From the data officially released by the United States, we can observe that recently many countries that previously sold off U.S. Treasuries have begun to buy them back. However, China seems unmoved, with the latest data still showing that China is in the process of selling.

American media warn that in addition to continuously selling U.S. Treasuries, China is also continuously increasing its holdings of gold. Do not be deceived by the published gold reserve data; the amount of gold that China holds may far exceed the disclosed figures.

So, is China using the funds obtained from selling U.S. Treasuries to increase its gold holdings?

01. Gold Decline

Last week, gold had already fallen for five consecutive weeks, and this week, the international gold price continues to follow a downward trend. It currently appears very likely to break below the $1,800 mark and may continue to decline.

The most significant factor affecting gold prices today is the strengthening of the U.S. dollar, and the expectation of the dollar's appreciation stems entirely from the Federal Reserve's expectation to resume significant interest rate hikes and raise the terminal rate.

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Since entering February, data related to inflation have shown that U.S. inflation remains high and is still increasing on a month-to-month basis.

Data related to economic heat, on the other hand, indicate that the labor market remains tight and that the PMI has returned to an expansionary state.

In fact, both sets of data point to the Federal Reserve needing to further raise interest rates. In September last year, the expected terminal rate was 5.1%, and by December last year, this expectation was raised to 5.25%. Now, it seems that the Federal Reserve's interest rate hikes will reach at least 5.75%.

A terminal rate that far exceeds market expectations will lead to another rise in the U.S. dollar index, which will inevitably cause gold prices to continue to fall, presenting a good opportunity for a significant purchase.In the past few months, the People's Bank of China has announced that its gold reserves have increased for three consecutive months. Now, as the price of gold has fallen from its high, it seems to indicate that China can take this opportunity to buy more gold.

02. Inverse to the US Dollar

Looking back at the price of gold over the previous period, we find that gold has a negative correlation with the US Dollar Index.

The chart above shows the trend of international gold prices from last year to the present. At the end of February and the beginning of March, due to the outbreak of conflict in Europe, the international gold price surged in a short period, reaching $2,078.

Subsequently, as the Federal Reserve entered an interest rate hike cycle, the US Dollar Index continued to strengthen, and the price of gold also kept falling, until November of last year. The international gold price fell to a low of $1,618.3 per ounce, but then it began a strong rebound.

Let's look at this chart of the US Dollar Index, and we find that for most of last year, the index kept rising, corresponding to the continuous decline in gold prices.

However, starting from November of last year, the US Dollar Index experienced a rapid decline, until the end of January and the beginning of February this year, which coincided with the rebound in international gold prices, rising from $1,618 to $1,975.

But after entering February of this year, the US Dollar Index began to rise, and the price of gold also happened to fall during this period.

03. Calling the Bluff

However, we need to remind everyone that when a country or a central bank buys gold, it is not from an investment perspective, so it will not pay much attention to the short-term fluctuations in the price of gold.The purchase of gold by our country should be a relatively long-term process. It has been buying gold in the past and should continue to do so in the future.

The gold reserves announced by the central bank may only be a part of it, with more gold being continuously purchased not stored in the form of central bank reserves.

We can draw this conclusion from the comparison of multiple data.

At present, after several consecutive months of increase, our country's gold reserves are only slightly over 2,000 tons. However, last year, our country's gold production reached 372 tons, a 13% increase from 2021; and our country's gold consumption reached 1,000 tons, far greater than the production.

This indicates that a lot of gold consumption is met through imports.

The large amount of gold imported by our country in recent years may not all be consumed by the public. It is very likely that some financial institutions have converted it into gold reserves.

From another set of data, we can also see that last year, the total value of U.S. debt sold by our country reached 210 billion U.S. dollars. However, the central bank's data only shows that the gold reserves increased by 62.21 tons from November to December. This indicates that we may have bought more gold, but it is not reflected in the central bank's data.

Another piece of data shows that last year, central banks worldwide net purchased 399 tons of gold in the third quarter, but 300 tons of it did not have a clear buyer. After analyzing, Japanese media pointed out that this was bought by China, and this amount of gold has not yet been fully reflected in the increase of gold reserves.

From the past silent purchase to the current active disclosure of reserve changes, combined with the recent request of U.S. Treasury Secretary Yellen to visit China, it indicates that China's continuous selling of U.S. debt and buying of gold is actually a further clear attitude to the outside world: the renminbi will continue to improve its international status.