The People’s Bank of China (PBOC) purchased 20 tonnes of gold in July, marking its largest monthly acquisition since October 2023 and extending a 21-month buying streak. The addition brings China’s total gold reserves to a record 2,366 tonnes, according to official data.
Gold prices surged 7% last week, logging their best weekly gain since January. Analysts attribute the rally to a weaker U.S. dollar, falling Treasury yields, and softer-than-expected U.S. employment data, which reduced expectations of aggressive Federal Reserve rate hikes. The rally extended to other precious metals, including silver, platinum, and palladium, while copper remained near recent highs.
Global Central Banks Stockpile Gold
A World Gold Council survey found that 89% of central banks expect global gold reserves to grow over the next year, with 45% planning to increase their own holdings. Governments are diversifying reserves amid concerns over inflation, geopolitical instability, and currency risks. Gold is valued for its liquidity, lack of counterparty risk, and role as a long-term store of value.
China’s gold purchases align with a broader shift to move sovereign reserves from London to Hong Kong, supporting the city’s ambition to become a major international bullion-trading hub. The PBOC’s accumulation reflects efforts to reduce reliance on dollar-denominated assets and hedge against economic uncertainty.
Market Reactions and Outlook
Gold remains below its 150-day moving average, but indicators suggest momentum. Newmont Mining, the largest constituent of the gold miners ETF (GDX), has broken through this threshold, signaling potential upward movement for other gold-related assets.
Analysts note that while China’s gold accumulation reinforces the "digital gold" narrative for Bitcoin, the central bank continues to prioritize physical bullion over cryptocurrencies due to strict regulatory restrictions on digital assets.
Key Drivers Behind the Rally
- Macroeconomic Shifts: Declining Treasury yields and a softer U.S. dollar lowered the opportunity cost of holding non-yielding gold.
- Labor Market Concerns: Softer U.S. employment data reduced fears of aggressive Fed rate hikes, prompting investors to seek safe-haven assets.
- Geopolitical Risks: Central banks are increasing gold holdings as a hedge against currency devaluation, inflation, and global instability.
The trend underscores gold’s enduring role as a reserve asset and safe-haven investment in times of economic and political uncertainty.