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China keeps buying gold: April's 8-tonne purchase marks its 6-month shopping spree

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(Kitco News) - After a solid start in the first quarter, China's central bank has once again demonstrated its appetite for gold. And while the demand is slowing, it is not going away.

Updated reserve information from the People's Bank of China shows that it bought 8.1 tonnes of gold last month, its sixth consecutive month of purchase. According to the data, China's gold reserves now total 2,076.50 tonnes, representing roughly 4% of total foreign reserves.

So far, in this new buying cycle, China's central bank has bought more than 128 tonnes of gold. However, April's purchase does mark a slowdown in the buying frenzy. In March, the central bank bought 18 tonnes of gold.

China's latest update on its gold reserves comes after the Word Gold Council said that central banks bought 228.4 tonnes of gold between January and March, a record for first-quarter demand.

China's slowdown in April also reflects the broader marketplace. Central bank demand increased by 178% from the first quarter of 2022. Still, it was down significantly compared to activity reported in last year's third and fourth quarters.

"We continue to expect central banks to be net buyers of gold overall this year. But it is important to understand that our forecasts do not expect the same level of buying last year, in part because of the sheer number," said Juan Carlos Artigas, Head of Research for the WGC, in an interview with Kitco News.

Although China's and other central bank gold demand appears to be slowing, analysts don't expect the trend to reverse anytime soon.

In a recent interview with Kitco News, George Milling-Stanley, chief gold market strategist at State Street Global Advisors, said the global deleveraging away from the U.S. dollar will take years. He added that this trend will continue to provide long-term support for gold prices.

"Central banks are dangerously overexposed to the U.S. dollar and dangerously underexposed to gold, and this is why they will be steady buyers of gold, and this has nothing to do with the price at all," he said.

China's central bank puts the world on notice as it buys more gold; analysts at PDAC expect this is only the start of a new trend

Looking specifically at China's gold reserves, officially, it currently has the seventh largest gold hoard in the world, behind Russia, which holds 2,326.50 tonnes of gold.

However, China's gold holdings represent slightly less than 4% of its total reserves, well below most developed countries. Japan, while it only holds 846 tonnes of gold, the precious metal represents 4.3% of its total foreign exchange holdings.

Singapore, which has also been on a shopping spree this year, holds 222.4 tonnes of gold, representing 4.4% of its total foreign reserves.

Some analysts have said that while there is no magic number for China's gold reserves, it does have to be higher if the country wants to build the yuan's international standing.

Looking beyond geopolitical issues, driving the current de-dollarization trend, Paul Wong, market strategist at Sprott Asset Management, said that he expects central banks to continue to be net gold buyers for the foreseeable future as the world economy faces higher inflation.

"If you want your reserves to retain their value, gold is an attractive asset," he said.

While China has been busy buying gold, Krishan Gopaul, senior analyst at the WGC, noted that the Central Bank of Uzbekistan sold 1.6 tonnes of gold last month. He said that so far this year, the country has sold 16.2 tonnes, bringing gold reserves down to 379.8 tonnes.

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.