China hoarding gold to challenge U.S. dollar?

The People’s Bank of China has not formally disclosed any changes to its gold holdings in years, but it’s believed that the central bank is purchasing gold to diversify its reserve holdings. In 2009, China announced that it boosted its gold reserves by 454 tonnes via acquiring gold quietly over the previous five years. That represented an impressive 76 percent increase in gold reserves. Today, China still shows that it holds 1,054.1 tonnes in reserves, but it’s speculated by analysts to actually have around 2,000 to 3,000 tonnes.Some market participants also believe China is building up its gold reserves to challenge the U.S. dollar, which is currently the world’s reserve currency. A few years ago, China’s official news agency, Xinhua, said, “International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country.”

China faces an uphill battle if it’s going to challenge America’s gold stockpile. According to the most recent data from the World Gold Council, the U.S. holds 8,133.5 tonnes of gold, representing 71.8 percent of reserves and the most held by any one country in the world. Furthermore, a behind-the-scenes look from Greenspan reveals that the U.S. is not likely to sell its gold stash anytime soon.

“In 1976, for example, I participated, as chair of the Council of Economic Advisers, in a conversation in which then U.S. Treasury Secretary William Simon and then Federal Reserve Board Chair Arthur Burns met with President Gerald Ford to discuss Simon’s recommendation that the United States sell its 275 million ounces of gold and invest the proceeds in interest-earning assets,” said Greenspan. “Whereas Simon, following the economist Milton Friedman’s view at that time, argued that gold no longer served any useful monetary purpose, Burns argued that gold was the ultimate crisis backstop to the dollar. The two advocates were unable to find common ground. In the end, Ford chose to do nothing. And to this day, the U.S. gold hoard has changed little, amounting to 261 million ounces.”

Full article: China hoarding gold to challenge U.S. dollar? (USA Today)

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