China’s Steady Hold on Gold Reserves
China’s central bank has maintained its gold reserves unchanged for five consecutive months, as of September. The decision to hold back on purchasing more gold has been influenced by the rising prices of the precious metal. Currently, China’s gold holdings stand firm at 72.8 million troy ounces, according to the latest official data.
However, despite no new purchases, the value of these reserves climbed. By the end of September, the value increased to $191.47 billion, up from $182.98 billion in August. This rise reflects the ongoing surge in gold prices, which have jumped approximately 28% so far this year. Notably, 2023 is on track to mark the biggest annual gain for gold prices in 14 years.
Global Trends in Gold Demand
The increase in gold prices can be attributed to several factors. Firstly, the U.S. Federal Reserve’s recent interest rate cuts have stimulated demand. Additionally, rising geopolitical tensions have driven investors toward safe-haven assets like gold. Central banks around the world have also contributed to this trend, though their buying pace has slowed compared to 2022 and 2023.
In fact, the World Gold Council noted that global central banks are expected to reduce their gold purchases in 2024 compared to the previous year. Nevertheless, these purchases will likely remain above the pre-2022 levels. China’s decision to halt gold buying, which began in May after 18 consecutive months of acquisition, is a significant factor in this slowdown.
China’s Strategy Amid High Prices
Despite pausing its gold purchases, China’s central bank remains a key player in the global gold market. In 2023, the People’s Bank of China (PBOC) was the largest official sector buyer of gold. However, with prices climbing higher, the PBOC seems to be waiting for a more favorable opportunity to resume purchases.
Experts suggest that the PBOC’s strategy may involve waiting for a dip in prices before making further investments. WisdomTree commodity strategist Nitesh Shah explains that while the central bank is likely interested in acquiring more gold, it may have to wait longer for a price drop. Nonetheless, with forecasts predicting that gold prices could surpass $3,000 per ounce within the next year, the PBOC may need to reconsider its timing sooner rather than later.
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