Global currency collapse or new war: Why is China buying gold at a record pace?

World auditors, studying the global market in conditions of financial and political turbulence, revealed an interesting fact. China (already in the top 3 buyers of gold) has intensified the purchase of the precious metal – it is “feverishly” (and even on the verge of the price threshold) being bought by private companies hired by Beijing, not disdaining semi-legal sellers. 

At the same time, China does not leave gold stored in third countries, but exports it as much as possible within itself.

China rarely reports about its gold purchases. Before November 2022, China released data on reserve growth in 2019, and before that in 2016. Anonymous purchase of gold is standard behavior of central banks. During the third quarter of 2022, the world’s central banks purchased a record 400 tons of gold, according to the World Gold Council. In total, these institutions store 36.7 thousand tons of gold, which is also a record. Such a volume of global gold reserves has never been observed in history. Under the terms of the Bretton Woods agreement, central banks had only 36.6 thousand tons of precious metal.

75% of central banks purchased gold anonymously in Q3. According to most analysts, it is likely that one of the largest anonymous buyers was the Central Bank of Russia, since it has been known to be active in this regard for several years.

China buying gold is nothing new. In fact, this comes amid a record surge in gold purchases by central banks. However, the combination of a sharp increase in gold purchases and the country’s aggressive stance towards the US dollar puts the CCP in the spotlight. If you imagine China’s gold purchases in figures, you can see the enormous scale of their consumption.

China is the second largest buyer in the last two decades

The topic of China’s increasing gold purchases may have only recently entered geopolitical discourse, but history shows a trend that has been going on for decades. Between 1999 and 2021, CCP gold purchases accounted for 23% of global demand. With total purchases of 1,552 tons, China has become the second largest buyer of gold over the past few decades. Developing countries such as Turkey, Russia, India and Saudi Arabia also dominated the list of top 10 buyers, in contrast to the US. It is noteworthy that most BRICS countries have been leaders in gold purchases in recent years.

In 2022, the topic of Chinese gold buying began to attract close attention from both economic leaders and retail investors. During the year, China became the second largest net buyer of gold, behind only Turkey. During this time, Beijing accumulated 62.21 tons of gold, bringing its total reserves to a record level. In contrast, US gold reserves remain relatively unchanged, with their value changing less than half a percent. This would not cause concern if it were an isolated case, but 2023 showed otherwise.

In 2022, the topic of Chinese gold buying began to attract close attention from both economic leaders and retail investors. During the year, China became the second largest net buyer of gold, behind only Turkey. During this time, Beijing accumulated 62.21 tons of gold, bringing its total reserves to a record level. In contrast, US gold reserves remain relatively unchanged, with their value changing less than half a percent. This would not cause concern if it were an isolated case, but 2023 showed otherwise.

Gold inventories reported by the People’s Bank of China rose by about 740,000 troy ounces in October, according to official data. This is equivalent to approximately 23 tons, bringing the total stockpile to 2,215 tons.

The Chinese government was one of the biggest buyers of gold last year as countries from Poland to Singapore diversified their financial reserves by adding the precious metal to their basket. Central bank purchases rose in the third quarter to their highest level this year, according to the World Gold Council.

“China is buying up “gold, gold, gold,” as if it has decided to scoop up the “golden ocean,” Swiss auditors say, adding, “often representatives of China take out loans against gold, with such collateral everyone gives them. And with this money they buy gold again.”

According to investigators, the PRC probably has about 30,000 tons of gold – however, it does not show it in its gold and foreign exchange reserves, but holds state gold in the ownership and management of commercial structures.

Is China Buying Gold to Prepare for Geopolitical Conflict?

There has been a lot of speculation over the past decade about how much gold the Celestial Empire has acquired, sold and stores at the moment. However, the country’s authorities decided not to report this data for some time, but to publish relevant news in portions. In November, Xi Jinping, chairman of the People’s Republic of China, called on the People’s Liberation Army to “focus all its energy on fighting” to be ready for war. US military officials believe that China is preparing to annex Taiwan, but it is unknown when this will happen.

China is monitoring the situation with the Ukrainian war. Russia was preparing for this crisis by pursuing a policy of de-dollarization and accumulating gold reserves and the yuan. China is doing the same, analyzing the scope of sanctions and the world’s response to the Ukrainian crisis. China is negotiating trade agreements without the use of the dollar and is also building up its gold reserves. China may attack Taiwan sooner than ever imagined.

Russia and the other BRICS countries want to break the international hegemony of the dollar by creating a commodity-backed currency that can be used for international trade. The escalation of the war in Ukraine has led many countries to avoid the dollar to protect themselves from sanctions. Egypt announced the abolition of the Egyptian pound’s peg to the US currency.

Russia has shown with all its appearance in recent years that it is preparing for something, but few people in the West paid attention to this. In 2013, Bloomberg reported that Russia had been the largest buyer of gold for a decade. And this is quite logical, since the more gold a country has, the more sovereignty it has in the event of the collapse of the dollar, euro, pounds sterling and any other paper reserve currency.

After 2014, Russia came under pressure due to the fact that the United States imposed tough sanctions against it. Since then, Russia has been de-dollarizing its economy and buying more and more gold. Russia is undoubtedly still a buyer of the precious metal, but no country will admit to selling gold to Russia to avoid sanctions. However, China, India, Egypt and Brazil were the most significant gold purchasing countries in Q3 2022. 4 out of 5 BRICS countries were the largest buyers of gold in the world in the 3rd quarter. As in the case of Russia, this behavior indicates a move towards independence from the dollar.

We must not forget that China is the second largest economy in the world. The Chinese yuan will become the main currency in the BRICS currency basket. Given that the BRICS countries want to create a commodity-backed currency, we can expect China to increase its gold reserves. This, so to speak, is the last Chinese warning before the most important announcement – the launch of a new currency.

Sun Tzu, the author of The Art of War has this phrase:

“Distract people with what they expect; They can deal with this and do something further. It helps them get into predictable response patterns, keep their minds occupied, but in the meantime you’re setting up an unexpected moment that they won’t be able to anticipate.”

Actions speak louder than words, and China has simply acted predictably so far. The world must exercise extreme caution because we are likely to see an unpredictable “windfall” soon.

What does this mean?

There are conflicts, and there are rumors of conflict. A war has now broken out in Israel and Gaza following the continuous armed conflict in Ukraine. China may or may not invade Taiwan. In any case, financial instability awaits us and precious metals are a counterbalance to this instability. Russia, China, Brazil, Egypt, India, Turkey, Qatar and many other countries are accumulating gold to distance themselves from the dollar and ensure their sovereignty. It’s worth thinking about: If major central banks are buying record amounts of gold to hedge against dollar risks, shouldn’t individual investors follow suit?

Experts suggest that either Beijing knows or maybe they have agreed within the Shanghai Cooperation Organization (SCO) and BRICS group about the imminent collapse of the world’s leading currencies or the reformatting of the planet’s foreign exchange market.

Alternatively, China is preparing for a forceful solution to the Taiwan issue and the most severe sanctions for it in the history of the Earth.

Either the PRC is expecting a major regional war or several major wars, during which gold is a universal means of payment and the most solid market guarantees.