China's gold reserves steady despite gold record high

China has remained on the sidelines with gold purchases for the fifth consecutive month, as soaring gold prices have reached new record highs. Data released on Monday for China's September foreign reserves showed that its gold reserves remained unchanged at 72.8 million troy ounces. However, the value of these reserves increased to $191.47 billion from $182.98 billion in August and $176.64 billion in July.

Gold prices increased by 29%

Gold prices have surged by 29% so far this year, with a rapid acceleration since May, prompting China’s central bank, the People’s Bank of China, to halt its gold buying after 18 months of consistent purchases, which began at the end of 2022.

Gold prices are holding steady near record highs as traders anticipate further US Federal Reserve rate cuts. As of Thursday (September 26) morning, spot gold was up 0.2%, trading at $2,661.25 per ounce.

This was close to the gold record high of $2,670.43 per ounce hit on Wednesday (September 25).

US gold futures remained stable at $2,684.50 per ounce, according to news agency Reuters.

In India, the 24-carat gold rate stood at ₹75,510 per 10 grams on September 26, with the 22-carat rate at ₹69,218 per 10 grams.

Factors driving gold prices

Gold’s surge has been driven by a combination of monetary policy easing, geopolitical tensions, and market uncertainty.

Tim Waterer, chief market analyst at KCM Trade, was quoted as saying in Reuters report, "A mild bounce from the US dollar has managed to keep the gold price in check, but with expectations of more aggressive Fed rate cuts, the risk remains to the upside."

Bullion has surged nearly 29% in 2024, fueled by global central banks easing monetary policy and geopolitical concerns.

This geopolitical tension is prompting investors to flock to gold as a safe-haven asset amid rising fears of a broader conflict in the Middle East.

The People’s Bank of China chose not to add any gold to its reserves in September
From January to April, the People’s Bank acquired 28.9 tonnes of gold, bringing its total holdings to 2,264.3 tonnes (72.8 million ounces), a level it has maintained since then.

Despite China's absence from the gold market, bullish momentum remains strong, driven by safe-haven demand amid geopolitical tensions in Israel, Gaza, Iran, and Lebanon, as well as hedge funds taking advantage of the ongoing upward trend.

The People’s Bank of China (PBoC) chose not to add any gold to its reserves in September, bringing the streak of inactivity to five months in a row, according to official data published Monday.

China's gold holdings remained at 72.8 million troy ounces, or 2063.84 metric tonnes, at the end of last month. However, the value of its gold reserves rose to $191.47 billion as of Sept. 30, up from $182.98 billion at the end of August, because of the yellow metal’s appreciation.

The PBoC had purchased gold every month for 18 consecutive months until they first refrained in May.

While Capital Economics sees a higher level of demand in the decade ahead, in the near term, they said the PBoC may continue to pause further purchases until gold price retreats from record highs.

“A combination of cyclical factors point towards gold demand in China weakening in the near term,” they warned. “Higher prices are already weighing heavily on jewelry demand, fiscal stimulus should provide a much-needed lift to the economy, and we expect stock market performance to pick up given that local equities seem lowly valued to us.”

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