Asia's central banks diversify and buy gold in the "new normal" as they reduce their reliance on the US dollars
Asia's central banks diversify and buy gold in the "new normal" as they reduce their reliance on the US dollars
Due to predictions that the US Federal Reserve would decrease interest rates next year following a period of hikes, gold prices are getting close to all-time highs.
Following the US seizure of Russia's foreign exchange reserves last year, central banks have been buying heavily due to concerns that their assets may be exposed.
Asian consumers have long been captivated by the allure of gold, and now, as the region becomes less dependent on the US dollar due to de-dollarization, its central banks are also buying up the metal.
Central banks have been purchasing heavily due to concerns that their assets may be susceptible after the US seized Russia's US$650 billion foreign exchange reserves in February of last year, according to a Sprott Asset Management study released this month. It indicated a "strong desire to diversify away from the US dollar and US dollar assets," according to the report. As a result, the price of gold has been supported, rising to almost all-time highs of more over US$2,000 per troy ounce. This has been fueled by anticipation that the US Federal Reserve will decrease interest rates next year following a series of raises over the previous 18 months.
According to Ross Norman, CEO of the London-based precious metals website Metals Daily, "vulnerable governments have been encouraged to seek reserve assets not directly at risk from exclusions" as a result of the sanctions imposed by the US administration on a number of sovereign entities, or what some have referred to as the weaponization of the dollar."
Over the past year, the term "de-dollarization," which seeks to remove the US dollar's hegemony, has been more popular. Anwar Ibrahim, the prime minister of Malaysia, demanded in April a new currency that the Brics countries—Brazil, Russia, India, China, and South Africa—could use to settle international trade agreements.
Although China has been attempting more with the yuan, people do not trust it as much as they do the US dollar. Since gold is regarded as a store of value during unstable times like the Israel-Gaza War and the conflict in Ukraine, it has become a viable substitute.
The precious metal has an edge because it can be bought and sold over the counter anywhere in the world, whereas the US dollar may need to be converted by service agents in countries outside the United States.
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