Bloomberg reported that Belgium sold $22 billion of Treasuries in the same quarter, which may indicate that China is shedding its holdings. China’s decision to sell off Treasuries comes as a strategic move amid escalating tensions with the United States.
On the other hand, China has been increasing its gold reserves as a safer alternative. Not only does gold provide liquidity for China’s massive reserves, but it also serves as a safeguard against potential sanctions, especially as relations between the U.S. and China continue to deteriorate.
With the U.S. imposing tariffs on Chinese imports and threatening Chinese companies and banks, China sees gold as a more secure investment compared to Treasury holdings.
Fed Will Likely Start Cutting Rates In September
According to the FedWatch Tool, there is a 49.8% chance that the Federal Reserve will begin cutting rates in September. Market expectations point to a decrease in the federal funds rate to a range of 475 – 500 basis points by the end of the year.
As interest rates decline, assets like gold and other precious metals become more attractive since they do not offer interest payments. This shift in interest rates is likely to further bolster the demand for gold in the coming years.
