China Halts Gold Purchases For The Second Month While Other Central Banks Boost Reserves

(July 8, 2024 - Neils Christensen)

(Kitco News) - After testing resistance at $2,400 an ounce on Friday, the gold market has seen its bullish momentum wane.

According to some analysts, traders are taking profits on Monday following the news over the weekend that the People’s Bank of China didn’t increase its gold reserves for the second consecutive month.

Official data from China’s central bank shows its gold reserves holdings at 2,264 tons. Investors are taking this news in stride as gold continues to hold critical support above $2,350 an ounce. August gold futures last traded at $2,360.80 an ounce, down 1.5% on the day.

Last month, when China ended its 18-month buying spree, gold prices dropped more than 2% overnight on the news.

However, some analysts note that while China has not updated its reserves on paper, it doesn’t mean it has stopped buying gold. Some analysts suspect that China will start keeping its gold purchases under wraps as prices remain extremely elevated.

In a recent interview with Kitco News, Christopher Vecchio, Head of Futures & Forex at Tastylive.com, said that some regional data shows China buying gold in late June.

However, Vecchio added that central bank demand, while supportive of gold, no longer has the same driving force it did at the start of the year. He noted that the market is now focused on the Federal Reserve’s monetary policy.

At the same time, China is just one central bank among a growing group of gold buyers. Last week, Juan Carlos Artigas, Head of Research at The World Gold Council, noted that the gold market is bigger than just one central bank.

He added that while central bank demand might not hit the record levels recorded in 2022 and 2023, purchases are expected to be above the 10-year average of 500 tonnes.

“What our information suggests is that central banks are well-positioned to see another robust year,” he said.

Although China didn’t officially buy any gold last month, other central banks continue to build their reserves.

In a comment on social media on Friday, Krishan Gopaul, Senior Market Analyst at the WGC, said that data from the National Bank of Poland shows it increased its gold reserves by 4 tonnes in June. This is the central bank’s third consecutive month of buying.

“Total gold holdings now stand at 377 tons, nearly 19 tons higher than at the end of 2023,” he said.

At the same time, Gopaul noted that data from the Reserve Bank of India suggests it bought 9 tonnes of gold in June.
“This is the highest monthly purchase since July 2022. YTD net buying now totals over 37 tonnes, lifting total gold holdings to 841 tonnes,” he said.