China buys gold to abandon US dollar

Recently, China has increased imports of gold. Thus, the government hoped to diversify the assets of the People's Bank of China (PBOC), as well as to reduce dependence on the U.S. dollar.

The sudden increase in gold purchases by China occurred in November 2022. According to the World Gold Council, an additional 32 tons of gold were bought in November above the usual monthly purchases. Another 30 tons followed in December. As a result of those measures, gold prices have been increased in recent months.

China is about to reduce its dependence on the dollar, as its relations with the U.S. are getting to deteriorate after a bunch of restrictions on Chinese semiconductor companies.

Besides that, today the Chinese central bank's reserves are mostly filled with dollars, so it may fall under sanctions at any time.

This scenario reinforced the urgent need to diversify the NBK's reserves as quickly as possible. In this case, the yellow precious metal must be a good alternative for conversion into currency.

The precious metal was also supported by the weakening U.S. dollar.