China’s Gold Grab Moves in Synch With Ongoing Drawdown in US Treasury Holdings

China continued to buy gold in May, continuing a streak of purchases that has gone on since November. The rise in gold buying has coincided with a drawdown in China’s US Treasury holdings and an uptick in its utilization of the Yuan for cross-border transactions. That is likely the latest sign of ongoing de-Dollarization in several emerging market economies, which is likely to boost gold demand. China is particularly focused on expanding its economic footprint in Southeast Asia, home to the only country that bought more gold than itself in the first quarter. 

Related ETF: SPDR Gold Shares (GLD)

Last week, China announced that it had increased its gold reserves for a seventh straight month, purchasing about 16 tonnes in May. Per Bloomberg, Beijing’s total stockpile now weighs in at 2,092 tonnes after adding a total of 144 tonnes across its recent buying streak, which began in November 2022. Prior to that, China had not disclosed any purchases of gold since 2019.

Though China’s foreign exchange reserves are still very heavy in US Dollars (USD), the country’s ongoing accumulation of gold coincides with a whittling down of its exposure to US Treasuries. China’s holdings of US sovereign debt have been trending lower for some time now, touching $848.8 billion in February, a drop of almost $250 billion since the start of 2021 and the lowest sum since 2010. MRP has previously noted that an ongoing trend of de-Dollarization by China, as well as other emerging markets that broadly oppose US geopolitical goals, will likely be tied to increasing demand for gold.

China was second only to Singapore in gold purchases by global central banks in the first quarter. The Monetary Authority of Singapore’s (MAS) undertook its second-largest single purchase ever in January, buying 45 tonnes of gold, equivalent to a 30% gain in their outstanding reserves. That was followed by…