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News Flash: China and Russia Continue to Add to Gold Reserves

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Last week we reported that central banks were jettisoning US debt and buying gold.

Figures released by the IMF this week indicate central bank gold hoarding has not abated.

Russia and China both extended their prolonged buying spree in April. Russia added 16.2 tons to its reserves. China increased its holdings by 10.9 tons. Another major buyer was Kazakhstan. The former Soviet Republic raised its tonnage by 3.2 tons. Turkey added 2.6 tons to its stash.

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Not only is the Chinese central bank continuing to expand its gold reserves, the country is steadily becoming a major player in the world gold market. Earlier this month, the largest Chinese bank bought one of the biggest gold vaults in Europe, as it expands its influence on global gold trade.

Central banks accounted for about 14% of the world’s gold demand last year.

As central banks continue to buy gold, many are dumping US debt. So far in 2016, global central banks have jettisoned $123 billion in US debt. Last year, they sold off $226 billion. According to the Treasury Department, central banks are selling US Treasuries at a pace not seen since at least 1978.

Analysts say a desire to diversify away from the US dollar serves as a primary driver for central bank gold purchases. Gold is effective hedge against future dollar weakness, indicating there isn’t a lot of faith in the dollar long-term.

One central bank is selling off its gold reserves – Venezuela’s. It sold 34.2 tons in February and another 8.5 in March, according to Reuters. The socialist government is trying to cope with a complete economic meltdown.

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