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According to official data released by China on Wednesday, the country’s official gold reserves remained unchanged at 72.8 million ounces in July 2024, marking the third consecutive month without additional purchases. The central bank’s decision to pause gold accumulation aligns with market expectations, given that gold prices remain near historical highs.
Krishan Gopaul, EMEA Senior Analyst at the World Gold Council, noted that the People’s Bank of China reported no change in gold reserves for three months. The reserves stand at 2,264 tonnes, accounting for about 5% of the total reserves. Although the volume of gold remained the same, the value of China’s gold reserves increased from $169.7 billion at the end of June to $176.64 billion at the end of July, due to rising gold prices.
Globally, strong demand from central banks and the over-the-counter market has driven gold prices to new heights throughout the year. Spot gold prices have surged by approximately 16% in 2024, reaching an all-time high of $2,483.60 per ounce on July 17. However, the high price levels have potentially dampened demand, with the People’s Bank of China halting its 18-month gold-buying streak in May, impacting the gold market and increasing sell-offs.
Ross Norman, CEO of Metals Daily, stated in an interview that China’s suspension of gold purchases was unsurprising, reflecting their view that current prices have surged excessively. Norman further indicated that if prices remain elevated, the central bank is unlikely to resume gold purchases.
Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, suggested that this move indicates China’s reluctance to continue high-priced gold purchases indefinitely and that current prices have reached their upper limit. He questioned whether this pause means the central bank is done purchasing gold or if it is a temporary break for other reasons, leaving the duration of this pause uncertain.
Historically, pausing gold purchases when prices are overvalued helps control purchasing costs. However, experts believe that in the long term, increasing gold reserves is part of China’s broader strategy to optimize international reserve structures and cautiously advance the internationalization of the renminbi.
