China's gold-buying spree tops 100 tonnes during trade war

China's gold reserves rose for the 10th straight month in September.
China's gold reserves rose for the 10th straight month in September.PHOTO: REUTERS

BEIJING (BLOOMBERG, XINHUA) - China has added more than 100 tonnes of gold to its reserves since it resumed buying last December, reinforcing its standing as one of the major official accumulators as central banks stock up on the precious metal.

China's gold reserves rose for the 10th straight month in September, as the People's Bank of China (PBOC) raised its holdings of the precious metal to 62.64 million ounces last month from 62.45 million in August, according to data on its website.

This puts China's gold reserves at around US$93 billion (S$128.5 billion). In tonnage terms, the latest inflow totals 5.9 tonnes, and follows the addition of about 99.8 tonnes over the prior nine months.

Bullion hit the highest in more than six years in September as slower growth, the trade war and rate cuts spurred investor demand. Central banks have been major buyers too, especially in emerging markets.

Official purchases will likely continue as protectionist policies and geopolitical concerns add to demand, according to Suki Cooper, a precious metals analyst at Standard Chartered Bank.

"Given strained relations with the US, China needs a hedge against its large holdings of the dollar, and gold serves that function," said Howie Lee, an economist at OCBC Bank.

"As China becomes a superpower in its own right, I expect more gold-buying."

The PBOC's run of bullion-buying has come against the challenging backdrop of the trade war with the US and a marked slowdown in growth at home. While high-level negotiations are set to resume in Washington this week, Chinese officials are signalling they're increasingly reluctant to agree to a broad deal.

Xinhua news agency said growing accumulation of gold by the PBOC, China's central bank, is in line with a global trend of increased gold holdings by other central banks.

 
 
 

Official data showed that China's foreign exchange reserves came in at US$3.09 trillion at the end of September, an increase of US$19.7 billion, or 0.6 per cent, from the beginning of 2019.

Spot gold rose as much as 0.4 per cent to US$1,511.31 an ounce on Monday (Oct 7) and traded at US$1,505.84 in early London trade. While prices fell 3.2 per cent in September, they are still up 17 per cent this year. The PBOC data were released at the weekend.

Along with China, Russia has also been adding substantial quantities of bullion. In the first six months, central banks worldwide picked up 374.1 tonnes, helping push total gold demand to a three-year high, the World Gold Council has said.

While a 10th straight month of accumulation marks a steady buying pattern for the PBOC, China has in the past gone for long periods without disclosing moves in gold holdings. When the central bank announced a 57 per cent jump in reserves to 53.3 million ounces in mid-2015, that was the first update in six years.