One of the gnomes speaketh and what they are saying is pretty important. If central banks, who know as much as is needed to be known about the factors going into the valuation of credits and the risks of holding various assets, decide they want less American paper we have crossed not the Rubicon but the Styx.
From Investing.com May 15:
The record recovery of gold is boosted by Central Banks, which are increasing their exposure by moving out of positions in US Treasury securities. This was pointed out in a note to the market yesterday by the Swiss group Julius Baer, which projects that, nonetheless, prices are expected to remain at still elevated levels, but are not likely to rise further. Gold prices continue to advance this Wednesday, the 15th, with futures up 1.36% at $2,392.05 per ounce.
"Instead of a major surge in demand, the record recovery of gold can be explained by an increase in buyers' willingness to pay, spiced with some speculation," says Carsten Menke, head of Julius Baer's next-generation research.
Menke evaluates that monetary authorities, including the People's Bank of China, would have greater willingness to pay than Western investors, with motivations considered more political than economic, but the shift in direction would be "much less widespread than thought."
Julius Baer believes that the Chinese central bank has been reducing its allocation in American Treasury bonds aiming for less dependence on the dollar, with less willingness to be subject to sanctions. Thus, central bank purchases would support prices at structurally high levels, "but not necessarily push them even higher," according to the specialist's understanding....
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Now the buying emanating from China has been apparent for a while, since around about the time the West froze Russia's foreign exchange assets so this is nothing new but it is striking when one of the 'name' private banks speaks so casually about what is a major change in perception.
