《电讯报》哈，又是一阵嘘嘘：

中国的黄金购买热潮可能成为压垮美元的最后一根稻草

The Telegraph

Some commentators have spent decades predicting the imminent demise of the US dollar’s special status as the world’s international reserve currency.

Eventually, they will be right, and that day may be drawing much closer. As usual, China could hold the key.

Historically, the dollar has been the reserve currency of choice because of some clear advantages over potential alternatives.

For a start, the US has a strong institutional framework, with well-established rules and many constitutional checks and balances. This makes it a relatively predictable and safe place to invest.

Moreover, the sheer size of the US economy and the depth of its financial markets have created a large pool of relatively liquid assets, ideally suited as a global store of value.

Indeed, many countries around the world still try to keep their own currencies stable against the US dollar, either with fixed pegs or some sort of managed exchange rate. The so-called dollar zone is therefore even bigger than the US itself.

It helps too that so much of global trade still takes place in dollars. The prices of key commodities are priced in the US currency, including oil, metals and grains, and the dollar is welcomed as a means of payment almost anywhere in the world.

And yet, cracks are starting to appear.

One that has been growing for some time is the gradual diversification by central banks, which have been reducing the share of foreign currency reserves they hold in US assets (mainly Treasury bonds).

IMF data suggest that this proportion fell to a 25-year low of 59pc at the end of 2020, compared to 71pc in 1999.

The downward trend has since paused but recent data has been flattered by the strength of the dollar, as the US economy has outperformed and the Fed has kept interest rates high.

In turn, this has depressed the dollar value of reserves held in other currencies. Beneath the surface, though, the diversification out of US assets has continued.

As part of this trend, central banks have been adding to their holdings of gold. The People’s Bank of China (PBOC) has been at the forefront here, with official data showing that March was the 17th successive month of net purchases. Industry insiders suspect there has been a large amount of covert buying by the authorities too.

This is not necessarily anything sinister. It could simply be that the PBOC is a shrewd investor, capitalising on gold’s traditional appeal as a safe haven, a hedge against inflation and a means to diversify risk.

The Chinese authorities may just have been playing a rising market extremely well.

It is worth noting too that private Chinese citizens have also been enthusiastic buyers of gold as a way to get around the country’s strict capital controls, and at a time when domestic equity and property markets have been performing poorly.

Nor is China alone. According to the latest official data, Turkey actually bought more gold in the first three months of this year (about 30 metric tonnes) than China (27 tonnes), with India (18.5 tonnes) not that far behind.

But there may still be a lot more to this story. There are clear strategic advantages to China diversifying out of US assets, largely given rising geopolitical tensions over Taiwan and Beijing’s growing assertiveness in the South China Sea.

As Matthew Henderson has argued in The Telegraph, the switch to gold has helped China build up a war chest safe from US sanctions. Russia has already taken this step, and other states may follow.

China’s stockpiling of gold could also be a warning that the country could use its large holdings of US government bonds as a weapon.

Any threat to dump these bonds could drive up the cost of borrowing, not just in the US but also in the rest of the Western world.

On top of this, the US may be its own worst enemy. The recent strength of the economy and markets partly reflects a massive fiscal stimulus begun under President Trump and continued under President Biden.

This is something that only a country issuing in the world’s dominant reserve currency could get away with, but the patience of international investors cannot be taken for granted.

The traditional confidence in US institutions and policymaking is at risk, too. There are major question marks over both leading candidates in this November’s presidential elections. At least one (take your pick) is a global laughing stock.

Either looks set to lurch further towards a protectionist trade war, raising tensions further with China.

This could play out in many different ways. It is possible that the dominance of the US dollar continues to be eroded but this simply takes the form of a gradual rebalancing towards other Western currencies, including the euro, as well as Australian and Canadian dollars.

The Japanese yen now looks remarkably cheap, with bond yields finally starting to rise to levels that might attract international buyers. Even sterling still accounts for a larger share of global foreign currency reserves (about 5pc ) than China’s renminbi (less than 3pc). The pool of investable assets in China itself remains small.

The scope to evade sanctions by diversifying out of the dollar is also limited by the likelihood that allies of the US would coordinate their response to a new threat from China, in the same way they did to Russia’s invasion of Ukraine.

The gold market is simply not large enough to absorb all of the capital that China has parked overseas.

But in the worst case, a sharp fall in the value of the dollar could have substantial negative effects elsewhere in the West, including spillovers into higher interest rates in the UK and the rest of Europe.

Investors therefore need to stay alert to geopolitical risks – and keep watching the signals from Beijing.

China’s gold-buying spree could be the straw that breaks the dollar’s back (msn.com)