China's Central Bank Puts The World On Notice As It Buys More Gold; Analysts At PDAC Expect This Is Only The Start Of A New Trend

(March 7, 2023- Niels Christensen)

Central Bank gold demand, with China expected to be a leader in the marketplace this year, has generated new bullish sentiment at the world's largest mining conference.

A key theme among analyst presentations and comments on the floor during the 2023 annual Prospectors & Developers Association of Canada has been the People's Bank of China's new foray into the gold market.

Wednesday, quoting updated reserve data from China's central bank, Krishan Gopaul, senior European, Middle East, and Asian markets analyst at the World Gold Council, said the country bought 24.9 tonnes of gold in February.

This is the fourth monthly increase in its gold reserves since China started publishing data in November. Gopaul noted that so far, the PBOC has bought 102 tonnes of gold in this cycle.

In an interview with Kitco News on the sidelines of PDAC, Willem Middelkoop, chief investment officer and founder of the Commodity Discovery Fund, said that he expects China will continue to publish its gold purchase as it looks to establish a new international currency, competing with the U.S. dollar as the world's reserve currency.

"It's no coincidence that China has just started to publish their gold purchases again. They are putting the world on notice that they have an international currency."

Middelkoop added that Western nations' weaponization of the U.S. dollar as a rebuke of Russia's invasion of Ukraine has sped up the dedollarization trend.

Thom Calandra, creator of The Calandra Report and the co-founder of MarketWatch.com, said he also expects China to continue to add to its reserves, highlighting the dedollarization trend.

"I think gold will be an important strategic assets for central banks and investors need to pay attention," he said.

Both Calandra and MIddelkoop said that they see gold prices pushing back to record highs this year in part because of central bank gold demand.

Byron King, editor and precious metals expert at Agora Financial and author of the Whiskey & Gunpowder report, said that he expects China to continue to increase its official gold reserves.

However, he added that the country holds a lot more gold than it is reporting, as the nation is the world's biggest gold producer and a lot of domestic companies are state run. He added that investors shouldn't underestimate China's push to create an internationally recognized yuan.