China’s Central Bank Pauses Gold Purchases, Leaving Gold Prices in Limbo

China’s Central Bank Halts Purchases of Gold Due to High Prices

The recent spike in gold prices has been met with a surprising development: China’s People’s Bank of China (PBOC) has decided to pause its gold purchases. Official data released on Friday indicated that China’s gold reserves remained unchanged in May, suggesting that the central bank did not purchase any gold.

This decision by the PBOC has made gold more vulnerable to further price drops, according to Ewa Manthey, a commodities strategist at ING Bank. The current spot gold price is around $2,300 per ounce, which is about 6% lower than its peak of nearly $2,450 per ounce on May 20.

Despite this setback, gold prices have been steadily rising this year due to various geopolitical uncertainties globally. In China, individuals have been increasing their gold holdings as a hedge against economic instabilities and a weakening Chinese yuan. However, the recent surge in gold prices may affect demand for gold temporarily.

China’s central bank began slowing down its gold purchases in April when it bought only 60,000 troy ounces of gold. This was significantly less than the 160,000 ounces purchased in March and the 390,000 ounces purchased in February. The PBOC had been purchasing gold for 18 consecutive months before pausing last month and became the world’s largest institutional buyer.

If the current trend continues and if China decides to resume its purchases once the price of gold corrects to around $2,200 per ounce, it could be a significant boost for global markets. According to David Tait, CEO of World Gold Council, “China has been observing the market closely.”

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