China's Central Bank Purchases 10 Tonnes of Gold in December: What It Means for the Gold Market
China's Central Bank Purchases 10 Tonnes of Gold in December: What It Means for the Gold Market
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Gold prices have recently surged to a six-week high, driven by a renewed demand from China, signaling a shift in the market that began early last year. The People’s Bank of China (PBoC) made a notable purchase of 10 tonnes of gold in December, boosting investor optimism.
Gold prices have recently surged to a six-week high, driven by a renewed demand from China, signaling a shift in the market that began early last year. The People’s Bank of China (PBoC) made a notable purchase of 10 tonnes of gold in December, boosting investor optimism.
Gold Prices Rise: Spot gold futures are trading around $2,647.80 per ounce, showing an increase of 0.44% on the day.
December Purchase: This marks the second consecutive month of gold purchases by China’s central bank, following a six-month hiatus.
2024 Purchases: The PBoC’s gold reserves rose by 44 tonnes in 2024, reaching a total of 2,280 tonnes, according to Krishan Gopaul, Senior Analyst for EMEA at the World Gold Council.
Key Drivers of Gold’s Surge
Investors and analysts are closely tracking China’s central bank, recognizing that its purchasing activities have played a critical role in pushing gold prices to consecutive all-time highs in 2024. This trend, alongside unprecedented demand from Chinese consumers, has outweighed relatively weaker interest from Western investors.
Central Bank’s Growing Influence: According to Carsten Fritsch, a Precious Metals Analyst at Commerzbank, central bank purchases have taken precedence over gold ETFs in shaping the price of gold.
Shift in Demand: China’s robust appetite for gold, combined with record demand from Chinese consumers, continues to significantly influence the global gold market.
What’s Next for China’s Gold Acquisition Strategy?
Looking ahead, analysts predict that China’s central bank will keep acquiring gold as part of its strategy to diversify from the U.S. dollar and strengthen the international standing of the yuan. Despite these ongoing purchases, gold still represents only around 5% of China’s total foreign reserves.
Diversification of Reserves: China’s central bank is likely to continue moving its $3 trillion reserve stockpile towards gold. At present, gold constitutes just 5% of its reserves—far less than India’s 9.3% or the higher percentages held by the Bank of England and the European Central Bank.
Sustained Central Bank Demand: George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, emphasized that China’s central bank is unlikely to stop its gold acquisitions anytime soon, as central bank demand now represents 15% of total gold demand and is expected to continue for the next 14 years.
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