Gold futures have experienced a significant surge in recent months, but recent developments in China’s purchasing patterns could pose a short-term hindrance. Last Friday, China reported no increase in its gold reserves for the past month, casting uncertainty over whether this pause will persist and potentially affect the ongoing rally of the yellow metal.
An analyst from the Swiss financial group Julius Baer emphasized in a Monday report to clients and the market that if China continues to abstain from purchasing gold in the upcoming months, this could dampen the current optimistic sentiment in the gold market, prompting speculators to reconsider their positions.
Carsten Menke, head of next-generation research at Julius Baer, referred to the situation as a “temporary setback.” He maintains a strong conviction that central banks will continue robust gold purchases and that there will be an increased willingness to pay for gold driven by political rather than economic motivations.
Julius Baer also points out that China has historically lacked transparency and consistency in its gold purchasing disclosures. With rising geopolitical tensions with the United States, it is anticipated that the People’s Bank of China (PBoC) will eventually resume increasing its gold reserves to mitigate reliance on the U.S. dollar.
“Despite its large-scale purchases, China’s gold holdings still account for less than 5% of its monetary reserves, compared to a global average of over 15%. This leaves substantial room for growth when measured in tons of gold,” Julius Baer notes, highlighting that previous buying sprees have shown the market’s sensitivity to price movements.
Gold futures for August delivery rose 0.18% to $2,329.10 per ounce at 3 p.m. ET, indicating continued interest in the commodity despite the potential uncertainties introduced by China’s recent purchasing behavior.
