"Scooping It Up at a Frightening Pace" – People's Bank of China Keeps Buying Gold for 17 Straight Months

China's central bank, the People's Bank of China (PBOC), has increased its gold holdings for 17 consecutive months.
According to major foreign media on the 7th (local time), the PBOC added 160,000 ounces of gold (about 5 tons) in March, the largest monthly increase in more than a year, extending its net buying streak to 17 months. The PBOC is now regarded as one of the largest official buyers of gold in the world.
This latest purchase is seen as a sign that China’s policy confidence in gold remains intact, even as gold prices have recently plunged.
At the end of January, the gold price surged to a record high of 5,600 dollars per ounce. However, as inflationary pressure persisted due to the conflict in the Middle East, expectations grew that the Federal Reserve System (Fed) would find it difficult to start cutting interest rates. As a result, gold prices in March fell about 12%, marking the steepest monthly drop since 2008.
As of the 7th, spot gold prices were trading above 4,690 dollars per ounce, up about 1%. The news agency reported, "The market is watching both the PBOC's gold purchases and the war situation involving the Islamic Republic of Iran," adding, "Even as some central banks are selling gold, continued buying by China could help support investor confidence in the metal."
Lin Yan, chief macroeconomic analyst at Guolian Minsheng Securities, told the state-run English-language newspaper China Daily, "The Chinese government's rationale for reducing its dependence on the dollar still holds," and explained, "This trend is underpinning the long-term upward trajectory of gold prices."
An investment industry source commented, "China is still scooping up gold at a frightening pace," and added, "Given gold's nature as a traditional safe-haven asset, if you take an ultra-long-term view, the outcome they are anticipating may well materialize."
However, there are also voices within China calling for stronger risk management in response to the sharp drop in gold prices.
According to a report last month by Metro Express, a local Chinese outlet, the Shanghai Gold Exchange (SGE) said in a notice, "There are many factors fueling market instability, and price volatility in precious metals has increased noticeably," stressing the importance of prudent investment, including risk management and adjusting portfolio allocations.
Meanwhile, the World Gold Council estimates that central banks bought about 25 tons of gold on a net basis between January and February this year. Of that, the National Bank of Poland (NBP) alone purchased 20 tons in February.


hsg@fnnews.com Han Seung-gon Reporter