Key information
- China’s central bank resumed gold purchases in November after a six-month hiatus.
- The People’s Bank of China added 160,000 ounces to its reserves, bringing the total to 72.96 million ounces.
- Sustained central bank purchases are expected to continue for several months, boosting global demand for gold.
Resumption of gold purchases
China’s central bank resumed gold purchases in November after a six-month hiatus, marking a return to bullion accumulation that experts say is likely to continue amid escalating trade tensions with states -United.
Vladimir Zernov, market analyst at FX Empire, explained that China had been patiently waiting for gold prices to fall, with the aim of increasing its reserves to lower levels. However, this drop in prices did not materialize, prompting the People’s Bank of China (PBOC) to return to the market in November, when prices reached a level deemed sufficiently attractive. The move was followed by a rally in gold prices, with the PBOC adding 160,000 ounces to its reserves, bringing the total to 72.96 million ounces.
Diversification of central banks
Zernov attributes this resurgence in Chinese gold buying to a broader trend of central bank diversification driven by geopolitical uncertainties and assertive economic policies of the U.S. government. He suggests that President Trump’s victory in the 2016 election, coupled with the subsequent intensification of sanctions against various nations, fueled this movement to diversify reserves away from U.S. government debt.
This strategic move by China is expected to continue for several months, supporting global demand for gold. Despite this renewed interest, gold prices have not yet returned to their historic highs, which could be explained by operators taking profits before the Federal Reserve’s next decision and by the recent rise in prices. Treasury yields, which generally put downward pressure on gold prices.
Sustained purchases by central banks
Looking ahead, Mr. Zernov maintains his bullish outlook for gold, emphasizing that sustained central bank purchases will remain a key factor in market strength. While the psychological level of $3,000 may not be reached before the end of the year, he believes it could be reached by 2025. Gold’s performance on Monday illustrated this continued dynamic, with prices first rising above $2,664.47 an ounce before settling around $2,651.87, reflecting a modest daily gain of 0.12 percent.
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