China's Central Bank Holds Back on Gold Purchases

SHANGHAI (Reuters) – China's central bank has refrained from increasing its gold reserves for the fifth consecutive month as of September, according to official data released on Monday. This decision comes in response to a significant rise in gold prices.

As of the end of last month, China's gold holdings totaled 72.8 million troy ounces, with the value of these reserves increasing to $191.47 billion from $182.98 billion at the end of August.

Gold prices have surged approximately 28% this year, marking a potential for the largest annual gain in 14 years. This increase is supported by the U.S. Federal Reserve's interest rate cuts, ongoing geopolitical tensions, and strong demand from central banks worldwide.

According to the World Gold Council, global central banks, which ramped up gold purchases in 2022-2023, are expected to decrease their buying in 2024 compared to 2023, though levels are anticipated to remain above those seen before 2022.

This reduction in purchases is partially attributed to the People's Bank of China's (PBOC) halt in buying, as it had previously acquired gold for 18 straight months prior to May 2023. The PBOC was recognized as the world's largest official buyer of gold in 2023, and its recent pause has dampened demand from Chinese investors in recent months.

Nitesh Shah, WisdomTree's commodity strategist, remarked, "With higher gold prices, the PBOC continues to pause from new purchases. We believe the central bank would like more gold but is waiting for a more attractive entry point."

He added, "However, with global interest rates falling and geopolitical tensions rising, it appears they may have to wait a significant time for a price dip. Given our forecast of prices reaching over $3,000/oz in the next year, the central bank might consider starting to build positions sooner."