China Stashes Away Tonnes and Tonnes of Gold

China Stashes Away Tonnes and Tonnes of Gold as Tensions Pick Up

The comments below are an edited and abridged synopsis of an article by Bloomberg/Singapore

China expanded its gold reserves for the 3rd straight month, strengthening the bulls’ case that central bank demand will remain elevated this year and putting Asia’s top economy on track to be the biggest buyer after Russia.

The People’s Bank of China increased its gold holdings to 60.26 million ounces in February from 59.9 million a month earlier. Last month’s inflow of 9.95 tonnes follows the addition of 11.8 tonnes in January and 9.95 tonnes in December, when buying restarted after a two-year pause. Russia leads the pack among central banks, taking in 274.3 tonnes in 2018.

Central-bank buying was a significant component of global bullion demand last year, hitting the highest level in decades, according to data from the World Gold Council.

China’s decision to restart its purchases comes amid signs of slowing growth at home, and as policy makers in Beijing seek to strike a trade deal with Washington.

Russia, which is de-dollarizing its reserves, has bought more than 200 tonnes in each of the past four years, with the push funded by sales of its US Treasuries.

While China’s gold holdings are the 6th-largest by country, they account for only 2.4% of its reserves, compared with more than 70% in the US and Germany.

Central bank purchases are likely to be sustained at the same level as last year amid elevated geopolitical tensions and less pressure on emerging-market currencies.

Kazakhstan added about 50 tonnes last year. Other countries, including Poland, India and Hungary, picked up smaller amounts.

Goldman Sachs predicts a rally to $1,450 over the next year.