China added another ten tons to Gold reserves in March

Last Updated: Mon, Apr 08, 2019 18:18 hrs
Gold China PBC

The Chinese government, according to data from the People's Bank of China, has increased reserve gold holdings for the month of March by a whopping ten tons.

The PBOC on Sunday updated its data on Gold reserves. Gold holdings for the month of March were reported at 60.62 million ounces [1718.54 tons]. This, from the 60.26 million ounces [1708.34 tons] that the PBOC reported a month ago.

In terms of evaluation, China's gold reserves have been valued at approximately $ 78.5 billion, down from $ 79.5 billion for Feb' holdings. Spot Gold prices peaked to $1350 per ounce on 18th February but then steadily dropped. Price on last trading day of March was reported at $1290 per ounce.

China, the world's biggest consumer of Gold has increased its Gold holdings continually in the Jan-Feb-March quarter. The country added an average of ten tons in February (9.95 tons), January (11.8 tons) and December (9.95 tons).

Data for the period prior from October 2016 to December 2018 had not been updated by PBOC. PBOC data has not been frequently updated. from publicizing buying behaviour for long periods. According to an old notification, China's Gold reserves in mid-2015 were reported at 53.3 million ounces [1511 tons].

Accumulation of the yellow metal by monetary agencies has not surprised market observers. In fact, 2018 saw a rush among central banks to increase their Gold holdings. A World Gold Council data suggests that central banks around the world increased their gold holdings by 651.5 tonnes in 2018.

Among prominent countries were Russia, that added approximately 274 tons in 2018 as part of a de-dollarizing activity. The country under President Vladimir Putin almost quadrupled its reserves in a decade. Its Central Bank data reported Gold reserves growing by 1 million ounces in February [31 tons], the most since November'18.

Other countries that have piled on their Gold reserves in 2018 include Kazakhstan, Turkey, Hungary, Poland, Mongolia and more notably India.

Last year, the Reserve Bank of India made significant investments in Bullion. The RBI added 8.46 tons of Yellow Metal to its reserves, a first in as many as nine years.

China, which has been the most aggressive after Russia in adding to Gold reserves could be considering the safe haven the yellow metals offers. Also, in the aftermath of trade related tensions and tariff barriers, piling on Gold as a safe haven may not be a very surprising move.

The impact of Chinese central bank buying Gold to that of spot price cannot be estimated. However, if the buying trend continues, it may spur positive sentiments for the yellow metal.

There has been no proven correlation between purchase made by monetary agencies and the spot price of Gold, however a rub-on effect has been noticed. Buying action from central banks is a component of the overall global demand. As such, when central bank action increases, the demand too increases, and accordingly a price growth can be observed.

The World Gold Council's 2018 report said Gold demand climbed to 4345.1 tonne owing to a 4% increase from 2017. 15% of that increase was owing to central bank's Gold demand.

WGC pegged Central banks's collective Gold reserves at a staggering 34,000 tonnes of gold.

"Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and refocus their attention on the principal objective of investing in safe and liquid assets," the WGC said back then.

Recently, Gold prices slipped from the highs of February.

A stronger than expected US job data and assertion from the Federal Reserve on a probable pause in rate hikes improved investor sentiment in equities. But, although the past one month may have seen spot Gold prices cooling off, a strong revival has been expected for the yellow metal.

Forecasts from various brokerage houses paint a glory picture of Gold buying in 2019. Citigroup's Commodities division forecast Gold to touch levels of $1400 per ounce in the coming twelve months while Goldman Sachs Group Inc. expects Gold to rally up to $1,450 per ounce in the next one year.

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