(Kitco News) - Chinese demand is once again revitalizing the gold market, extending a trend that began early last year.
Gold prices remain near a six-week high, buoyed by renewed buying momentum following the People’s Bank of China’s announcement of a 10-tonne gold purchase in December. Spot gold futures recently traded at $2,647.80 per ounce, up 0.44% on the day.
This marks the second consecutive month that China’s central bank has increased its gold reserves after a six-month hiatus.
“Based on available data, the PBoC's gold reserves rose by 44 tonnes in 2024, reaching 2,280 tonnes,” said Krishan Gopaul, Senior Analyst for EMEA at the World Gold Council, in a social media post.
Investors and analysts are closely monitoring China’s central bank, as its purchases have been a critical driver of gold’s rally to consecutive all-time highs in 2024. The central bank’s robust appetite for the precious metal has also coincided with unprecedented demand among Chinese consumers, significantly outweighing weaker interest from Western investors.
“It is clear that gold ETFs have become less significant for the gold price trend. Instead, central bank gold purchases have grown much more influential over the past three years,” said Carsten Fritsch, Precious Metals Analyst at Commerzbank.
Looking ahead, analysts expect the PBoC to continue its gold acquisitions as part of their efforts to diversify away from the U.S. dollar and bolster the yuan’s international credibility. But despite the recent purchases, gold still accounts for only about 5% of China’s total foreign reserves.
“China’s central bank will likely continue tilting its $3 trillion stockpile of reserves toward gold. The metal comprises only about 5% of total reserves, compared to 9.3% for India’s central bank, and even more for the Bank of England or the European Central Bank,” wrote Hamad Hussain, Assistant Climate and Commodities Economist at Capital Economics, in a report last month.
In a recent interview with Kitco News, George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, noted that China’s central bank is far from finished with its gold acquisitions. He highlighted that central bank demand, led by China, currently accounts for 15% of total end-user demand—a trend he predicts could persist for the next 14 years.
