BEIJING – China is increasing its gold reserves, leading along with Russia in acquiring this precious metal in 2018 and the first half of 2019.
Tanzania, the 4th largest gold producer on the African continent after Ghana, Mali and South Africa, has awarded contracts to two Chinese companies to build a gold smelter and two refineries in the country, said Doto Biteko, the country’s minister of minerals.
According to the minister, the decision was taken after a thorough assessment of the companies’ financial capacity and history.
The next step will be to authorize the construction of large gold mines to be delivered to both companies. Each will invest about $100 million, the minister said. The country hopes to boost domestic gold production and state revenues from its sale by attracting foreign companies.
The Tanzanian government has taken steps to increase profits from natural wealth, although a significant portion of the gold continues to illegally leave the country.
In 2018, central banks in the various countries bought more gold than in any other year since 1971. The trend continues in 2019. China became the second largest buyer of precious metals in 2018 and 2019, after Russia.
In recent years, Russia has been accumulating its gold reserves amid its strategy of dollarization, and this strategy has worked well in light of rising precious metal prices, writes the German newspaper Handelsblatt.
According to the issue, low interest rate policies as well as global crises lead to rising gold prices.
In recent years, the Central Bank of Russia has been actively accumulating its gold reserves to reduce the US dollar’s share of its foreign reserves. According to the World Gold Council (WGC), since 2015 the Russian Central Bank has been buying more than 200 tons of gold annually.
The newspaper underlines that, thanks to rising gold prices, the value of Russian 2,000-ton gold reserves has increased by one billion dollars.
This week the price of gold reached $1,430 per ounce – the highest price in six years. Since early June the price of precious metal has increased by 11%. According to Handelsblatt, this increase was prompted by statements by the European Central Bank and the Fed about their plans to adopt a more flexible monetary policy.
This trend is accompanied by the weakening of the US dollar, which has depreciated against a number of other currencies amid expectations of falling interest rates.
Both phenomena are intertwined: as the price of gold is denominated in dollars, when the US currency falls, gold becomes cheaper for those who buy it in other currencies and therefore demand may increase.
Experts underline that the price of gold will continue to rise in the near future. In addition to the increased demand from international players, amid the instability and unpredictability of the financial and geopolitical situation, one more factor that will contribute to the increase in the price of the precise metal is the beginning of the fall in its production in the coming years, reaching in 2022 the level of the beginning of the last century.