China continues to dominate the gold market with a 12-month buying spree, adding 23 tonnes in October

beijingwalker · Nov 23, 2023

China continues to dominate the gold market with a 12-month buying spree, adding 23 tonnes in October

Neils Christensen
Tuesday November 07, 2023 12:36

(Kitco News) - Central bank gold demand continues to define the precious metals market, providing critical support and withstanding considerable headwinds as the Federal Reserve maintains a tightening bias regarding its monetary policy.

Last week, the World Gold Council raised its expectations that central banks will be close to buying a record amount of gold this year, nearly or potentially exceeding last year’s record. Analysts note that China continues to dominate the gold market.

Quoting the latest data from the People’s Bank of China, WGC analyst Krishan Gopaul reported on social media that China bought another 23 tonnes of gold in October.

This is the twelfth consecutive month that China has bought gold.

“It's reported gold reserves now total 2,215 tonnes, 204 tonnes higher than at the start of the year,” Gopaul said in his comment.

While China continues to lead central banks in overall demand, they are not alone in increasing their gold reserves.

Last week, the WGC said that central banks bought 337 tonnes of gold during the third quarter; this was the third strongest quarter on record.

“The strength of buying has, to some degree, exceeded our expectations. While we were confident that central banks would remain net purchasers in 2022, we thought it unlikely that it would match last year’s record buying volume. Should buying continue to be strong in Q4, the full-year total could get closer than we anticipated,” the analysts said in the report. “Our view is based on our survey findings, as well as the broad base of buying, which suggests that increasing gold allocations are becoming an accepted prudential strategy across the segment.”

So far this year, central banks have bought 800 tonnes of gold, an increase of 14% from last year.

Although gold has seen solid demand so far this year, the market has a way to go to match last year’s unprecedented record of more than 1,135 tonnes.

Juan Carlos Artigas, global head of research at the WGC, said in an interview with Kitco News that central bank demand highlights gold’s diverse role in a portfolio.

“Gold is a well-rounded asset that can play a vital role in portfolios by providing long-term returns, diversification, especially in times of need, and providing liquidity,” he said.

Analysts have said that it’s not surprising that central banks continue to buy gold as they diversify away from the U.S. dollar.

In a recent interview with Kitco News, Robert Minter, director of ETF Investment Strategy at abrdn, said that the government’s growing debt and deficit is a growing liability for the U.S. dollar. He added that it’s unlikely the U.S. dollar will lose its world reserve currency status, but nations will continue to diversify their foreign reserves.