China, the world’s largest official sector buyer of gold, is anticipated to restart its bullion acquisitions once prices ease from the record highs reached in May, according to industry experts at a recent conference.
After consistently increasing its gold reserves for 18 consecutive months, the People’s Bank of China (PBOC) reported no change in its holdings for May. This announcement led to a significant drop in global spot prices on Friday【GOL/】.
“China’s data did show a pause,” David Tait, CEO of the World Gold Council (WGC), remarked on the sidelines of the Asia Pacific Precious Metals Conference in Singapore. “But they are just waiting and watching. If prices correct to the $2,200 per ounce level, they will resume again.”
On Monday, benchmark spot gold traded around $2,300 per ounce following its largest daily decline in three and a half years, influenced by the PBOC’s data on holdings. The market had previously hit a record $2,449.89 per ounce on May 20, driven by expectations of interest rate cuts and robust central bank buying amidst geopolitical tensions.
The PBOC regulates the amount of gold entering China through quotas allocated to commercial banks. It emerged as the largest official sector buyer of gold in 2023, with net purchases totaling 7.23 million ounces (224.9 metric tons), the highest annual amount since at least 1977. In April alone, the PBOC added 60,000 troy ounces to its reserves.
A survey by the Official Monetary and Financial Institutions Forum indicated that central banks plan to continue increasing their gold holdings over the next 12 to 24 months.
“Central banks are buying gold, and China is the main buyer. Sentiment on gold is bullish because of geopolitical tensions and elections. China is expected to buy more,” said KL Yap, chairman of the Singapore Bullion Market Association.
Gold has historically served as a hedge against geopolitical and economic risks and remains a favored investment in China amid ongoing economic concerns and a weakening yuan.
“The fact that China’s gold buying was minimal in April, and zero in May, does not imply by any stretch of the imagination that they are not going to start reporting again,” said Rhona O’Connell, an analyst at StoneX.
In April, the Shanghai Gold Exchange increased margin requirements for some gold futures contracts from 8% to 9% following a surge in prices to historical highs.
