Monday, October 22, 2018

Nations all around the world shoring up their currencies and central bank reserves by dumping dollars and accumulating gold

It is unfair to say that India is new to the game of gold accumulation, but what is different this time is that a large amount of buying is coming from the country's own central bank.

In a sudden sea-change from the recent past where the Reserve Bank of India (RBI) was trying to dissuade the use of gold in their economy in exchange for fiat currency, a new report is out showing that the central bank is now actually dumping its dollar reserves (Treasuries) in order to help shore up the Rupee while also accumulating gold as a replacement reserve asset.

The Reserve Bank of India (RBI) is cutting down on its holding of US Treasuries, joining a number of countries which have been dumping US debt to bolster domestic economies. 
The country’s share of US sovereign debt saw a gradual decline from $157 billion in March to $140 billion as of the end of August, according to the latest US Treasury report. RBI needed US dollars to sell in the market to stop the steep slide of its currency, the rupee. The bank has sold foreign currencies worth $18.6 billion in the spot market since April to rein the value of the rupee. 
Foreign portfolio investors (FPI) have pulled out more than $10 billion of their investments in the Indian markets since April. That has resulted in rupee losing more than 10 percent in value against the dollar. 
“If FPI flows do not revive amid an US-China trade war, the RBI may need to sell another $10-15 billion by March,” said Bank of America Merrill Lynch. According to its report, there could be more pressure on India's central bank to sell US bond holdings in order to meet the dollar demand. 
Experts say the RBI may be using part of the sales proceeds of the US bonds to buy gold. Statistics showed that the bank’s gold reserves grew to 18.64 million troy ounces in August from 18.01 million troy ounces in March 2018. – Russia Today
However India is not the only country to be rushing to accumulate gold in the global de-dollarization movement.  And with the U.S. right now in negotiations with SWIFT to turn the reserve currency into a full on economic weapon, we can expect to see even more nations besides the emerging market ones to follow this trend of dollar divestiture.
Countries around the world are turning to gold as uncertainty about the global economy rises. Trade wars and the aggressive policies of the United States are making emerging economies withdraw from dollar assets, analysts told RT. 
“The aggressive US policy in recent years has forced some countries to look for an alternative to the dollar and replenish their gold reserves. Worries about the future growth of global economy are an additional incentive for purchases. Many question Donald Trump’s protectionism.”  
There are signs that the global financial system dominated by the US dollar could collapse, says financial institute FinIst analyst Denis Lisitsyn. These signs include the uncontrolled emission of money from different countries, an increase in US interest rates, trade wars, the rapid rise in energy prices, geopolitical tensions in Syria, Iraq, the war in Yemen, he says. 
“Many countries are buying gold in advance. They understand that paper money is constantly eaten up by inflation, equities will sharply fall in price in case of a crisis, and foreign deposits can be arrested, confiscated or frozen,” he said. 
Hungary, Poland, Russia, China, India, Turkey, Saudi Arabia are all hoarding gold, notes Vladimir Rozhankovsky, LIFA, expert at the International Financial Center. - RT


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