Chinese Central Bank Increases Official Gold Reserves for Fourth Consecutive Month

The latest data from the People’s Bank of China indicates that China lifted its gold reserves for the fourth consecutive month in March.

China’s official gold reserves stood at 60.62 million ounces as of the end of March, for an on-month rise of 360,000 ounces.

Reserves lifted by 320,000 ounces in December 2018, as well as 380,000 ounces in January and 320,000 ounces in February, for a cumulative increase of 1.38 million ounces over the past four months.

Given that one ounce of gold was recently valued at USD$1291.3, the 1.38 million ounce increase in China’s gold reserves is equal to approximately $1.782 billion, or 11.972 billion yuan.

The sudden rise in China’s official gold reserves arrives following the Chinese central bank’s absence from bullion purchases for more than two years.

Domestic analysts say that PBOC’s return to the gold market is driven by the US Fed’s recent dovish shift, which has prompted the central banks of many major economies to follow suit with looser monetary policy.

Gold’s safe harbour role is rising as a consequence, given the potential for a contraction in the real value of financial assets.

During the more than two-decade period from 1978 to November 2001 China’s gold reserves remained at around 12.67 million ounces.

China’s gold reserves subsequently rose to around 19.29 million ounces and remained at that level until April 2009, when they increased by 14.6 million ounces to 33.89 million ounces.

Gold reserves plateaued for the following six years at nearly 34 million ounces until June 2015, when then surged by 19.43 million ounces to 53.32 million ounces.

They subsequently saw steady, gradual increases from July 2015 until October 2016, rising to 59.24 million yuan, where they remained until PBOC recent decision to resume purchases in December 2018.

PBOC is one of many central banks around the world increasing their gold reserves.

Data from the World Gold Council indicates that central banks around the world increased their official gold reserves by 651.5 tonnes in 2018, for a YoY rise of 74% and the largest annual net purchase of gold by the world’s central banks since the end of the US gold standard in 1971.

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