While Citi analysts grabbed headlines Monday by suggesting that gold could fall below $1,000 if the U.S. dollar index continues to strengthen, Americas biggest rivals continue to take steps toward a world in which the greenback is no longer top dog.
CNN reported that in March, China and Russia (in addition to Brazil) sold off U.S. Treasury bonds at a record pace, with each shedding at least $1 billion worth of government debt paper. So far this year, the global bank debt dump has reached $123 billion, it reported. It’s the fastest pace for a U.S. debt selloff by global central banks since at least 1978.
Allies targeting U.S. petrodollar: What are they buying? China, when its not warning the U.S. to stop meddling in the South China Sea, just bought a record amount of oil from Russia in April, boosting imports by almost 53% to 4.81 million tons. Russia has now topped Saudi Arabia as Beijings biggest source of crude.
And Russia has been besting China as the largest purchaser of gold, with Moscows central bank buying 500,000 ounces (or 15.6 metric tons) in April, according to analyst Lawrie Williams.
The average month-on-month increase this year has been 500,000 ounces, suggesting that the bank may be planning to increase reserves by this amount on a regular monthly basis throughout the year, Williams speculated, putting Russia on course to amass 187 tons this year.
These moves on the bond, oil, and gold fronts continue to drive home the point that Russia and China are moving to establish new alternatives to the U.S. dollar and petrodollar hegemony.
Gold to shine this year, CEO says: No wonder some of Russias top miners are so bullish on gold. I personally expected the metal to trade sideways this year, so this midyear price was a pleasant surprise, Polymetal CEO Vitaly Nesis told Bloomberg last week. Asked whether golds movement is sustainable, he said, I would say short-term yes as long as there is significant political uncertainty. Over the remainder of the year, I think gold will continue to shine.
And commenting on the increase in merger activity in the mining sector, Petropavlovsk CEO and cofounder Pavel Maslovskiy said that the market is starting to welcome mergers. While gold prices were low that was on the backburner, but its coming to the fore again now.
According to Maslovskiy, gold could reach a record of $2,000 in the next few years, Bloomberg reported in relaying his forecast.
Gold and the dollar and inextricably linked, and if the dollar loses stature to competitors such as Russia and China, then bullion priced in the greenback could become prohibitively expensive to those seeking to buy the metal at the last minute. The early bird gets the worm.