China’s Gold Reserves Update

SHANGHAI (Reuters) – China’s central bank has not purchased gold for its reserves for the fifth consecutive month in September, according to official data released on Monday. This decision is largely attributed to a significant rise in gold prices.

As of the end of September, 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, on track for the highest annual gain in 14 years. Factors contributing to this increase include interest rate cuts by the U.S. Federal Reserve, geopolitical tensions, and strong demand from central banks.

According to the World Gold Council, global central banks, which were active buyers of gold in 2022-2023, are expected to slow purchases in 2024, although remaining above pre-2022 levels. This includes the People’s Bank of China (PBOC), which paused its buying after an 18-month consecutive purchasing streak until May.

The PBOC was the largest official sector buyer of gold in 2023, and its halt has dampened Chinese investor demand recently. Nitesh Shah, a commodity strategist at WisdomTree, commented on the situation: “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.”

Shah also noted that with global interest rates declining and geopolitical strains rising, a price dip may not be forthcoming soon. Given forecasts of prices exceeding $3,000/oz in the coming year, he suggests the central bank may need to consider earlier purchasing opportunities.