China Ramps Up Gold Buying Amid Global Uncertainties & Rate Cuts

(October 28, 2019 - Business Times)

New data from the State Administration of Foreign Exchange has shown a sharp increase in China's gold holdings over the last 10 months.

Economists have pointed out that China's hoarding of gold is likely a direct result of increasing global uncertainties and the anticipation of further rate cuts by global central banks.

According to data from the State Administration of Foreign Exchange, China's gold holding has risen to 1,948 metric tons from December 2018 to September of this year. Analysts point out that gold is still one of the best safe-haven assets.

The valuable metal has become the go-to asset for both investors and central banks given the recent rise in uncertainties fueled by trade and political disputes around the world.

China's ongoing trade spat with the United States is likely one of the major reasons for China's gold purchase ramp up this year. Unlike more volatile assets such as equity and currency, gold is much easier to trade and it does offer relatively high returns.

The secretary to the executive of the board of China National Gold Group, Hou Songling, mentioned that China has been increasing its gold stocks since December of last year and there seems to be no sign that it will be slowing down.

The China National Gold Group is a state-owned firm that is involved in the mining of precious metals such as gold, molybdenum, and silver.

In China, gold-related trading has also drastically increased. In the first six months of this year, gold-related trades on the Shanghai Futures Exchange have reportedly increased by 101 percent to $1.24 trillion. The values of gold-related transactions on the exchange reportedly also rose by 5 percent year-on-year.

According to the Ministry of Industry and Information Technology, the total volume of gold transactions for the period has increased by 88.3 percent year-on-year. The trade volume is roughly equivalent to around 30,200 tons of the precious metal.

Apart from trading, gold consumption in China has also apparently increased. This has partly been driven by a continually increasing demand for gold jewelry and items from consumers living in second and third-tier Chinese cities.

In the first six months of this year, gold consumption from the jewelry industry has increased by 2 percent year-on-year. This is equivalent to around 358.8 tons of the valuable metal.

According to the World Gold Council, governments have drastically increased their gold reserves this year. Aside from China, countries such as Russia, Turkey, and Kazakhstan have also drastically increased their gold reserves.

A report from the World Gold Council estimates that global central banks have increased their holdings by a total of more than 374.1 tons of gold in the first six months of this year.