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China buys 29 tonnes of gold in August, stretches buying spree to 10 months

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(Kitco News) - China's appetite for gold remains insatiable as the nation's central bank added more of the precious metal to its foreign reserves for the tenth consecutive month.

According to updated foreign reserve data, the People's Bank of China bought 29 tonnes of gold in August, lifting year-to-date purchases to 155 tonnes. Last month's data was also the central bank's biggest purchase since December.

The PBOC has been the leading central bank in the gold market. And its current buying spree has matched its previous 10-month run that ended in September 2019.

Looking ahead, many analysts said that they expect China to continue to buy gold as it strengthens the yuan's international credibility to compete with the U.S. dollar as the world's reserve currency.

"I don't think this scramble away from the U.S. dollar is going to end anytime soon,” said Edward Moya, senior market analyst at OANDA.

In a recent interview with Kitco News, Chantelle Schieven, head of research at Capitalight Research, said that she expects China to remain a long-term gold buyer as part of the bigger de-dollarization trend.

"I don't believe the U.S. dollar is going to zero anytime soon, but there is a real effort to diversify away from the U.S. dollar and when you start looking for other assets, you don't have a lot of options other than gold,” she said. "There are no political risks with gold, which is becoming very important.”

The gold market could hit $2,600 as U.S. dollar index falls below 104 - DeCarley Trading's Carley Garner

Analysts note that central bank gold demand is a significant factor behind gold's resilience as the U.S. dollar index trades near a six-month high at 105 points. At the same time, U.S. 10-year bond yields continue to hold near 16-year highs above 4.2%.

Moya noted that while central bank demand continues to support the market, prices could continue to struggle in the near term.

"What gold prices need to go higher is for global growth to slow down and bond yields to move lower,” he said.

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.