China’s Gold Hoard Swells
The comments below are an edited and abridged synopsis of an article by Bloomberg
Central banks are going after gold in 2019, boosting holdings as economic growth slows, trade and geopolitical tensions rise, and some authorities seek to diversify their reserves away from the dollar.
The People’s Bank of China said it raised gold reserves for a 7th month in June, adding 10.3 tons, following the inflow of almost 74 tons in the 6 months through May. Poland said it more than doubled its gold assets over this year and last, becoming the top holder in central Europe.
Bullion has rallied to a 6-year high in 2019 as investors bet on rate cuts by the Federal Reserve, although robust jobs figures recently clouded that view. Gold purchases by central banks are adding to overall demand, with Russian authorities a substantial and sustained buyer of the traditional haven.
“Aside from its attempt to diversify its holdings of dollars, owning more gold reserves is also an important strategy in China’s rise as a superpower,” Howie Lee, an economist at Oversea-Chinese Banking Corp., said. Additions are likely to continue in coming months, according to Lee.
Last year, central banks bought 651.5 tons of gold, 74% up on the previous year. Official sector purchases could reach 700 tons this year, assuming the China trend continues and Russia matches 2018 volumes of about 275 tons.
China’s recent bullion accumulation, as well as that by other central banks, has come against a backdrop of firming prices. Spot bullion traded at $1,406.90 an ounce on Monday after a 9.1% climb in the second quarter.