China’s Massive Gold-Buying Spree Continues

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After returning to net gold buying in June, central banks continued to add to their gold reserves in July.

Globally, central banks reported net purchases of 55 tons in July, according to the latest data compiled by the World Gold Council.

In March, April and May, central banks reported net gold sales, primarily due to Turkey selling 160 tons of gold over that three-month period. According to the World Gold Council, this was a specific response to local market dynamics and didn’t likely reflect a change in the Turkish central bank’s long-term gold strategy.

This was confirmed in June when the Central Bank of Turkey flipped back to buying, adding 11 tons of gold to its reserves. It continued increasing its reserves in July with a 17-ton gold purchase.

According to the World Gold Council, the Turkish government reinstated gold import quotas in early August. It remains to be seen whether this will lead to renewed central bank gold selling should local gold demand remain elevated.

The Turkish government recently raised the country’s inflation forecast to 65%.

The People’s Bank of China ranked as the largest buyer in July, adding 23 tons of gold to its holdings. It was the ninth consecutive month of buying for the Chinese central bank. China is the largest gold buyer year-to-date, having increased its official reserves by 188 tons. The People’s Bank of China now officially holds 2,136 tons of gold, making up 4% of its total reserves.

China has a history of adding to reserves and then going silent.

The People’s Bank of China accumulated 1,448 tons of gold between 2002 and 2019, and then reported nothing for more than two years before resuming reporting last fall.

Many speculate that the Chinese continued to add gold to its holdings off the books during those silent years.

In fact, there has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

Last year, there were large unreported increases in central bank gold holdings.  Central banks that often fail to report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar.

The National Bank of Poland (NBP) was also a big gold buyer in July, adding 22 tons of gold to its holdings. It was the fourth consecutive month of gold purchases for the Polish central bank, totaling 71 tons.