It's no secret that Russia and China both share a growing appetite for gold. But how excited are they about U.S. Treasuries, the most boring but "safe" investment which basically translates into..."we believe that everything will basically stay the same"?
From the looks of it, Moscow and Beijing no longer think T-bonds are a safe bet or in their national interests.
As Bloomberg's Zhuo Zhang explains, Russia and China are selling their treasuries and buying up all the gold they can get their hands on:
As they sharply increase their gold reserves, China and Russia are selling off their U.S. Treasuries, with their hunger for the metal coming amid a strict diet excluding dollars. Gold is appealing to these countries because it shields them from the U.S. government's ability to control the value of their holdings. Gold is a country-less currency. A continuing trend of reserve buildup and Treasury sales might weaken the dollar and pressure gold prices higher.
China and Russia have officially added almost 50 million ounces of gold to their central banks while selling off more than $267 billion of Treasuries.
Yes, for those who missed it: "Gold is appealing to these countries because it shields them from the U.S. government's ability to control the value of their holdings. Gold is a country-less currency. A continuing trend of reserve buildup and Treasury sales might weaken the dollar and pressure gold prices higher."
We imagine this is also part of an effort to increase confidence in their own currencies, which are increasingly being used for bilateral trade. A year ago, Moscow became China's top crude exporter after it agreed to accept Chinese yuan for its oil.
Moscow realizes that despite the risks, a policy of gradual de-dollarization is crucial in order to shield itself from western economic warfare. China of course is in the same boat. These countries aren't just dumping the dollar, they're also positioning their own currencies for trade throughout Eurasia.
And the fact that growing demand for gold could lead to a weakened dollar is definitely an extra "F-you" to Washington.
And hey: maybe a weak dollar would allow American manufacturing to blossom, returning the U.S. to the happy days when it actually had good, not-Walmart jobs. Who knows?