China’s Gold Rush Continues: Central Bank and Consumer Demand Fuel Market Momentum China adds 10 tonnes of gold to reserves in December!
The global gold market is experiencing sustained vitality thanks to China’s renewed appetite for the precious metal. This continues a pattern established in early 2023. Recent market movements show gold prices hovering near six-week highs. Spot futures reached $2,647.80 per ounce—a 0.44% daily increase—following the People’s Bank of China’s (PBoC) latest gold acquisition announcement.
December 2023 saw the PBoC add another 10 tonnes to its reserves. China Adds 10 Tonnes of Gold to Reserves in December! This marks two consecutive months of purchases after a half-year pause. According to World Gold Council Senior Analyst Krishan Gopaul, China’s central bank has already expanded its gold holdings by 44 tonnes in 2024. This brings its total reserves to an impressive 2,280 tonnes.
This systematic accumulation by China’s central bank has proven instrumental in driving gold to successive record highs throughout 2024. What makes this trend particularly noteworthy is the parallel surge in Chinese consumer demand. This surge has effectively counterbalanced the diminished interest from Western investors.
Commerzbank’s Precious Metals Analyst Carsten Fritsch highlights a significant shift in market dynamics. Gold ETFs have ceded their market influence to central bank purchases over the past three years. This transformation reflects a broader change in how gold prices are determined in today’s market.
The PBoC’s gold-buying strategy aligns with China’s larger economic objectives. Specifically, the strategy helps reduce dependence on the U.S. dollar and enhance the yuan’s global standing. China Adds 10 Tonnes of Gold to Reserves in December! However, despite recent acquisitions, gold’s share in China’s foreign reserves remains relatively modest at approximately 5%. This is considerably lower than other major central banks. For example, India’s central bank maintains 9.3% of its reserves in gold. Meanwhile, the Bank of England and European Central Bank hold even higher proportions.
Capital Economics’ Assistant Climate and Commodities Economist Hamad Hussain suggests this disparity indicates significant room for growth in China’s gold holdings. With foreign reserves totaling roughly $3 trillion, China appears positioned to continue its gold accumulation strategy.
The long-term implications of China’s gold purchases are substantial. According to George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, central bank demand, with China leading the charge, currently represents 15% of total end-user demand. In his analysis shared with Kitco News, he emphasizes that this trend could extend over the next 14 years.
This persistent Chinese demand, both at the institutional and consumer levels, suggests a fundamental shift in the global gold market’s dynamics. The combination of central bank purchases and robust consumer interest in the world’s most populous nation continues to provide strong support for gold prices. China Adds 10 Tonnes of Gold to Reserves in December!
The situation underscores China’s growing influence in the global precious metals market. It hints at a longer-term strategic move to reshape its reserve holdings. As this trend continues, market participants worldwide will need to factor in China’s gold appetite when forming their market outlooks and investment strategies.
