Gold prices rose nearly 3% last week, marking the largest weekly gain in three months, stabilizing at $2,385 per ounce. During this period, central banks’ gold purchases attracted significant market attention. Specifically, the People’s Bank of China did not increase its gold holdings for the second consecutive month in June, while India significantly added to its gold reserves.
As of the end of June, China’s central bank maintained its gold reserves at 72.8 million ounces, unchanged from the previous month. This figure has remained stable for three consecutive months since April 2024. Over the previous 18 months, China’s central bank had continuously purchased gold until May this year, with cumulative additions totaling 10.16 million ounces.
Driven by global central bank purchases, particularly by India, China, and Singapore, gold prices have surged this year, reaching an all-time high in May. Additionally, expectations of Fed rate cuts and geopolitical tensions worldwide have also supported gold prices.
Historically, it is not uncommon for China to pause its gold purchases, especially when prices are at historic highs. Christopher Wong, a foreign-exchange strategist at Oversea-Chinese Banking Corp., mentioned that after the PBOC’s data release, there could be a potential price decline. Saxo Capital Markets strategist Charu Chanana also pointed out that the surge in gold prices might have halted the PBOC’s purchasing, but gold still has room to continue rising this year amid loose monetary policies and ongoing geopolitical risks.
Bruce Pang, JLL’s Chief Economist in Greater China, noted that gold prices have been oscillating at high levels recently, suggesting a high probability of price fluctuations and adjustments in the short term. In this context, the PBOC’s halt in gold accumulation reflects a cautious approach in adjusting and optimizing the structure of international reserves to ensure asset preservation and risk reduction.
Furthermore, as the world’s largest gold consumer, the PBOC’s actions greatly influence the market. WisdomTree commodity strategist Nitesh Shah mentioned that gold prices are still somewhat elevated, and the PBOC might be waiting for prices to fall further before resuming its purchasing plans, which could exert some pressure on the global gold market.
The primary goal of the PBOC in increasing gold holdings is to optimize the structure of official reserve assets and promote diversification, especially as the credibility of the US dollar declines and global financial market turmoil accelerates the diversification of foreign exchange reserves. Thus, despite the currently high gold prices, considering gold’s advantages in hedging, inflation resistance, and long-term value preservation, the PBOC’s long-term strategy and direction remain unchanged, and it will continue to increase gold reserves at the appropriate time.
In conclusion, China’s consecutive second-month halt in gold accumulation has undoubtedly stirred waves in the global gold market. However, in the long run, the PBOC’s overall accumulation strategy and goal of diversified asset allocation remain unchanged. Whether gold can withstand this shock wave requires continuous observation of market trends and policy changes.
