As Gold Prices Ease, China’s Central Bank Is Expected to Resume Gold Purchases

Published on: Jun 11, 2024
Author: Amy Liu

Gold has always been considered a hedge against geopolitical and economic risks. Amid prolonged economic concerns and a weakening yuan, gold has remained the top choice for investment in China. Industry experts at a meeting this week indicated that due to the persistent fundamental reasons for holding gold, China, as the largest official gold buyer, is poised to resume its gold buying spree once prices retreat from the historical highs set in May.

After increasing its gold reserves for 18 consecutive months, official data from the People’s Bank of China (PBOC) showed no change in its gold holdings for May, leading to a significant drop in global spot gold prices last Friday (June 7).

David Tait, CEO of the World Gold Council (WGC), stated at the Asia-Pacific Precious Metals Conference in Singapore, “The Chinese data do indeed show a pause. But they’re just waiting and watching. They will resume purchases again if prices correct to around $2,200 per ounce.”

Spot gold traded around $2,300 per ounce on Monday (June 10), following the release of Chinese gold holdings data, marking the largest single-day drop in over three and a half years.

According to WGC data, the People’s Bank of China was the largest official sector gold buyer in 2023, with net purchases of 7.23 million ounces or 224.9 tons, marking the highest annual purchase volume since 1977.

A survey conducted by the Official Monetary and Financial Institutions Forum revealed that central banks plan to continue increasing their gold reserves over the next 12-24 months.

KL Yap, Chairman of the Singapore Bullion Market Association, stated, “Central banks around the world are buying gold, with China being the primary buyer. Market sentiment toward gold is bullish due to geopolitical tensions and elections. It is anticipated that China will purchase more gold.”

Rhona O’Connell, an analyst at StoneX, mentioned, “China made minimal gold purchases in April and none in May, but this does not mean they will not start buying gold again.”

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