Declined US Dollar Index Boosts China’s Gold Holdings

China boosted its foreign exchange reserves in the yellow metal. The country’s gold holdings rose by 2.1% to reach $3.28 trillion in the previous month. As stated by SAFE in its Sunday data release, it is the 2-year high that exceeded analysts’ expectations alongside a Reuters poll of experts predicting China’s gold reserves to be $3.17 trillion.

According to the SAFE release, the rise was triggered by the US Dollar index decline. USD fell by 2%. Another reason was the rising price of global financial assets that occurred back in December. Both resulted in different market sentiments, major economies’ expectations, and monetary policies applied by leading central banks.

With a weakening greenback in the foreground, the yuan made a slight rally to rise by 0.52% against the main reserve currency. China appears to have boosted its gold holdings for the 14th month in a row.

At the moment, the country holds 71.87 million troy ounces, which is 0.19 million more compared to China’s holdings in November. The total value of all foreign exchange reserves increased to reach $148.23 billion.

What’s more, the government still takes steps to weaken the dollar. Following its official announcement on December 29, China’s foreign exchange platform is planning to apply better-reflected trading patterns by adjusting the weightings of two key yuan index baskets this year. The same will happen to the euro.

It should be noted that CFETS is overseen by the central bank and is aimed at enhancing the yuan currency basket index representativeness.

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