Earlier this month the World Gold Council published its quarterly report– and it shows that central banks and foreign governments from around the world are buying up gold at their fastest pace in six years.
This is pretty big news, and it says a LOT about the future of the dollar.
Remember, central banks and foreign governments hold literally TRILLIONS of dollars of reserves… and traditionally they do this by buying US government debt.
It sounds strange, but to big institutions, banks, etc., US government debt is equivalent to cash. They use it as a form of money.
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More importantly, they hold US dollars because that’s the global standard: the US dollar has been the world’s primary international reserve currency for seventy five years.
So US debt is extremely liquid. In fact, the $22 trillion US debt market is the biggest and most liquid market in the world.
But foreign governments have started breaking with the tradition of buying treasuries.
As the World Gold Council’s report showed us, foreign governments and central banks have been buying a LOT more gold than in previous years.
Net gold purchases in Q1/2019 among foreign governments and central banks was nearly 70% greater than Q1/2018… and the highest rate of first quarter purchases in six years.
The Chinese in particular, have been stockpiling gold faster than ever, while at the same time, Chinese ownership of US treasuries as a percentage of total holdings has been gradually declining over the past years.
And it’s not just China.
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