China’s central bank has continued its strategy of increasing gold holdings, marking the ninth consecutive month of accumulation in July. This move comes as the nation’s foreign exchange reserves experienced a dip, primarily influenced by the strengthening U.S. dollar and shifts in asset valuations.
Sustained Gold Purchases
The People’s Bank of China added 60,000 ounces of gold to its reserves in July, bringing the total to 73.96 million ounces. This consistent purchasing pattern, which began last November, has seen the central bank acquire 1.16 million ounces of gold. The value of these gold reserves climbed by roughly USD 1 billion to USD 244 billion.
Factors Influencing Gold and Forex Reserves
Analysts suggest that the ongoing geopolitical uncertainties and trade policy shifts have contributed to a stable, albeit fluctuating, gold price, making it an attractive asset for central banks. Despite a cooling in international trade frictions, the price of gold has remained elevated, hovering around USD 3,480 per ounce. Experts believe there is little reason for the People’s Bank of China to halt its gold accumulation strategy.
In contrast, China’s foreign exchange reserves fell by approximately USD 25.2 billion to USD 3.3 trillion by the end of July. This decline was largely attributed to the U.S. Dollar Index’s 3.4 percent rise in July, which caused non-dollar denominated assets within the reserves to depreciate in value. Changes in asset prices also played a role in the overall decrease.
Strategic Reserve Management
Currently, gold constitutes about 7 percent of China’s official reserve assets, which is significantly lower than the global average of 15 percent. This suggests a potential for continued expansion of gold holdings. Looking ahead, the strategy is expected to involve further increasing gold reserves while moderately reducing holdings of U.S. Treasury bills, reflecting a diversification of China’s reserve assets in response to evolving global economic conditions.