The Chinese elite are stocking up gold. In 2018, the export of gold from Switzerland to China nearly doubled. “In China, literally everyone invests in gold with no intention of stopping. They understand what is happening right now and thus accelerate the pace of procurement,” says the Swiss analyst Egon von Greyerz.
Why are the Chinese buying up gold in such a rush?
Currencies lose their influence, while gold is strengthening.
Most people got used to estimate the worth of gold in dollars. In the meantime, according to investor and journalist Claude Beget, gold shows a significant growth against other 72 world currencies. This is happening due to the devaluation* of national currencies.
Let’s review four examples.
In recent years, Europe dealt with a number of serious problems: the refugee crisis, high unemployment, the Brexit* chaos, the consequences of sanctions. Over the previous year, the euro fell by 2,75% against gold. The President of the European Central Bank Mario Draghi emphasized the deterioration of the economies of the eurozone* and the diminished importance of the euro currency in the global financial system.
In the chart: since 2004, the price of gold has increased by 253,86% against the euro.
Anti-Russian sanctions exert the strongest pressure on the national currency exchange rate. In 2018, the ruble fell against gold by 17,5%. The planned tightening of sanctions will cause more damage to the national currency. The largest bank of Russia Sberbank published its forecasts for 2019-2020 with rather discouraging prospects, predicting a further fall of the ruble and a growing inflation rate. Considering this, Russia stocks up gold: last year the country purchased a record amount of gold – 274 tons.
In the chart: since 2010, the price of gold has increased by 150,32% against the ruble.
At the moment, Turkey is experiencing an economic decline. In 2018, the Turkish lira devalued against gold by 36,7%, given the inflation rate of 17,9%. The deterioration of relations with the United States, as well as the political crisis in the country, add more fuel to the fire, further aggravating the situation. To maintain the lira rate, the Central Bank of Turkey is now forced to sell gold from its own reserves.
In the chart: since 2010, the price of gold has increased by 347,94% against the Turkish lira.
Experts note that the growth of the Chinese economy has slowed down, the unemployment rate in the country has sharply increased. As a result of the trade wars with the United States, the yuan devalued, falling by 3,3% against gold. Probably this explains why not only the People’s Bank of China (PBC), but also the citizens of the country are actively buying gold. Realizing its true value, smart people strengthen their financial security, preparing in advance for possible changes.
In the chart: since 2014, the price of gold has increased by 5,97% against the yuan.
Gold is an accurate indicator reflecting the state of the economy. As soon as the situation worsens, the price of gold increases.
On April 15, 2019, the price of an ounce of gold is $1,287.
This year, the US economic slowdown is expected, leading to the weakening dollar that in turn will strengthen the position of gold. Claude Beget believes that the price of gold can reach up to $1,500 per ounce.
Gold is the most reliable asset, the stability and durability of which has been tested for centuries. Thanks to gold, everyone can be protected against financial threats and enhance the financial status.
*Devaluation — the depreciation of the national currency with respect to a foreign reference currency or currency basket.
*Brexit — the withdrawal of the United Kingdom from the European Union.
*Eurozone — a monetary union established within the European Union that adopted the euro as the common currency and sole legal tender.