Robust Chinese gold buying has pushed prices of the precious metal to record highs. Reuters
China’s economy is struggling, leading to a surge in gold purchases as a safe-haven investment.
Central banks are now on a buying spree, contributing to record high gold prices.
Other central banks are also buying gold to diversify their investments in the face of the strong dollar.
China’s economy is in crisis. So people buy gold as a safe haven to protect themselves against economic uncertainties. This is driving the price of the precious metal to a record high. The price of gold is currently around $2,330 per ounce (around €1,980.50). This is below its record high of over $2,400 per ounce (around €2,040) in April.
The country’s central bank has also jumped on the bandwagon, adding 60,000 troy ounces to its gold holdings in April, according to data released on Tuesday official data emerges. It was the 18th consecutive month that the People’s Bank of China invested in gold.
How much is an ounce of gold in kilograms?
China’s central bank increased its gold holdings by 60,000 troy ounces in April, according to data released on Tuesday (May 7, 2024). official data emerges. But how much is that?
The calculation of ounces
An ounce (oz) is a unit of mass used primarily in relation to precious metals such as gold and silver. One ounce is approximately 28.35 grams. In some countries, the metric ounce is also used, which is exactly 30 grams.
For example, to convert 60,000 ounces to kilograms, we first need to know what type of ounces we are referring to. There are two common types of ounces: the avoirdupois ounce and the troy ounce.
The avoirdupois ounce is used for general purposes in most countries and is equal to about 28.3495 grams. The troy ounce is used primarily for precious metals such as gold and silver and is equal to about 31.1035 grams.
If we mean a troy ounce, then we already know that a troy ounce is approximately 31.1035 grams. So to convert 60,000 troy ounces to kilograms, we multiply the number of troy ounces by the weight of one troy ounce in grams and divide by 1000 to get the result in kilograms:
60,000 troy ounces×31.1035 grams/troy ounce=1,866,210 grams60,000 troy ounces×31.1035 grams/troy ounce=1,866,210 grams
To get the result in kilograms:
1,866,210 Grams/1000=1,866.21 Kilograms 1,866,210 Grams/1000=1,866.21 Kilograms
So 60,000 troy ounces is approximately 1,866.21 kilograms.
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The strong US dollar makes importing goods too expensive for China
But it’s not just economic uncertainty that’s at the forefront: the increased interest in gold is also a reaction to the strong US dollar, which makes importing goods too expensive for emerging countries like China.
The dollar index, which measures the dollar’s value against six other currencies, is up 4 percent this year and 10 percent since the start of 2022. This is due to the Federal Reserve’s interest rate hikes since March 2022, which tend to strengthen the dollar. (The Federal Reserve, often abbreviated as “Fed,” is the central bank of the United States of America and is responsible for implementing the country’s monetary policy.)
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The Chinese yuan fell 4 percent
The Chinese yuan has lost 1.6 percent against the dollar so far this year. It has fallen 4 percent over the past 12 months and has lost about 12 percent against the dollar since the start of 2022.
Other central banks are also stocking up on gold. The big gold buyers include China, Turkey and India, he said World Gold Council (WGC ) in a report from last week.
The strongest gold start to a year ever recorded
The council wrote that many see central banks’ continued hunger for gold as a key reason for gold’s recent performance, “given what appears to be challenging conditions, namely higher yields and the strength of the U.S. dollar.”
In total, the world‘s central banks bought 290 tonnes of gold in the first quarter of this year – the strongest start to a year on record, according to the WGC.
The central banks are not yet finished buying gold
However, while central banks have bought quite a bit of gold since 2022, they may not be done yet, according to the WGC: “The long-standing trend in central bank gold purchases is not only unbroken, but continues to be dominated by emerging market banks.” , the WGC continued.
Emerging market central banks that bought gold in the first quarter of the year include Kazakhstan, Oman, Kyrgyzstan and Poland.
Political motivations
There are also political motivations for central banks to diversify their assets. “It has become apparent that in some cases, nations that are not allied with the United States have begun to reduce their reserve mix away from the dollar. They see the risks of keeping these reserves vulnerable to sanctions,” wrote analysts at JPMorgan in a March report.
Governments allied with the U.S. are also investing in gold to protect themselves from higher and more volatile inflation worldwide, the analysts added.
As access to the USD becomes more expensive, borrowers will look for alternatives.
The rush to invest in gold could have a longer-term negative impact on the US dollar if the currency continues to rise. “A stronger USD would weaken its role as a reserve currency,” economists at Allianz, an international financial services firm, wrote in a report dated 29. June. “If access to the USD becomes more expensive, borrowers will look for alternatives.”
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