Central banks added more gold to their reserves last month, continuing a trend that stretches back into last year.
Globally, central banks added another 31 net tons of gold in March, according to the latest report by the World Gold Council based on International Monetary Fund data. That brings the total increase in central bank gold holdings this year to 145.5 tons.
The Reserve Bank of India has jumped on the gold bandwagon.
Since December 2017, the Indian central bank has added 50.4 tons of gold to its reserves.
India bought 8.2 tons of gold in January and February of this year and analysts project that pace to pick up. Economist Howie Lee told Bloomberg he expects the RSB to add as much as 1.5 million ounces of gold to its reserves in 2019. That comes to about 46.7 tons.
This has become a monthly feature here a SchiffGold News – Russia buys more gold.
The Central Bank of Russia added another 18.7 tons of gold to its stash in March according to a press release last week. This boosts the country’s gold reserves to 2, 167.9 tons or 69,700,000 ounces. Gold now makes up about 18% of the Russian central bank’s reserves.
Russia is considering eliminating its value-added tax (VAT) on gold purchases. According to a Russian paper, this could increase gold demand in the country by 50 to 100 tons per year.
Russia currently charges a 20% tax on all gold bar purchases, and investors do not get the tax back when they sell their gold.
Countries like Russia, China and Iran have been looking for ways to limit their dependence on the US dollar for years. More recently, we’ve even seen American allies looking to de-dollarize the world. Last month, German foreign minister Heiko Maas called for the creation of a new payments system independent of the United States.
It’s gotten to the point people are beginning to discuss a “post-dollar” world.
RT’s Max Keiser recently talked about the issue of the US weaponizing its currency with the head of research for GoldMoney.com, Alasdair Macleod.
At the moment we are at the turning point towards a gold bull market. The macroeconomic and geopolitical factors support this tendency. One of the things we notice across the bull markets of the past 50 years is that, even in its weakest period of increase, gold gained more than 70%. This record supports our optimism for future developments. From our point of view, stronger inflation tendencies or the abandoning of the rate-hike cycle in the US could trigger an increase in momentum of the gold price. We regard these scenarios as realistic.”
The United States uses the dollar as a weapon to keep other countries in line, but it’s becoming a less and less effective strategy as other nations find ways to minimize their dependence on the greenback.
Pakistan serves as the latest example. Just one day after Pres. Trump blasted the country on Twitter, Pakistan’s central bank announced it was abandoning the dollar and replacing it with the yuan for bilateral trade with China. This is yet another sign of global de-dollarization.
Earlier this month, we reported a move by China that could foreshadow the end of the US dollar as the world reserve currency. The Chinese announced the launch of a gold-backed, yuan-denominated oil futures contract. The move potentially creates a way for oil exporters to circumvent US dollar denominated benchmarks by trading in yuan. The contracts will be priced in yuan, but convertible to gold.
More broadly speaking, Russia and China seem to be setting the stage to set up an alternative the international US dollar system. Many analysts believe the two countries are buying gold specifically to minimize their dependence on the US dollar. Russia and China are also reportedly moving closer to developing a broader gold-based trading system.
In an article originally published on the Mises Wire, Ronald-Peter Stöferle digs deeper into the possibility of “de-dollarization.”
The world is looking for alternatives to the dollar — and finds them more and more often.”