China’s Central Bank Ceases Purchasing Gold Due to High Costs

China’s Gold Purchasing Spree Ends as Cost Squeezes the Central Bank

Due to record-high gold prices, China’s appetite for the precious metal has decreased. In May, the People’s Bank of China (PBOC) paused its gold buying streak after gold holdings remained unchanged, marking the end of an 18-month streak of purchasing gold. The central bank had been a significant factor in driving prices to record highs, but the high cost of gold has caused it to take a break from buying.

Gold prices have increased by 11% this year due to geopolitical tensions, although they have softened slightly from their peak. Despite gold’s status as a traditional safe-haven asset, its record-breaking rally may dampen demand for the metal in the short term. Commodities strategist Ewa Manthey believes that the pause in purchases by the PBOC has left gold vulnerable to potential further declines.

The current benchmark spot gold price is approximately $2,300 per ounce, which is 6% lower than its record high in May. If prices drop to around $2,200 per ounce, China may resume purchases as it was the world’s largest institutional buyer of gold in 2023, acquiring 225 tons. However, if prices continue to decline or if geopolitical tensions escalate further, China may reduce or even stop its gold purchases entirely.

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