China Is Replacing Its US Treasury Holdings with Gold

The comments below are an edited and abridged synopsis of an article by Arsenio Toledo

China is accelerating its selling of US Treasury securities and replacing its holdings with more gold.

China Is Replacing Its US Treasury Holdings with Gold - BullionBuzz - Nick's Top Six
A macro image of a green Chinese one yuan bill with a gold coin. Shot close up.

Since 2008, China has been one of the largest foreign holders of Treasuries. It began selling them off in 2018, around the same time that it started buying more gold.

The reason for the sell-off has not been disclosed, but China has had a strong incentive to diversify its foreign reserves away from American-held goods ever since the US sanctioned Russia’s US dollar holdings.

In November, China’s US Treasuries fell by $7 billion compared to the previous month. China’s holdings of Treasuries are currently the lowest they’ve been since May 2010.

China has sold off around $310 billions’ worth of Treasuries since 2018, with $199 billion sold in 2022 alone.

Reports suggest that China has 2,025 tons of gold in its reserves. It is expected to continue adding to that throughout 2023 along with other central banks, accelerating the global trend toward de-dollarization.

CITIC Securities, China’s largest publicly traded brokerage, believes gold will hit record highs this year, thanks to the buying sprees of the world’s central banks, led by the People’s Bank of China.

Most of China’s latest gold imports are from Switzerland, with Swiss exports of gold to China up to 524 tons (around $33 billion). This is a massive increase from the 354 tons of Swiss gold China bought in 2021, and the most gold China purchased from the country since 2018.

The next largest exporter of gold to China is Russia: 6.6 tons in 2022, a 67% increase from 2021.

All of this caused gold priced in Chinese yuan on the Shanghai Gold Exchange to rise by 4.53% in 2022.

Emerging-market central banks hold about two-thirds of their reserves in dollar-denominated assets, and less than 5% of their holdings are in gold. These ratios are expected to change rapidly in favour of gold.

In total, central banks last year purchased more gold than they have since 1967, and the second-most since 1955.

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