Why Gold is Flowing from West to East?
In recent years, there has been a noticeable shift in the global gold market, with demand and market influence moving from the West to the East. This trend is driven by various factors, including geopolitical uncertainty, central bank purchases, consumer demand in China and India, and the militarisation of money. Eastern nations are also establishing their own gold trading infrastructure and institutions to reduce reliance on the Western financial system. Understanding this shift is crucial for investors and policymakers alike.
Central Bank Gold Demand
A significant driver of this shift is the surge in gold demand from central banks, particularly in emerging and developing markets such as China, India, and Turkey. China’s central bank, for example, has extended its monthly gold purchases for 17 consecutive months, setting a new record. This increase in demand is fueled by heightened geopolitical uncertainty and the perception of gold as a safe-haven asset during periods of tension and policy ambiguity.
Consumer Demand in China and India
Robust consumer demand for gold bars and coins is another key factor, with China and India playing significant roles. Improved household finances, challenges in domestic equity and property markets, and currency instability contribute to this trend. In 2000, China and India represented only 29% of global consumer demand for gold. By 2022, their share had nearly doubled to 48.4%.
Militarisation of Money and Sanctions
The militarisation of money, highlighted by the freesing of Russian central bank reserves and the exclusion of Russian banks from SWIFT, has also driven this shift. Emerging markets are increasingly concerned about potential economic sanctions from the US and Europe, leading them to seek alternatives to the dollar and euro. Owning gold provides these nations with a measure of independence from the Western financial system.
Eastern Gold Trading Infrastructure
Eastern nations, particularly China, Russia, and the UAE, are enhancing their gold trading infrastructure and establishing new markets. Efforts include collaboration between the Shanghai Gold Exchange and Russia’s National Financial Association, increased representation in global institutions like the LBMA and World Gold Council, and the establishment of new exchanges and pricing mechanisms like the Moscow World Standard. These developments are reducing the East’s reliance on Western-dominated financial systems.
Shift of Wealth and Importance of Gold
This shift of wealth from the West to the East underscores the lack of a ‘Plan B’ for the West in the event of a monetary crisis. The video encourages individuals to be their own central bank by owning gold and silver. As the East steadily builds a fortress against the Western-dominated financial system through its gold accumulation and infrastructure development, owning gold becomes increasingly important as a hedge against potential monetary crises.
Understanding these dynamics highlights the importance of gold in today’s global economy and suggests that Western investors should consider the strategic benefits of holding gold as part of their portfolios.
Watch more here: https://www.youtube.com/watch?v=t7n4-v3NZjU
Article and video courtesy of Dave Russell from Gold Core.
