China’s Gold Buying: Appetite Remains, But Prices Matter
China is continuing its quest to diversify its reserves away from the US dollar, with gold playing a key role. While the People’s Bank of China (PBOC) paused gold purchases in May and June due to high prices, the appetite for gold remains strong.
Geopolitical Concerns Drive Demand
The ongoing geopolitical tensions, including the Russia-Ukraine war and the Middle East conflict, have fueled China’s interest in gold. The PBOC’s gold buying spree, which began in November 2022, is seen as a way to protect its reserves from potential sanctions.
Record Purchases and a Growing Share
The PBOC was the world’s largest gold buyer in 2023, adding 7.23 million ounces to its reserves. This boosted gold’s share of China’s total reserves to a record 4.9%. However, this still remains lower than the global average of 16%.
China’s Gold Reserves: A Long-Term Play
Experts believe the PBOC will continue to purchase gold for decades to come. The country’s vast foreign currency reserves and the increasing recognition of gold as a safe haven asset are strong drivers.
Impact on Global Gold Prices
China’s gold buying has a significant impact on global prices. The pause in purchases in May and June led to a dip in prices, but they have since rebounded.
The Future of China’s Gold Strategy
While the PBOC’s future gold purchases remain uncertain, the country’s commitment to diversifying its reserves is clear. China’s gold buying is likely to continue, influencing global gold markets for years to come.
