Gold closed the week down at $1,276 per ounce, temporarily falling through its support level as the U.S. dollar rose.

In the long view of the contest between gold and the U.S. dollar, it is important to consider the moves being made by countries looking to replace the U.S. dollar as the world’s reserve currency with a composite unit that would include gold as a major component.

According to Bloomberg, “Governments worldwide added 651.5 tons of bullion in 2018, the second-highest total on record, according to the World Gold Council. Russia has quadrupled its reserves within the span of a decade amid President Vladimir Putin’s quest to break the country’s reliance on the dollar, and data from the central bank show holdings rose 1 million ounces in February, the most since November.”

Bloomberg adds, “Last year’s bullion buying by emerging-market central banks was the most robust in a long time as countries diversified reserves, Ed Morse, Citigroup Inc.’s global head of commodities research, said in a Bloomberg TV interview. The bank’s positive on gold, targeting $1,400 by year-end.”

Another country looking to break global dependence on the U.S. dollar has joined the bullion-buying spree: China. The Asian power, which is currently embroiled in a major trade dispute with the U.S., has already negotiated various side deals with different countries (including Russia) to have direct exchanges, bypassing the dollar as the default trade currency.

Bloomberg reports, “China’s on a bullion-buying spree as Asia’s top economy expanded its gold reserves for a fourth straight month, adding to investors’ optimism that central banks from around the world will press on with a drive to build up holdings. … Should China continue to accumulate bullion at the current rate over 2019, it may end the year as the top buyer after Russia.”

Rick Andrews is president of Avant Capital Management