Chart of the Day – China's Gold Holdings Continue to Rise

Gita Gopinath Speech 5/7/24 – Geopolitics and its Impact on Global Trade and the Dollar

“Looking at global FX reserves, the most notable development during 2022-23 has been an increase of gold purchases by central banks.”

“Gold is generally viewed as politically neutral safe asset, which can be stored at home and be insulated from sanctions or seizure. It can also be an inflation hedge but cannot be easily used in transactions.”

“The share of gold in the FX reserves of the China bloc has been rising since 2015—a trend not exclusively driven by China and Russia. Importantly, during the same period, the share of gold in FX reserves of countries in the U.S. bloc has been broadly stable.”

“This suggests that gold purchases by some central banks may have been driven by concerns about sanctions risk. This is consistent with a recent IMF study[3] confirming that FX reserve managers tend to increase gold holdings to hedge against economic uncertainty and geopolitical including sanctions risk.”

“Looking at China, the share of gold in total FX reserves has increased from less than 2 percent in 2015 to 4.3 percent in 2023. During the same period, the value of China’s holdings of U.S. Treasury and Agency bonds relative to FX reserves has declined from 44 percent to about 30 percent. This reflects both net purchases and valuation effects.”

Source: https://www.imf.org/en/News/Articles/2024/05/07/sp-geopolitics-impact-global-trade-and-dollar-gita-gopinath