Why China is buying so much Gold | Geopolitics, Economy

Why China is buying so much Gold | Geopolitics, Economy

in this video we’re going to understand why China is buying so much of gold you must have heard in the news that China is buying gold aggressively as if there is no tomorrow the highest price of gold ever went was around 73958 per 10 G on April 12th and now it’s hovering around 70,500 to 71,500 on a daily chart this is the Indian commodity exchange now here you can see the US dollar value per ounce of gold on a daily chart the highest it vent was around $2,431 per ounce right now it is hovering around $ 2250 to $2,350 per ounce now you might think that is just a difference of 2,000 Rupees or $100 so what’s the big deal about it yes that’s true but when it comes to Gold even a change of 500 to 1,000 rupees upward or downward in the commodity Market becomes a significant matter if you look at the gold price on a monthly chart overall the trend is upward which means gold prices will always remain higher but then on a daily chart you see this curve from April 12th to 17th onwards and after that prices takes a sharp dip and remains to be in a narrow sideways movement so this is where you have to understand that on April 13th and 14th if you remember Iran fired hundreds of missiles and drones towards Israel and then on April 19th Israel fired a missile into the Iranian territory of Isfahan Province and that is when there was a big cell on Monday 22nd April and then on 23rd April you will see immediate buy orders started appearing and these huge buy orders are majorly from China and the whole reason behind this 30th April dip or pullback is because during economic uncertainty or geopolitical tensions investors sell their gold in other words you get an immediate discount now this sideways movement means here the demand is going to be filled and a strong support will be made when enough demand is made suddenly the prices will shoot or go much higher higher than 74,000 rupees per 10 G or $2,500 per ounce we all are aware of the fact that gold is a safe haven during economic uncertainty or geopolitical tensions if those tensions are ease investors might sell their gold even if there are still people buying overall now this can cause a temporary price dip and that’s what we get to see even in the month of May now the reason I said China is majorly buying so much of gold is because Chinese consumers and China’s Central Bank is constantly adding huge quantities of its gold reserves as I said gold is often considered a safe investment during geopolitical and economic turmoil the same we got to see during Russia Ukraine war as well in February March of 2022 China already has a significant amount of gold currently it is a country holding sixth largest gold Reserve in the world here is a report from World gold Council in the first quarter of 2024 China’s gold Reserve has increased by 27 tons apart from the Chinese Central Bank young buyers in China are buying gold aggressively the increase in gold prices is being driven by domestic consumption in China in terms of jewy gold bars and coins China is now both the world’s biggest producer of gold as well as its largest consumer from the beginning of this year there has been an enormous Chinese retail buying on the domestic Shanghai Gold Exchange usually we see it is the middle-aged women who buy a lot of gold jewelies but this time it is the young customers in their 20s who do not have the money to buy gold bars but they are buying the bean which is 1 G it’s as if a new trend has emerged in China where young people are buying small golden beans 1 G each and collecting them in glass jars just like we used to collect small tofes in our childhood it is being seen as a way to maximize this savings by investing in the yellow precious metal now the question is why do these people feel that buying these small gold beans is better than investing money elsewhere it is simply because the country’s confidence in real estate and stocks has gone down really bad you remember the Chinese real estate crisis of 2021 which is also called as ever Grant’s bankruptcy or Chinese property Market crisis although it started in 2015 the actual time started much before even today you will get to see it affecting the Chinese economy the Chinese Communist Party government started encouraging people to invest in real estate for many years in the hope to stimulate the economy promoting social stability and create jobs as a result there was a significant over supply of housing in China why there was an over Supply because people were buying homes not to live in them but to sell them for a profit then in 2015 the CCP government began to tighten lending standards in an effort to cool the overheated Market this made it more difficult for people to buy homes which led to a decline in demand the decline in demand led to a decline in prices which caused a number of developers to default on their loans this led to a further decline in prices and a loss of confidence in the market the housing Market crisis created a ripple effect throughout the Chinese economy it has led to a decline in investment job losses and a Slowdown in economic growth because of this the Chinese people have lost confidence in investing in the real estate sector and then you must be aware that the Chinese stock market is struggling like anything it’s in a downward Trend since a decade so the stock exchange of China is not at all in a good condition for Chinese citizens to invest in the Shanghai stock exchange another thing is that Chinese citizens can invest in Forex but with strict limitations imposed by the Chinese government unlike some countries China restricts Forex Trading for individuals you can only buy and sell through commercial Banks and not through any private brokerage account then there is the annual limit on how much foreign currency you can purchase these limitations aim to control capital outflow and maintain stability in the yuan’s exchange rate so keeping all of this in mind physical gold is the only safe investment there isn’t much alternative in China with exchange controls and capital control RS you can’t just look at other markets to put your money into and that is why the Chinese people are buying physical gold and now China central bank is also increasing its gold reserves and why is the Chinese Central Bank doing that basically the Chinese Central Bank is slowly reducing its US debt holding and they’re looking for other places to put their money in China’s Central Bank already has a lot of US dollars as of April 2024 China owns $797 billion of the US national debt China and Japan have been the largest foreign holders of US debt for the past 20 years what it means is China has loan the US government a significant amount of money by buying US Treasury Securities $797 billion represents only about 99.94% of the total US national debt now the Chinese Central Bank is slowly selling some of the US debt to someone else like another country or a large investment firm who is willing to purchase the US debt from them and why is China doing that suppose if the value of the US dollar goes down China loses money on the investment so selling some debt reduces that risk now that money is being used to buy gold and other currencies to minimize the risk this also indicates that China might want to be less reliant on the US economy so that they are not going to be affected by what happens in the US as China slowly reduces its US debt Holdings they looking for other places to put their money that is where China is buying huge amount of gold now there’s another angle I want you to think about you remember what happened with Russia during Russia Ukraine war Western countries collectively put sanctions on Russia and they froze a significant amount of Russia’s foreign currency reserves that were held in their Banks because of that Russia could not freely access and use those funds it’s like putting a lck on a portion of Russia’s saving account held abroad although Russia still technically owns the money but they can’t easily use it the same thing can happen with China and China is aware of that and because of that China will have a tough time negotiating with Taiwan as you know Western countries have a strong love for Taiwan so if China needs to negotiate or persuade Taiwan in any way Western countries especially the United States can exert some power over China they can impose sanctions and freeze China’s foreign currency reserves similar to what they did with Russia so if you look at this huge quantity of buy orders this is a clear sign that it is a political purchase by China and the consequences of this will be soon visible in the future where we can see some sort of confrontation with the United States so let’s see what happens I will update you further as things unfold I hope you found this video informative thank you for watching it

In this video, we’ll understand why China is buying so much of Gold.
China’s recent surge in gold purchases is driven by a complex interplay of economic, geopolitical, and strategic factors. Heightened tensions in the Middle East spurred a rush to safe-haven assets, prompting China to bolster its reserves. Domestically, instability in real estate and stock markets has fueled a shift towards gold as a secure investment. China’s strategic diversification away from US debt indicates a desire to reduce reliance on the US economy and safeguard against potential sanctions. However, concerns arise over potential geopolitical implications, particularly in relations with the US and Taiwan, as China’s gold reserves swell.
#china #gold #economy #geopolitics

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