Instructed Banks to Sell US Securities – The Beginning of the End of Exorbitant Privilege?

[Igor Pereira]

The Chinese Money Wall just turned its back on Uncle Sam.

Chinese regulators issued a clear verbal order to the country's leading banks: Limit new purchases of US Treasury Securities (US Treasures) and reduce existing positions.

By Igor Pereira Financial Market Analyst

The official justification is "focus risk," but we can read between the lines. That's... Armada Dedollarization. It is financial preparation for a world where China no longer finances the American deficit.

Analysis of the seismic impact of this decision on the Fixed Income markets and, of course, on Gold.

The instruction came not by public decree, but by "window orientation" (verbal), which makes it even more serious.

• Command: Banks must stop accumulating U.S. debt and start selling what they have.

• The Scope: The order affects commercial banks (which held around $298 billion in securities in September), but for now , does not officially apply to the State reserves of the Central Bank.

• Sorry. They quote "market volatility" and "risk diversification." In ExpertFX language, this means: "We don't trust you any more than America will pay your bills without devaluing the dollar."

Where does that money go? If Chinese banks cannot buy US bonds (4-5%), they need to put the capital elsewhere.

• The Exchange: They're selling Paper Promises (US debt) to buy Real Assets (Gold, Commodities, Infrastructure).

• Coincidence: Remember the previous report: China bought Gold for 15 months straight. Now they tell you to sell U.S. bonds. That's not a coincidence; it's a reserve replacement strategy. Gold is the only reserve asset that has no American counterparty risk.

The market reacted instantly.

• Yields: The prices of the Treasures fell and the incomes (Yields) rose. If the biggest foreign buyer (China) leaves the market, who remains to buy the US debt? Just Fed. This pushes American interest up in the long run.

• Dollar (USD): The coin has weakened slightly. The sale of dollar assets creates a natural selling pressure in the currency.

The structural buyer of the American debt left the room.

My Vision: That's extremely Bullish (High) for long-term gold.

1. The Vacuum: Without China buying debt, the US will have to monetize its deficit (print money) or offer much higher interest. Both scenarios destroy the value of the Dollar and strengthen the Gold.

2. The Financial War: China is insulating itself financially to protect itself from future sanctions. They're cleaning the exhibit before anything bigger happens.

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