China’s central bank, the People’s Bank of China (PBOC), is taking a wait-and-see approach with gold. For the second month in a row, the PBOC has refrained from adding gold to its reserves, a significant shift from its previous buying spree. This decision comes after a period of 18 months where the PBOC consistently purchased gold, contributing to a substantial rise in gold prices during the first half of 2024.
China’s Gold Reserves Remain Flat as Prices Stay High
Data released on July 7th, 2024, showed that China’s gold holdings remained unchanged at 72.80 million troy ounces at the end of June. This signifies a pause in gold accumulation that began in May, coinciding with record highs in gold prices. Analysts believe the PBOC is strategically waiting for a more favorable price point before resuming its gold buying program.
“It appears the PBOC views current gold prices as a bit too expensive,” said Nitesh Shah, a commodity strategist at WisdomTree. “They’re likely waiting for a pullback in prices before restarting their gold purchasing program.”
In recent years, there’s been a growing trend of central banks around the world diversifying their foreign currency reserves by increasing their gold holdings. This strategy aims to hedge against potential economic fluctuations and market volatility. In 2023, China emerged as the world’s top buyer of gold among central banks, significantly increasing its gold reserves.
PBOC Waits for Buying Opportunity as Gold Price Dip is Predicted
Analysts like Shah believe there might be a buying opportunity on the horizon. “Our models suggest a possible 7% decline in gold prices this quarter,” said Shah. “This could create a perfect window for the PBOC to acquire more gold at a lower price. However, they’ll need to act quickly, as gold is expected to rebound and reach new highs soon after.”
The PBOC’s decision to pause gold purchases has sparked discussions among financial experts. Some analysts believe the central bank is aiming to manage its spending and control inflation. Others suggest the PBOC might be shifting its focus to other asset classes. Regardless of the specific reasons, the pause has created uncertainty in the gold market. Investors are now closely watching the PBOC’s next move and its potential impact on gold prices.
Several global factors could influence the PBOC’s decision-making process regarding gold purchases. The ongoing geopolitical tensions, the performance of the US dollar, and global economic growth are all variables that the central bank will likely consider. A significant shift in any of these factors could prompt the PBOC to resume or even accelerate its gold buying program.
Source: Mining.com
