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Gold price climbs closer to $1,900 as China says it bought 30 tonnes in December

Kitco News

Welcome to Kitco News' 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.

(Kitco News) - The gold market is trading at its highest level in seven months, driven partly by the People's Bank of China's growing appetite for the precious metal.

In an update published Saturday, China's central bank announced that it increased its gold reserves by 30 tonnes in December. This follows November's purchase of 32 tonnes of gold, the first officially recorded purchase since September 2019.

China's gold reserves now total 2,010 tonnes.

Some analysts have said this could continue to support gold prices as they climb closer to $1,900 an ounce. February gold futures last traded at $1,880.70 an ounce, up 0.59% on the day.

"It's bullish when the world's second-largest economy buys that much gold," said Jim Wyckoff, senior technical analyst at He said the market considers central bank gold buying as "smart money."

However, not all analysts see China's purchases as a game-changer for gold. Marc Chandler, managing director at Bannockburn Global Forex, said that China's gold holdings still play a minor role in the central bank's total reserves.

"Many pixels have been used talking about China diversifying away from the dollar toward gold. We have played this significance down. Its gold holdings did rise by about $5.5 bln to $117.2 bln, or a little more than 5%, in December. This is a little more than the valuation adjustment," he said in a note Monday. "Before getting too carried away, note that at the end of 2020, China's gold holdings were worth $118.2 bln. As a percentage of overall reserves, the share of gold was virtually unchanged over the two years at around 3.7%."

China's continued purchases come as central banks worldwide maintain a voracious appetite for the precious metal.

Krishan Gopaul, senior European, Middle East and Asian markets analyst at the World Gold Council, noted that between the first and third quarter of 2022, central banks bought 673 tonnes of gold.

In a report published last week, Gopaul said central banks bought 50 tonnes in November.

Along with China, Turkey's central bank added another 19 tonnes of gold to its reserves and the Central Bank of the Kyrgyz Republic bought 3 tonnes of gold.

"Looking ahead to the full year picture, it's likely that central banks accumulated a multi-decade high level of gold in 2022," he said.

China buys 32 tonnes of gold in November, first increase in reserves since 2019

Analysts expect that central banks will continue to purchase gold through 2023 as they diversify away from the U.S. dollar.

In a recent interview with Kitco News, Sean Fieler, owner and chief investment officer of Equinox Partners, said that central bank gold demand in 2022 is a game changer for the gold market and demonstrates to investors that there is real value in the precious metals market.

He added that China's gold reserves are still at extremely low levels, and there is room for further growth.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.