The People’s Bank of China (PBOC) has decided to pause its gold buying streak, which had lasted for 18 consecutive months. Official data revealed that China’s gold reserves remained unchanged in May, indicating that the central bank did not make any gold purchases. This decision by the PBOC has made gold vulnerable to further declines in value, according to Ewa Manthey, a commodities strategist at ING Bank.
Despite the significant increase in global geopolitical tensions and a weak Chinese yuan, people in China have been purchasing gold as a hedge against economic uncertainties. This surge in demand contributed to the rise in gold prices this year. In April, the PBOC’s gold purchases began to slow, with only 60,000 troy ounces bought compared to 160,000 ounces in March and 390,000 ounces in February.
David Tait, CEO of the World Gold Council, stated that China is currently monitoring the situation and waiting for gold prices to potentially correct to around $2,200 per ounce. If prices reach this level, the PBOC may resume its gold purchases. This suggests that the central bank’s break from buying gold may not be permanent but rather a strategic decision based on market conditions.
