Summary
Highlights
BRICS countries, particularly China, have been rapidly increasing their gold reserves. The sanctions on Russia and tariff threats have pushed nations away from dollar assets. BRICS now hold 17.4% of global gold reserves, accumulating 6,000 tons, mostly stored domestically. The confiscation of Iranian and Russian assets serves as a warning, prompting China's continuous gold acquisition to build a robust global reserve asset base, anticipating an eventual US dollar default.
China's Central Bank (PBOC) and its citizens are actively buying gold, with 8.1 tons added in April. This gold is likely coming from Western markets, as evidenced by massive gold selling in North America while China buys, often during price drops. A domestic gold shortage in China, caused by declining mine output and rising consumption, means China relies heavily on imports. This has led to the US exporting a record $17.8 billion in non-monetary gold in February, primarily to Switzerland for refining before reaching China, effectively draining US wealth.
China is using its trade with the US to exchange goods for gold, discarding US dollar assets. The Iran war is accelerating this trend, as China seeks to insulate itself from global instability. China's exports to the US are rebounding, but they are demanding gold in return, not US treasury bonds. Beyond trade, China is strategically acquiring gold mines globally, particularly in countries like Ecuador and Brazil through companies like CMOC Group and Zijin Gold. These Chinese miners operate with state backing and lower costs, outperforming Western counterparts.
China's long-term plan is to establish itself as a global gold hub, attracting foreign central banks to custody their gold reserves on the mainland, much like Cambodia is already doing. This ambition is fueled by a growing loss of faith in dollar assets among foreign central banks. Treasury holdings have collapsed from 33% to 21% since 2015, while gold's prominence has risen from 9% to 24% in global reserves. This signals a major global shift away from dollar treasuries towards gold, which the US seems to be underestimating or ignoring, leaving it vulnerable to a significant reshuffle of the global financial system.