Jul 9, 2019

China's central bank buys gold for 6th straight month

The People's Bank of China added nearly 16 tons of gold to its reserves in May, the sixth straight month China's central bank has added to its gold reserves.

Why it matters: The Chinese have been working to move away from the dollar as the world's international funding currency for years. They've increased these efforts since President Trump's election.

What it means: The gold buying binge is part of the Chinese government's "determined diversification" away from dollar assets, Argonaut Securities (Asia) Ltd. analyst Helen Lau told Bloomberg, adding that retail demand has also increased. China could buy 150 tons in 2019 at this rate of accumulation, Lau said.

  • Precious metals company Kitco cites analysts at Commerzbank who estimates that the PBOC has bought 85 tons of gold in total since December.
  • "One reason is likely to be the trade dispute with the U.S., which has prompted China to reduce its dollar holdings and U.S. Treasuries of late," the analysts said, according to Kitco.

The big picture: Gold is gaining popularity among the world's central banks, particularly the Chinese, the world's top gold consumer. Last year 15% of the world’s gold demand came from came from central banks, which collectively bought 651.5 tons, according to World Gold Council data.

The last word: Bloomberg notes that prices of gold bullion have risen for the past 3 weeks, "hitting the highest level since April 2018, as investors seek out havens and traders increase bets that the Federal Reserve will cut interest rates following signs of weakness. Spot gold was at $1,329.60 on Monday, after climbing 1.7% in May."

Go deeper: The world's slow drift away from the dollar

Go deeper

June was a historic month for gold

Data: Investing.com; Chart: Axios Visuals

Gold-backed ETF holdings have risen to the highest level since early 2013, with June showing the largest inflows in more than 3 years, data from the World Gold Council's June report shows.

What's happening: Investors have flocked to gold as expectations have risen for the Fed to lower interest rates, which is expected to push down the value of the dollar, and as continued global uncertainty has sent money into safe-haven assets.

Go deeperArrowJul 11, 2019

Chinese yuan weakens past key milestone as trade war heats back up

Illustration: Rebecca Zisser/Axios

The Chinese yuan was allowed to weaken past 7-to-1 against the dollar for the first time ever in offshore markets and the first time in more than 10 years in its onshore market.

What it means: The move is seen as a response to President Trump's threat on Thursday to add 10% tariffs to $300 billion of Chinese imports. Wall Street extended its multi-day sell-off after the news: the Dow is down more than 500 points, while the S&P 500 and the Nasdaq are off as much as 2% early on Monday. Meantime, the yield on the U.S. 10-year note fell to multi-year lows.

Go deeperArrowAug 5, 2019

Central banks are cutting rates around the world

Photo: Biddiboo/Getty Images

With the Fed universally expected to cut U.S. interest rates this month, central banks around the globe are doing the same, and an increasing number of policymakers aren't even waiting for Powell to make the announcement.

Why it matters: The central banks represent 3 of the world's largest emerging market countries and their actions send a clear signal that even with global debt rising to new highs, especially in EM, policymakers are prioritizing easy money and stimulus.

Go deeperArrowJul 16, 2019