the 1930’s, the US dollar has lost 90% of its purchasing power since 1950. And while the precious metal offers no yield, its status as an inflation hedge and store of value not subject to fiat currency manipulation are good reasons for central banks to purchase gold. With Treasury notes paying such low net yields, gold becomes an attractive investment. ![]() There’s an old saying on Wall Street: “Six percent interest will draw money from the moon.” And it’s true, but what is also true is, 1/ As long as real interest rates are below 2% gold is in a bull market and 2/ Real interest rates below 2% draw investors to gold.Ĭentral banks know this, so do educated gold buyers. Subtract 2.6% inflation and the real yield is negative 1.1%. Looking at the 10-year chart, we see the yield starting to climb in January, reaching as high as 1.74% on March 19 before falling from 1.69% at the start of April to the current 1.5 %. ![]() The yield on the 10-year Treasury slid to 1.5% while the 30-year yield was reduced to 2.26%. ![]() On Tuesday, the World Health Organization warned that global infections were reaching their highest levels, prompting many fund managers to rotate money into safe-haven bonds. Although US Treasury yields have been climbing, owing partly to expectations of inflation, in recent weeks this trend has reversed, amid renewed concerns about the pandemic. The reason is simple: T-bills don’t offer a good return, and neither do other sovereign debt instruments. US Treasuries are as much sought-out by investors in a crisis or pending crisis, but lately, Treasuries have become much less popular as a means of storing wealth.
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