Investing.com — The People’s Bank of China (PBOC) reported no change in its gold reserves in May in data released Friday, bringing to an end a year-and-a-half-long gold-buying frenzy. The rally that saw gold prices reach new record highs was dependent on central bank purchases, particularly from China, which caused the price of gold to fall by more than $50 an ounce on Friday.
The People’s Bank of China has been buying gold since November 2022, with April marking its 18th consecutive month of purchases, but the smallest increase during the period. Data for May shows the People’s Bank of China’s gold holdings held steady at 72.8 million ounces, unchanged from April. The World Gold Council had reported that the first quarter of 2024 saw the biggest increase in global central bank gold purchases since records began in 2000, with China being the largest contributor.
This buying spree has been a key factor behind the rise in gold prices, driven by central bank interest, consumer demand and, in particular, strong buying by Chinese buyers. The World Gold Council notes that there is unreported buying that is not reflected in the data, suggesting that the actual scale of central bank buying could be even larger.
The People’s Bank of China’s decision to pause monetary easing at a time when gold prices are at their peak appears to have triggered a market reaction. Without continued central bank purchases and sustained consumer demand, gold price gains could be in jeopardy and there may be better opportunities to get into the gold market before the end of the year, analysts at RBC Capital Markets said in a note on Friday.
