Friday, June 9, 2017

Russia and China's gold purchasing intrinsically tied to weaning their economies off the dollar

Over the past four to five years, both Russia and China have been purchasing physical gold and are by far the largest buyers of any sovereign nation.  And while their 'official reports' show that they hold in the range of between 1500-3000 tons respectively, insiders acknowledge that the actual number is more like between 18,000 and 30,000 tons.

Since the world has no longer been on a gold standard over the past 46 years, and the primary monetary vehicle of choice over that time has been the U.S. dollar and its sister vehicle, the U.S. Treasury, one has to ask for what real purpose would these nations be accumulating so much gold for if the most liquid asset is to hold dollar denominated debt?

That answer may be more geo-political than financial as experts are recognizing that Russia and China's gold accumulation program is all above lessening their need for the dollar, and subsequently providing a mechanism for global trade that lessens the entire world's need and use of the reserve currency.

In recent years, Russia and China have actively been purchasing the yellow metal and have significantly enlarged their national gold reserves. 
According to Philip Klinkmüller, a financial expert with Hopf-Klinkmüller Capital Management, there is a visible trend in Russia and China to buy more bullion to end their dependency on the US dollar. 
The expert suggested that in the years to come global financial markets will see a significant devaluation of the American currency. 
"According to our estimates, there will be a downward trend in the dollar exchange rate in the next 15 years. In the long-run, it cannot be guaranteed that the dollar will remain a global reserve currency," Klinkmüller told Sputnik Germany. 
Bullion was traditionally a major part of the Russia’s and China’s gold and foreign exchange reserves. At the same time, nearly 60 percent of global exchange reserves are denominated in dollars. 
On the one hand, gold is a national reserve in the event of a crisis. On the other hand, gold reserves help compensate losses from a fluctuating dollar. 
By stockpiling bullion, Russia and China want to get more independent in trading gold and cut their reliance on the US dollar, according to Jochen Stanzl, a market analyst at CMC Markets. – Sputnik News

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