West Street Observation. The central bank’s increase in gold holdings on dips provides inspiration to ordinary people
The price of gold has fallen, and central banks are increasing their accumulation of gold. The latest foreign reserve data disclosed recently show that the central bank increased its gold holdings by 480,000 ounces in June, setting a record for monthly gold purchases since November 2024. Interestingly, the price of gold fell sharply throughout June, with a monthly decline of 11.7%, and market sentiment was low. This round of decline in gold prices is not unrelated to the sudden increase in expectations for the Federal Reserve to raise interest rates. After that, the U.S. dollar and U.S. bond yields rose simultaneously, and gold, a non-interest-bearing asset, suffered a financial sell-off.
The price of gold has fallen, and central banks are increasing their accumulation of gold. The latest foreign reserve data disclosed recently show that the central bank increased its gold holdings by 480,000 ounces in June, setting a record for monthly gold purchases since November 2024. Interestingly, the price of gold fell sharply throughout June, with a monthly decline of 11.7%, and market sentiment was low. This round of decline in gold prices is not unrelated to the sudden increase in expectations for the Federal Reserve to raise interest rates. After that, the U.S. dollar and U.S. bond yields rose simultaneously, and gold, a non-interest-bearing asset, suffered a financial sell-off. The price of gold continued to rise sharply in the early stage, a large number of profit-making orders were cashed in, funds were diverted from the technology track, and multiple negative factors were concentrated, which contributed to this rapid correction. While ordinary investors are waiting in panic, the central bank bucked the trend and aggressively increased its positions. This seemingly "unconventional" operation is worth pondering. In fact, looking back at its operations over the past 20 months, the central bank has always had its own logic and rhythm. If the price of gold rises, you will suspend buying, and if the price of gold falls, you will steadily increase your position. In March this year, the holdings were increased to 160,000 ounces, 260,000 ounces in April, 320,000 ounces in May, and directly increased to 480,000 ounces in June. The lower the price, the more aggressive the buying. The central bank's gold purchase against the trend has also brought inspiration to ordinary people. Instead of speculating about the rise and fall of gold prices every day, it is better to calm down and judge the cost performance of assets. The latter is far easier to implement than predicting the market. What is more important is to find the correct positioning before talking about buying. Many people regard gold as a short-term speculative product and are bent on buying low and selling high. Once the gold price pulls back, the mentality immediately loses control. In the central bank's asset list, gold is the ballast stone of the entire foreign exchange reserves. What is pursued is not short-term gains, but long-term security. There is a risk of default on bonds, and sovereign currencies will continue to depreciate. Only gold is not subject to credit constraints. At present, ordinary people also need to clarify their goals when allocating gold. If it is short-term speculation, you will naturally have to endure price fluctuations. If it is used to balance the asset portfolio of deposits, stocks, and funds, then the fall in gold prices is a good thing, and it can increase the family's safe assets at a low cost. That is to say, we need to fill the configuration gap and then worry about market fluctuations. The central bank continues to increase its holdings of gold, with the core of making up for shortcomings in reserves. At present, gold accounts for only 8.8% of my country's foreign exchange reserves, which is far lower than the global average of 27%. There is still a lot of room for safe asset reserves. The same principle applies to family financial management. If there is no gold allocated in the account, the first task is not to predict the gold price trend, but to supplement this asset "insurance" first. The current gold bull market will start in 2022, and the trigger is the continued weakening of US dollar credit. In order to reduce dependence on U.S. dollar assets, major central banks around the world have launched a wave of gold purchases. my country's central bank has steadily increased its holdings over the long term, continuously increasing the proportion of gold in foreign reserves. Of course, the over-issuance of the U.S. dollar and long-term inflation have also continued to provide support for gold prices. The trend of gold prices in the second half of the year is full of uncertainty, and no one can accurately predict it. But what is certain is that the ability of a family to resist risks will be completely different if it holds a portion of hard currency that is separated from the credit system and if all assets are tied to deposits, stock markets, and bonds. In the face of market fluctuations, learning from the central bank's determination is far better at safeguarding one's wealth than frequently betting on the market. (