Written by Brijesh Patel and Ashitha Shivaprasad
SINGAPORE (Reuters) – China, the sector's biggest official gold buyer, is expected to resume its bullion buying spree once prices fall from record highs reached in May, with the underlying condition of the metal remaining steady, industry players said at a conference this year. . week.
After adding to its gold reserves for 18 straight months, official data from the People's Bank of China (PBOC) showed its holdings were unchanged in May, sending global spot prices sharply lower on Friday. (J/)
“China’s data showed a pause,” David Tait, CEO of the World Gold Council, told Reuters on the sidelines of the Asia-Pacific Precious Metals Conference in Singapore.
“(But) they are just waiting and watching. If prices stabilize at $2,200 an ounce, they will pick up again.”
The index was trading at about $2,300 an ounce on Monday after its biggest daily decline in three and a half years in the wake of China's data on holdings.
The market hit a record high of $2,449.89 an ounce on May 20, driven by expectations of interest rate cuts and aggressive central bank purchases, fueled by geopolitical tensions.
The People's Bank of China controls the amount of gold entering China through quotas to commercial banks.
It was the largest official sector gold buyer in 2023, with net purchases of 7.23 million ounces, or 224.9 metric tons, according to the World Gold Council, the most in any year since at least 1977.
China's central bank added 60,000 troy ounces of gold to its reserves in April.
A survey by the Official Forum of Monetary and Financial Institutions showed that central banks plan to continue increasing their exposure to gold over the next 12 to 24 months.
“Central banks are buying gold and China is the main buyer. Sentiment on gold is bullish due to geopolitical tensions and elections. China is expected to buy more,” said KL Yap, president of the Singapore Bullion Market Association.
Historically known as a hedge against geopolitical and economic risks, gold has been the preferred investment option in China amid ongoing economic concerns and a weak yuan.
“The fact that China’s gold purchases were minimal in April, and in May they were zero, in no way means they won’t start reporting again,” said Rhona O’Connell, an analyst at StoneX.
In April, the Shanghai Gold Exchange raised margin requirements for some contracts to 9% from 8% after prices rose to historic levels.