China’s central bank resumes gold purchases after six-month pause
The World Gold Council (WGC) is forecasting a stable Chinese gold market in 2025, with the nation’s economy expected to be more secure and the potential for further government stimulus packages.
Ray Jia, the WGC’s research head for China, said that with declines in yields and the local currency likely to be weaker, gold investment demand should be supported.
While the WGC report forecasts a drop-off in gold jewellery demand, bar and coin investment is expected to remain healthy in 2025, although it may not reach the rate of growth seen in 2024.
Currency depreciation
The WGC believes increasing currency depreciation pressure and a high likelihood of interest rate cuts are likely to provide support for gold, with its model projecting an approximately 20% year-on-year (yoy) rise in full-year 2024 and an 8% yoy increase in 2025.
According to the WGC, the local gold price in China has so far experienced a record-breaking year in 2024.
The RMB gold price – as represented by the Shanghai Gold Exchange (SGE) Au9999 – surged by 28% as of the end of November, making it the best-performing asset in China so far this year.
Mr Jia added that, should they resume, gold purchasing announcements from the central bank will provide an additional tailwind to local investor appetite.
Central bank buying
It has been reported in the international media that, according to official data released by the People’s Bank of China (PBOC), China’s central bank resumed buying gold for its reserves in November after a six-month pause.
The PBOC was noted as the world’s largest official sector buyer of gold in 2023, but that trend slowed after the PBOC paused its 18-month buying streak in May.
According to official figures, China’s gold holdings rose to 72.96 million troy ounces at the end of November, up from 72.80 million a month earlier.
Fundamental driver
Mr Jia noted that gold demand in China is not solely driven by changes in price.
He said economic growth forms the fundamental driver for both gold jewellery consumption and bar and coin investment.
“Changes in yields and the local currency are closely tied to retail investment growth and relatively shorter-term gold ETF investors are mainly driven by the gold price, hedging demand and media attention.”