Gold prices have been rising steadily this year, increasing by about 11% year-to-date due to various geopolitical uncertainties globally. In China, individuals have been increasing their gold holdings as a hedge against economic instabilities and a weakening Chinese yuan. However, the recent surge in gold prices may affect the demand for gold temporarily.
China’s central bank began slowing down its gold purchases in April, buying only 60,000 troy ounces of gold that month. This was a significant drop from 160,000 ounces in March and 390,000 ounces in February. The PBOC had been purchasing gold for 18 consecutive months before pausing last month, becoming the world’s largest institutional buyer.
Official data released on Friday revealed that China’s gold reserves remained the same in May, indicating that the central bank did not purchase any gold. The decision by the PBOC to halt purchases has made gold susceptible to further decreases in value. Ewa Manthey, a commodities strategist at ING Bank, expressed this concern on Monday. The current spot gold price stands at around $2,300 per ounce, which is approximately 6% lower than its peak of nearly $2,450 per ounce on May 20.
According to the World Gold Council, China’s central bank purchased 225 tons of gold in 2023, with Poland’s central bank coming second at 130 tons. David Tait, the council’s CEO, mentioned to Reuters on Monday that China is currently observing the market. If gold prices correct to around $2
