One week ago, in his latest – and arguably most important note of 2022 – Credit Suisse repo guru Zoltan Pozsar discussed the two key anchors of the Bretton Woods III regime he believes will replace the world in which the dollar is a reserve currency: i) commodity encumbrance (i.e., rehypothecation) and ii) the Petroyuan, and – intertwined inbetween them – China’s aggressive accumulation of gold.
This was hardly a coincidence: just a few weeks earlier, we learned that for the first time in years, China had bought 32 tons of gold in the month of November, its first official purchase since September 2918 (even as it had unofficially been buying up much more gold over the past three years). We added the following:
Back in March we pointed out that according to JPMorgan, “while the world is short on commodities, China is not given they have started stockpiling commodities since 2019 and currently hold 80% of global copper inventories, 70% of corn, 51% of wheat, 46% of soybeans, 70% of crude oil, and over 20% of global aluminum inventories.” And now, China is aggressively stockpiling every ounce of physical gold it can get its hands on. Almost as if China is actively preparing for war.
And while our conclusion appears spot on, especially in light of Zoltan’s latest just published note which we will discuss shortly, what is just as notable is that for the second month in a row, China reported an increase in its gold reserves topping up holdings again after its first reported purchase in more than three years.
The People’s Bank of China raised its holdings by 30 tons in December, according to data on its website on Saturday. This follows November’s addition of 32 tons, which was the country’s first reported inflow since September 2019. Prior to that, the last previous increase was in October 2016. The recent official purchases bring the nation’s holdings to a total of 2,010 tons….