China's Golden Challenge To The Dollar: A Spark In The De-Dollarization Fire

EDITOR'S NOTE: China's unyielding push to reshape global finance gains steam as its central bank secures another 23 tonnes of gold in July, extending its consistent gold buying spree over nine consecutive months. This strategic accumulation underscores China's determination to erode the U.S. dollar's supremacy and diversify its reserves. With 2,136 tonnes now in its official reserves, China's message is unmistakable – a resounding vote against the U.S. dollar's hegemony. As global de-dollarization gains momentum, the implications of this move extend far beyond the precious metal market, pointing toward a future where financial power dynamics could be significantly altered.

(Kitco News) - China continues to put the world on notice that it intends to challenge the U.S. dollar's role as a reserve currency after the nation's central bank bought more gold in July, pushing its current shopping spree to nine consecutive months.

Krishan Gopaul, senior analyst at the World Gold Council, reported on social media that the People's Bank of China bought 23 tonnes of gold last month. Gopaul noted that so far this year, China has purchased 126 tonnes of gold, increasing its official reserves to 2,136 tonnes.

China's ongoing gold purchases have put renewed focus on the growing de-dollarization trend as nations around the world reduce their exposure to the U.S. dollar. Although China has become a leading buyer in the precious metal market, some analysts say that the central bank is just getting started.

"When you buy gold, it's a direct vote against the U.S. dollar," said Willem Middelkoop, creator of the Commodity Discovery Fund. "China is sending a message to the White House that they don't support the global financial system backed by the U.S. dollar."

Thorsten Polleit, chief economist at Degussa, said he also sees China's sustained gold purchases as a vote of no-confidence in the greenback.

"China is sending an unmistakable signal to the world for all eyes to see: It reduces its US-dollar holdings and, at the same time, increases its gold reserve stock," he said. "Like many other non-western countries, China wishes to reduce its dependence on the greenback, and physical gold is the greenback's natural substitute."

Polleit added that as aggressive as China has been in the last nine months, the central bank still has a long road ahead.

"The U.S. M2 money stock amounts to nearly 21 US$ trillion, backed by the US official gold stock of 8,133.5 tonnes. The Chinese M2 money stock – in terms of current US$ – amounts to nearly 40 US$ tn, while the Chinese official gold stock is just 2,113.5 tonnes," he said.

Middelkoop said he also expects China to buy gold for an extended period, and that he believes this is the start of the endgame for the U.S. dollar.

"It will take decades, but this is how a new system is started," he said. I expect China will continue to buy gold for the next decade. We will have a multi-polar currency world for quite a while."

Analysts have said that central bank demand, while it has slowed in the last few months, remains a significant support for gold prices. Middelkoop noted that gold is holding critical support levels even as the yields on U.S. 10-year bonds hold around 4%.

Originally published by: Neils Christensen on Kitco News