China is now allowing domestic and international banks to import large amounts of gold into the country in an effort to support prices
Frank Holmes | April 29, 2021 | SmallCapPower: Since 2010, central banks have been net buyers of the yellow metal as they seek to mitigate risk and hedge against their very own monetary decisions.
(The following is an article originally published on usfunds.com on April 26, 2021)
That being so, 2021 is off to a rough start in terms of official purchases. Central banks were net sellers in January and February for the first time in over a decade, unloading some 16.7 metric tons, according to the World Gold Council (WGC). This has contributed to gold’s poor performance so far this year, falling 6.5% through last Friday. Turkey was the biggest seller, dumping 11.7 tons in February alone.
Not all central banks were sellers. India bought 11.2 tons in February, Uzbekistan 7.2 tons. Serbia has been accumulating gold every month since February 2019.
The Magyar Nemzeti Bank (MNB), the central bank of Hungary, announced earlier this month that it tripled its holdings from 31.5 metric tons to 94.5 tons, putting Hungary first among Central and Eastern European (CEE) countries in terms of gold reserves per capita.
“As it carries no credit or counterparty risks, gold facilitates reinforming trust in a country in all economic environments, which still renders it one of the most crucial reserve assets worldwide,” the bank wrote in a press release.
China to Allow Large Gold Imports
When it comes to gold policy, though, the big news is that China is now allowing domestic and international banks to import large amounts of the precious metal into the country in an effort to support prices. According to reporting by Reuters, an estimated 150 metric tons worth $8.5 billion will be shipped into China as soon as this month or next.
For the sake of comparison, in 2019 China imported around 75 tons per month, or $3.5 billion.
The country is already the world’s largest importer of the metal, so this is an important development that I believe could help the gold price stay buoyant.
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