There was an announcement out of China a few weeks ago that we think was important and underreported in the Western press. Chinese insurance companies are now allowed to buy gold.

When I was living in China and interacting with their large institutions on behalf of Bridgewater, I spent a lot of time with the companies who are now part of this pilot program. Insurance companies in China have the misfortune of having oversight from both insurance regulators and securities regulators, plus the normal array of "dotted-lines" into various senior Chinese officials. Adding anything new to their portfolios was...a challenge, to put it mildly. I'm reminded of this comic:

In other words, this program came from way, way up the chain to be able to cut through all of that. And, it is an enormous undertaking. The institutional folks on this mailing can appreciate what is involved in starting to trade and own a new asset class. They don't have gold traders and don't have gold expertise in their orgs, so they have to build that from scratch. And there is a ton of work in the plumbing that will need to be done - accounting, reporting, valuation, etc. The only way any of this makes any sense is if the central government really wants to pick up the pace of gold accumulation onshore in China.

The chart below shows how China has been accumulating gold for their reserves. We think of this number as a floor, since they have ways to control gold that is "off the books."

The presence of big government buyers - who are mostly price insensitive - has reshaped the gold market. Gold is money that cannot be printed. So when printable money offers an attractive interest rate, gold gets less attractive and the price falls - and vice versa. You could set your watch to that relationship until about 3 years ago, when government buying blew it apart.

The dollar isn't going anywhere any time soon, and most of the articles about de-dollarization wildly overstate the near-term possibility of a dollar collapse. But as data points like this show, China and others are starting to walk that very long road to be less reliant on the USD, and investors can and should participate in that trend.

Disclaimer: The views expressed are the views of Josh Blanchfield through the period February 2025. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. Past performance is no guarantee of future results.