Is Trade Tension Forcing China and Investors to Generally Buy Gold?

Over the past few weeks we have been writing about how gold should be seen as both a portfolio diversifier and portfolio insurance. China’s extended gold buying spree suggests they feel the same too. Over the past six months, the People’s Bank of China has increased its allocation to bullion, now owning 61.61 million ounces (at last count of their ‘official’ figures, it may well be higher). The rise reflects China’s potential determination to move away from dollar linked assets but also maybe the purchase of insurance as their trade war with the United States starts to hurt growth expectations. Similarly, it is evident that retail demand has also gained traction over the past few months. China is now the world’s top producer and consumer of gold (all of Chinese’s still gold remains in the country) and it is facing the prospect of a slowing domestic economy as it fights with Trump and his administration over tariffs on Chinese imports, as well as, restrictions on companies like Huawei Technologies from the US markets. Having paused its purchases of gold in 2016, data published by the People’s Bank of China shows that the country has started purchasing gold at a steady pace, once again. Other countries, most notably Russia have been continually increasing their allocation to gold in recent years.

The price of bullion has risen rapidly over the past few weeks to their highest level since April 2018. If you look across the world, all the dominant asset classes have valuation question marks against them and generally throughout history, this is when gold comes into play. With interest rates in the US falling again as the rising Eurodollar prices show and increased rhetoric looking for a weaker dollar, gold looks poised to benefit.

While we have seen gold rise back to the crucial $1350 upside break out point over the past month from a trend ready status as demonstrated by our technical trend index tool, we have seen much less interest from a typical monitor of gold (especially retail) buying interest, the GLD shares outstanding ETF. The lagging of investor interest suggests that this up-trade may have been missed so far and that there may be a catch-up surge anytime. We believe gold may have so much more to offer in the coming months.

Protect your assets and purchasing power during this period of uncertainty by purchasing gold through the Glint.