China’s Appetite for Gold Grows
China’s appetite for gold remains insatiable as the nation’s central bank added more of the precious metal to its foreign reserves for the tenth consecutive month. The People’s Bank of China purchased 29 tonnes of gold in August, bringing the year-to-date purchases to 155 tonnes. This marks the central bank’s biggest purchase since December.
China’s Leading Role in the Gold Market
The People’s Bank of China has been a leading player in the gold market. Its current buying spree has matched the previous 10-month run that ended in September 2019. Many analysts expect China to continue buying gold as it strengthens the yuan’s international credibility and competes with the U.S. dollar as the world’s reserve currency.
Long-Term Gold Buyer
Analysts believe that China will remain a long-term gold buyer as part of the larger de-dollarization trend. Chantelle Schieven, head of research at Capitalight Research, stated that the U.S. dollar is not expected to go to zero soon, but diversifying away from the dollar is crucial. Gold is seen as a safe haven asset with no political risks.
Influence on Gold Prices
Central bank gold demand plays a significant role in gold’s strength, especially as the U.S. dollar index remains strong and U.S. 10-year bond yields hold near 16-year highs. However, analysts suggest that for gold prices to rise further, global growth needs to slow down, and bond yields should move lower.