China’s central bank (PBOC) has once again refrained from increasing its gold reserves in June, ending an 18-month buying spree that had pushed gold prices to record highs. According to data released on July 7, 2024, PBOC’s gold holdings remained unchanged at 72.8 million troy ounces at the end of June, the same level as at the end of May.
The move surprised some analysts who had expected China, the world’s second-largest economy, to continue diversifying its reserves and protecting itself from inflation by buying gold. The rise in geopolitical tensions and uncertainty in financial markets in recent months has led to around 20 central banks planning to increase their gold reserves in 2024.
Gold prices reached a record high of over $2,400 per ounce in May, but have eased slightly in recent weeks after expectations for US monetary easing have diminished. Despite this pullback, gold prices remain significantly higher compared to 2023.
Some analysts believe that high gold prices may have deterred PBOC from further purchases. Others point to the slowdown in the Chinese economy as a possible factor. Regardless of the reasons, it is clear that PBOC has taken a cautious approach to gold buying in this critical period for the global economy.
It is important to note that even though PBOC did not buy any gold in June, it is still one of the largest holders of gold in the world. Its gold reserves represent around 2% of its total foreign exchange reserves.
It remains to be seen how PBOC will approach gold buying in the future. The trajectory of the global economy, gold prices, and US monetary policy will likely play a key role in the bank’s decision-making.
