3,000 tons of gold arrive in China.
We often say that U.S. Treasury bonds are a significant risk factor, especially for Asian countries that hold a large amount of U.S. debt due to historical reasons, and are likely to suffer substantial losses due to a decline or default in U.S. debt.
However, it is unexpected that the decline in U.S. Treasury bonds has now led to the bankruptcy of a large domestic bank in the United States.
Currently, an increasing number of central banks are continuously buying gold while selling U.S. Treasury bonds.
However, the American media has pointed out that China's pace of selling U.S. debt is gradually slowing down and is about to stop selling U.S. debt.
What is going on?
01, Bankruptcy due to U.S. debt
Last Friday, the U.S. authorities suddenly announced that a large regional bank, Silicon Valley Bank, was closed for business, and all customer deposits were transferred to the deposit insurance company.
Subsequent analysis indicated that the main reason for the bankruptcy of this bank was due to huge losses from investments, which involved losses caused by the decline in U.S. Treasury bonds.
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Over the past two years, Silicon Valley Bank's deposits have increased significantly. To allocate these assets, Silicon Valley Bank naturally thought that placing money in safe U.S. Treasury bonds was the best choice.
But it was this safe choice that turned out to be the biggest risk.In 2022, due to the Federal Reserve's aggressive interest rate hikes, the prices of U.S. Treasury bonds plummeted wildly, with the decline being the largest since 2009. The Silicon Valley Bank, which held $16 billion in U.S. Treasury bonds, suffered substantial losses as a result, ultimately leading to a liquidity crunch and declaring bankruptcy under the pressure of a run by its clients.
02 Central Banks Buy Gold, Replacing U.S. Treasury Bonds
The risks associated with U.S. Treasury bonds are growing, and central banks around the world have been continuously selling them throughout 2022, while purchasing gold has become a common choice for them. According to the latest survey report, global central banks have increased their gold purchases by 40 tons in 2023, a nearly 200% surge compared to the previous period. This also indicates that under the influence of geopolitical conflicts and rampant inflation, the demand for gold among countries around the world is also growing day by day.
Official institutions reported that last year, the net increase in global central bank gold reserves reached over 1,100 tons, with a continuous upward growth trend for 13 years since 2009, setting the highest historical record for the growth of gold reserves since the 1950s. Officials stated that due to the ongoing international disputes caused by the Russia-Ukraine conflict in recent years, the sanctions policies implemented by various countries have disrupted the stable trading market, leading to a continuous increase in inflation rates. Global central banks have adopted the strategy of continuously purchasing gold, a universally accepted general equivalent, as a safeguard to better withstand economic risks.
03 China Buys Over 3,300 Tons in 4 Years
Last year, the country with the highest gold purchases was Turkey, and in 2023, Turkey continues to maintain its gold purchasing strength, buying nearly 20 tons of gold in January.The reason why Turkey keeps buying gold is due to the country's persistently high inflation and monetary policy. The Turkish currency has fallen to an all-time low against the US dollar, and in this situation, buying a large amount of gold is actually one of the best ways to resist the dollar's harvesting.
It seems that this is the most important reason for central banks to buy gold - the risks of the US dollar and US debt.
Some economists also analyze that a large part of the reason for buying a large amount of gold is to reduce dependence on the US currency.
Gold, as a general equivalent, has its unique non-renewable resource attribute, which is different from the currency and bond products issued by the United States. Therefore, buying a large amount of gold is a good way to replace US Treasury bonds and the US dollar.
Contrary to the judgment of US media, we have not reduced the sale of US debt. On the contrary, even in December last year, when the price of US debt rebounded significantly, we still sold at least 15 billion US debt.
However, due to the rebound in the price of US debt, the US debt we hold only decreased by 2.9 billion, creating the illusion of a decrease in the amount of sale.
At the same time, according to data from the People's Bank of China, the People's Bank of China has also increased its gold holdings for four consecutive months.
In fact, from the statistical data of some major customs in recent years, we can find that China has been importing gold.
From 2019 to 2022, in just four years, our country has imported a total of 3,367 tons of gold. As more and more gold is shipped from overseas markets to China, our confidence in resisting the risks of US debt is becoming stronger and stronger.
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