The world is currently going through a major geopolitical crisis. On one hand, America and Israel have opened a front against Iran, while on the other hand, China is peacefully pursuing its own ‘Golden Trick’. Amidst this sound of war and global uncertainty, China is continuously buying gold in large quantities. Gold prices have crossed the level of $ 5,000 per ounce in the international market. In such a situation, it is important to understand why the world’s second largest economy is increasing its gold reserves in such a hurry and what effect it is going to have on the global economy.
What is Dragon’s plan?
China’s central bank ‘People’s Bank of China’ (PBOC) has continued its rapid purchasing of gold in the month of February also. This is the 16th consecutive month when China has increased gold in its treasury. According to the latest data, PBOC purchased 30,000 troy ounces of gold in February, after which its total gold reserves have increased to 74.22 million ounces. In January this figure was 74.19 million ounces.
Experts believe that this step of China is not just an investment, but it is a well-thought-out strategic move. Since the end of 2024, China has been working towards reducing its dependence on the dollar (de-dollarization). To protect its economy from foreign exchange fluctuations, it is placing its trust in gold instead of the US dollar.
Gold price crossed 5000 dollars
The shine of gold is continuously increasing in the international market. There is an atmosphere of fear among investors after the joint military action by America and Israel against Iran. Whenever global security is at stake, investors move away from risky options like the stock market and move towards safe-havens like gold.
This is the reason why ‘Spot Gold’ has crossed $ 5,171 per ounce with a huge jump of 1.85%. The inclination of common investors and institutions is also exactly like that of central banks. This can be gauged from the fact that in February, there was a huge investment of $4.5 billion in US-listed gold ETFs.
There is panic in other central banks of the world
While on one hand China and East Asian countries are busy accumulating gold, on the other hand the strategy of the central banks of the rest of the world seems to be completely divided. Poland’s central bank, which until recently was the world’s most aggressive buyer, is now planning to sell part of its reserves to meet its domestic defense needs.
On the other hand, countries like Russia and Venezuela, facing stringent sanctions and economic isolation, are selling their gold to raise cash. World Gold Council analyst Marisa Salim says that due to huge fluctuations in prices, some central banks may have stopped purchasing, but geopolitical risks are not likely to reduce. Therefore, the demand for gold will remain in the market.
Will prices touch the sky now?
These global developments have a direct impact on the common man’s pocket and his investments. JP Morgan analysts estimate that by the end of 2026 the average price of gold may be around $ 5,055 per ounce. This simply means that due to the continuous demand from central banks, there is little hope of any major fall in gold prices. There may be short-term instability in the market due to changes in US monetary policy, but in the long run, gold will remain a strong and safe option.