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China's splurge on gold adds intriguing twist to trade war

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24.06.2019

There are some interesting aspects to the surge in the gold price to its highest level in nearly six years, not the least of which is that China has been buying gold while selling US Treasury bonds.

In fact it’s not just China. Central banks generally have been diversifying their reserves away from US Treasuries. According to the World Gold Council they bought 145.5 tonnes of gold in the first quarter of this year, the most since 2013.

The gold price has soared as trade tensions rise and global growth falters.Credit:Nine

In the past week alone the price shot up almost 10 per cent, to $US1408.80 an ounce, with the depreciation of the Australian dollar pushing the price in local currency terms to record levels above $2000 an ounce.

The movement in the past week points to one of the factors driving the price. The 9.8 per cent spike appears to have been a direct response to last week’s US Federal Reserve Board’s meeting, which signalled likely cuts to US official interest rates later this year.

With the European Central Bank also talking about resorting to more stimulus to try to reflate a spluttering eurozone economy, and China’s economy slowing as the Trump administration’s trade war bites, the prospect of lower growth and even lower rates in an already low-rate global environment are........

© Brisbane Times