China has recently stepped up its accumulation of gold, raising questions about its long-term intentions. This trend is part of a wider strategy to reduce the country's dependence on the US dollar. The price of gold and the price per gram of gold are key indicators to watch in this context.

In this article, we explore the motivations behind this accumulation and the potential implications for the global monetary system.

Countries with the largest gold reserves

Gold, often purchased in the form of gold coins or bars, is a valuable reserve asset for many countries. According to data from the International Monetary Fund (IMF), the world's financial institutions and central banks hold approximately 34,000 tonnes of gold in reserve. It should also be noted that the IMF itself holds around 2,800 tonnes of gold.

The US Federal Reserve (FED) alone holds almost a quarter of these reserves, or 8,133 tonnes. The other countries in the top 5 largest gold reserves by country are Germany, Italy, France, Russia and China :

The United States

With around 8,133 tonnes of gold, the United States holds the world's largest gold reserves, according to IMF figures. This massive stock helps support the US dollar as the world's reserve currency.

Germany

Germany follows with around 3,366 tonnes of gold. Some of these reserves have recently been repatriated, indicating growing confidence in the stability of the precious metal.

Italy

Italy holds around 2,451 tonnes of gold. Like Germany, Italy sees gold as a precaution against financial crises and a way of diversifying its reserves.

France

France has around 2,436 tonnes of gold in reserve. Although this is a significant amount, it is slightly less than Italy's. In France, gold is seen as a stable asset, especially in times of economic volatility.

China

China recently added 16 tonnes to its reserves, bringing the total to around 1,948 tonnes. Although this is less than the other countries mentioned, China has increased its reserves for the seventh consecutive month, indicating a deliberate strategy of diversification and de-dollarisation.

China continues to de-dollarise by accumulating gold

China has recently increased its gold reserves, partly in response to liquidity and solvency problems. Although official figures place China behind other nations in terms of gold reserves, some experts suggest that the reality may be quite different. 

Indeed, China increased its gold reserves by 74 tonnes in 2019 and also saw its domestic gold production reach 403 tonnes in the same year. What's more, it is the world's largest importer of gold, having imported around 1,500 tonnes in 2019. Buying gold is therefore a deliberate strategy for diversification and de-dollarisation.

This accumulation of gold is seen as an attempt to de-dollarise and diversify its reserve assets. Compared with European and American countries, China has a relatively small amount of gold, which makes this accumulation even more significant.

Is there a "gold rush" in China ?

The term "gold rush" is often used to describe China's growing interest in gold. The price of gold in Shanghai has risen recently, and the People's Bank of China has even encouraged young people to invest in gold. 

As a result, the People's Bank of China (PBOC) has taken an interesting initiative to approve young taxpayers to invest in gold. It has introduced a product in the form of a gold pill, at a relatively affordable price, with the aim of encouraging young people to invest in this precious metal. The underlying idea is that young people could set aside part of their salary to buy one grain of gold a month, which would be a positive long-term investment strategy.

The Shanghai Gold Exchange (SGE) also plays a crucial role in setting gold prices in China. Unlike other markets, the SGE sets prices based on physical exchanges of gold and silver, reflecting real demand relative to physical supply. This pricing mechanism reinforces the credibility of gold as an investment asset in China.

Finally, in China, the yellow metal is increasingly seen as a more reliable asset than other traditional investments, such as property or equities. This perception is fuelled by a series of factors, including the volatility of the Chinese property market and the uncertainties surrounding the stock markets.

As a result, China is intensifying its quest for gold in order to diversify its reserves and reduce its dependence on the dollar. This trend will have major repercussions for the global monetary system and could challenge the dollar's dominance as the world's reserve currency.