China has spent years reducing its holdings of U.S. government debt while buying more gold.

Its reported holdings of U.S. Treasury securities fell to about $633 billion in June, their lowest level since 2008. That is down from roughly $1.3 trillion in 2011.

At the same time, China has continued adding gold to its official reserves.

It is part of a much larger trend.

Central banks around the world have bought an average of roughly 1,000 tonnes of gold a year over the past four years, about twice the average of the previous decade.

In a recent World Gold Council survey, 89 percent of central bank respondents expected global gold reserves to increase over the next year. Seventy-four percent expected the dollar’s share of global reserves to decline over the next five years.

None of this means the dollar is about to disappear.

The United States still has the world’s deepest financial markets and the Treasury market remains the foundation of the global financial system.

But the trend matters.

For decades, governments and institutions around the world have needed somewhere to put their money. A great deal of it has gone into U.S. Treasury securities.

That enormous demand has helped the federal government borrow at lower rates than it otherwise might.

If foreign governments gradually want fewer Treasuries, the United States can still borrow. But it may have to pay more to do it.

Higher interest rates make the federal debt more expensive to carry. More interest expense means more money must be raised through taxes, spending reductions or additional borrowing.

There is no automatic jump from that problem to printing money.

But the choices become harder.

If large deficits continue while interest costs rise, particularly during a recession or financial crisis, pressure could eventually grow for easier monetary policy.

That could mean lower interest rates and, under some circumstances, renewed growth in money and liquidity.

This is where gold becomes interesting.

Gold does not need the dollar to collapse to become more valuable.

It only needs enough governments and investors to decide they would rather keep some of their wealth in an asset that is not another government’s debt.

That appears to be happening already.

Mining analyst John Kaiser recently told Investing News Network that he believes the increase in gold prices since 2024 represents a fundamental repricing.

Kaiser now believes roughly $4,000 could represent a new base for gold. He also suspects China may be accumulating substantially more physical gold than appears in its official central bank reserves, possibly through other state-controlled entities.

That second claim is a theory. There is no public evidence establishing that China has accumulated the enormous hidden reserves Kaiser describes.

But his larger argument does not require the theory to be true.

The reported buying is already substantial, and China is not alone.

The more interesting question may be what happens if gold simply remains expensive.

Kaiser believes the mining industry has not fully adjusted to that possibility.

Large gold producers are generating substantial cash flow. But investors remain cautious about assuming today’s gold prices will last, and much of the junior mining sector has yet to participate in the boom.

Kaiser describes the market as being in roughly the “fourth inning” of what he believes could become a much larger resource cycle.

If gold remains high, the economics begin to change.

Deposits that were marginal at $2,000 gold can look very different at $4,000. Lower-grade resources can become economical. Exploration becomes more valuable. And large mining companies eventually need new deposits to replace the gold they are removing from the ground.

That could make junior mining companies a highly leveraged way to participate in the trend.

It also makes them highly risky.

A junior explorer can spend millions of dollars drilling and discover very little.

Large producers have real mines and real revenue, but they face another problem. Inflation raises the cost of labor, fuel, equipment and construction.

That makes royalty and streaming companies worth watching as well.

They can participate in the economics of producing gold without bearing all of the operating and capital costs required to build and run a mine.

None of this is intended to be investment advice. There is a larger American story here.

Gold is only one commodity.

The United States also needs copper, uranium, critical minerals, energy, food, machinery and the infrastructure required to turn raw materials into useful products.

In a world becoming more divided politically and financially, the ability to produce things matters.

America cannot control whether China buys another Treasury bond.

It can control whether energy is produced here, factories are built here, and whether Americans have the skills and infrastructure necessary to operate them.

And it must think differently about who owns those assets.

If public investment helps finance the next generation of mines, factories, energy systems and other productive businesses, there is no reason the financial benefits must flow only to people who already own substantial amounts of capital.

Public policy can encourage production while also creating ways for more Americans to acquire ownership in productive assets.

That may ultimately be the more important lesson in China’s move toward gold.

The dollar does not have to collapse.

China does not have to sell every Treasury it owns.

Gold does not have to reach $20,000 an ounce.

The world only has to become a little less willing to keep so much of its wealth in American financial assets for the economics to begin changing.

America’s answer should not be fear. It should be to build more, produce more, and help more Americans have a stake in what gets built.