As the US and China trade war unfolds and the stock market ebbs and flows on its heels, there is one certainty: Beijing is clamoring for gold. The Chinese central bank again boosted its gold reserves as it has done regularly over the past eight months. It is reported that the People’s Bank of China just increased its holdings by nearly 10 tons of gold.
Gold Surge In Recent Months
There is no question that gold has surged in 2019 due to global economic uncertainty, a more relaxed policy among central banks and the Fed, and the impending trade wars. These activities
no doubt play a role in the recent increase in the demand for gold, and thus, the gold price increase that has followed. The last one-quarter-percentage drop in the Federal Funds interest rate also plays a role. As well, China has decreased the value of its currency in efforts to mitigate the tariff situation, yet another action to support a gold investment.
Why Diversification Is Becoming Critical
Some financiers believe now is a critical time in which the country must reconsider a diversification plan that includes more than the US dollar to offset these economic risks. Currency devaluation due to the trade war is one key ingredient driving the purchase of gold.
Interestingly, China shows a slow but consistent pattern of increasing its gold reserves without a noticeable disruption in the gold market. It seems they have a strategy for diversification of their monetary foreign-exchange reserves. Overall, the central banks continue to store up gold, pushing demand, and there is evidence this pattern will continue. It is also interesting to note that China is, in fact, the largest worldwide producer of gold, and they can purchase it with their currency.
Worldwide Debt and Gold
In an interview entitled Central Banks Buying Gold As Yields Drop, between Bloomberg’s Lisa Abramowicz and Paul Sweeney, and Frank Holmes, CEO, and CIO for US Global Investors, Holmes comments as to where the US is headed in terms of worldwide debt and gold. “It all depends on the fear index in global PMIs (Purchasing Managers’ Index) …whenever the global PMIs are slowing down, and you get panic with interest rates falling like we’re seeing…that triggers competitive currency devaluation by other countries in the world by lowering interest rates…this triggers what’s called the fear trade, and historically this drives gold. It’s the gold stocks where you make the big gains.”
Holmes goes on to say that central banks are buying more gold as rates drop, especially in countries like China and India, where you see modest GDP growth. These countries are also known to give gold as gifts. Even amid worldwide debt and an ongoing trade war, gold is attractive. It recently reached its highest value since 2013, at $1,519 an ounce, soon approaching the all-time highest price of gold at $1,900 and possibly going up from there.
A Good Time To Buy Gold
With the continual snatching up of gold by the central banks, and before gold surges beyond a record high, this trade war period may be one of the best times to buy gold. The foreign devaluation of currency along with the education in how the central banks and foreign investment competitors are reacting is a strong sign. The weakening Yuan is likely to strengthen the US dollar and lead China to buy even more gold. Now is the time when serious investors reduce their high-risk assets and instead seek haven investments such as precious metals. During a period of global economic uncertainties, gold is simply one of the best diversification alternatives to many financiers. The fact is gold is experiencing a bull market and trending higher each month.
Reagan Gold Group is an excellent, trusted source for your gold investment. Learn more about a gold IRA or gold investment now while gold is affordable. Get an honest opinion and a genuine hedging opportunity for your investment portfolio. It’s not too late to compete with our foreign investors. Now maybe the best time ever to buy gold.