China’s central bank expanded gold reserves again in July, pressing on with a run that stretches back to December.
The People’s Bank of China raised holdings to 62.26 million ounces from 61.94 million a month earlier, according to data on its website. In tonnage terms, the inflow was close to 10 tons, following the addition of about 84 tonnes in the seven months to June.
Gold has rallied in 2019 to a hit a six-year high as global growth stutters, central banks including the Federal Reserve eased policy, and the festering trade war all combined to bolster demand.
Increased central-bank buying from China to Russia and Poland has helped to buttress consumption at a time of rising prices.
This week, the conflict between Washington and Beijing worsened as the yuan was allowed to breach a key level, reinforcing the case for havens.
“It is important for the country to diversify away from the US dollar,” Philip Klapwijk, managing director at consultant Precious Metals Insights Ltd., said before the PBOC’s latest figure was released.
“Over the long run, even relatively small-scale gold purchases add up and help to meet this objective.”
Gold futures rose as much as 1.3% to US$1,503.30 an ounce on Wednesday, the highest since 2013, before trading at US$1,500.70 at 11.26am in London.
“This fits with China’s well-established pattern of increasing gold reserves month after month but not in a large enough volume to disrupt the gold market,” said Ross Strachan, a senior commodities economist at Capital Economics Ltd.
“We expect them to continue this trend as part of their long-term strategy to diversify their foreign exchange reserves.”
Central banks continued to load up on gold this year, helping push total bullion demand to a three-year high in the first half, according to the World Gold Council.
That trend is expected to continue, with a survey of central banks showing 54% of respondents expect holdings to climb in the next 12 months.
“Bear in mind that China is the largest mine producer of gold in the world,” Klapwijk added. “The state can always buy local mine production using” local currency, he said.