China's Gold Binge May Eclipse US Dollar, Says Top Economist
News Summary
A top economist suggests China has emerged as a major force behind the recent surge in gold prices, with its growing influence projected to surpass even that of the U.S. dollar. Torsten Slok, chief economist at Apollo Global Management, highlighted China's key role in the ongoing gold price rally, driven by central bank buying, arbitrage trading, and increased speculative and safe-haven demand among Chinese households. Slok posited that in the face of global macroeconomic uncertainty, central banks worldwide are likely to soon hold more gold than U.S. dollars. Steve Schoffstall, Director at Sprott Asset Management, previously noted that countries view gold as a way to circumvent economic sanctions. Venture capitalist Chamath Palihapitiya added that China’s relentless gold buying reflects a significant shift in global sentiment, with both governments and individuals seeking to hedge against mounting geopolitical and economic risks. While gold prices have surged past $4,000 per ounce, up nearly 50% year-to-date, gold miners experienced a sharp sell-off on Tuesday following a more than 5% plunge in bullion prices in a single session. The VanEck Gold Miners ETF (GDX) plunged 9.42%, and Newmont Corp. (NEM) fell 9.03%. Despite the sell-off, spot gold remains above $4,100, and market veteran Ed Yardeni forecasts prices could hit $5,000 by 2026 and $10,000 by 2030.
Background
China's central bank has been quietly amassing gold reserves since 2022. This, coupled with increasing safe-haven and speculative demand from Chinese households, has significantly contributed to the surge in gold prices in 2025, pushing them past $4,000 per ounce. Global macroeconomic uncertainty, including geopolitical risks and policy ambiguity stemming from the incumbent US President Trump and his administration, has driven central banks and investors to seek safe-haven assets like gold. This trend aims to diversify reserves and hedge against potential risks, challenging the U.S. dollar's current status as the primary global reserve currency.
In-Depth AI Insights
What are the true strategic intentions behind China's massive gold accumulation? - China's continuous gold accumulation by its central bank is likely more than just an economic hedge; it's a calculated geostrategic move aimed at gradually eroding the U.S. dollar's hegemonic position in the global financial system. - With the continued risk of trade friction and financial sanctions under incumbent U.S. President Trump, gold offers a tangible hedge against the potential weaponization of the dollar system, enhancing national financial resilience. - Long-term, as China's economic influence grows and the RMB internationalization progresses, increasing gold reserves lays the groundwork for a potential multipolar reserve currency system, reducing reliance on a single global currency. What are the profound implications of soaring gold prices and the challenge to the US dollar for global asset allocation? - A sustained gold bull market and the potential erosion of the dollar's reserve status will prompt global investors and institutions to re-evaluate sovereign credit and currency risks within their portfolios. - Investors may further pivot towards physical assets and non-sovereign currency assets to hedge against geopolitical uncertainties and inflationary pressures. This benefits not only gold but potentially other scarce commodities and alternative investments. - Economies heavily reliant on dollar financing or holding substantial dollar assets will see their risk exposure increase. Concurrently, nations actively pursuing de-dollarization may gain greater financial sovereignty. Does the sharp sell-off in gold miners' stocks signal the end of the gold rally? - The severe short-term correction in gold miners' stock prices is primarily due to a technical correction in gold prices after being overbought, rather than a fundamental reversal. A 5% drop from highs reflects quick profit-taking but does not breach critical support levels. - Structurally, as long as the underlying factors driving China and other central banks and investors to acquire gold (e.g., geopolitical tensions, macro uncertainty, de-dollarization trends) persist, the gold bull market is unlikely to end easily. - Investors should view short-term volatility in mining stocks as potential buying opportunities rather than a signal of a trend change, especially given analyst forecasts of long-term gold targets reaching $5,000 to $10,000.