Escalated China-U.S. Trade War Forces China To Restrict Gold Imports
China has been making adjustments aimed at shielding its economy from the negative impact of its ongoing trade war with the U.S. The latest of those adjustments is the restriction of gold imports in an attempt to prevent US dollar outflows from boosting the strength of the Yuan.
China's economy is currently experiencing a slowdown, mainly due to the prolonged trade war, which has affected the trade situation. The country's decision to restrict gold imports aims to reduce the outflow of its US dollar reserves. This move is part of the company's plan to maintain a balance in its foreign reserves, thus helping to shield the Chinese Yuan from the impact of the country's slowing economy.
Gold is currently trading at a strong price point against the US dollar. Its performance on Wednesday demonstrated an overall bullish trend with the price surging from as low as $1.494.58 to the day’s high at $1,524.115. Gold traded at $1,523.800 at the time of this press.
The metal is currently attractive as a store of wealth, especially for investors that want to shield their money from the corrosive effect of the trade war and the slowing global economy. It is particularly appealing to Chinese investors, especially now that the Yuan's value has decreased.
There are still concerns that the Yuan will continue to lose value against the US dollar on account of the trade friction.
The Asian country slashed gold shipments by around 300 to 500 tons compared to the amount of gold shipped into the country in 2018.
China is currently implementing measures that will help ease the burden of its slowing economy. The country is currently experiencing its slowest economic growth rate in the last 30 years, and this has pushed down the value of the Yuan to its lowest levels since 2008.
China is the largest gold importer in the world
China currently takes the top spot as the largest gold importer. The country imported gold worth about $60 billion in 2018, an amount that equates to a third of the total gold supply in the world. The Asian country's demand for gold in the form of investment bars and jewelry has tripled in the last 20 years, mainly due to the rapid growth of wealth.
Customs data reveals that the country imported 575 tons of gold in the first six months of 2019, which was significantly lower than the 883 tons that the country imported in the first half of 2018. This shows that China has been importing less gold this year compared to last year. The country imported 71 tons of the precious metal in May this year, a huge departure from the 157 tons that it imported in May last year. Its imports for June show a sharper decline from the 199 tons it imported in June 2018 to the 55 tones imported this year.
China receives most of its imported gold from South Africa, Austria, and Switzerland. The country usually pays for the gold in dollars, and this explains why it is currently keen on reducing gold imports.