(Kitco News) – The People’s Bank of China (PBoC) added to their bullion reserves for the 18th month in a row, but April also marked the second month in a row of dramatically lower quantities, suggesting that record-high prices may finally be souring the central bank on gold.
The PBOC bought 60,000 troy ounces of gold last month, far lower than the 160,000 ounces it purchased in March, and a far cry from February’s 390,000 ounces. March’s figure was the smallest since the central bank began its record run of purchases in November 2022, and April’s amount was 63% lower than that.
While market participants speculated that the low February numbers could have been impacted by the Lunar New Year holidays, which shuttered markets and stopped most business activities between Feb. 10-17, the March figures confirmed the downward trend in China’s sovereign purchases, and April’s decline was even more dramatic.
Still, many experts believe that the last 18 months represent a fundamental shift in the gold market away from the West and to the East, and to China in particular, and they don’t expect that overall trend to reverse any time soon.
Central bank buying has been a significant driver of gold’s price gains since the Russian invasion of Ukraine in 2022, and China has led the sovereign buying during that period.
The World Gold Council noted that central banks bought more gold in Q1 2024 than during any other first quarter on record. “Q1 saw no let-up in the pace of central bank gold buying,” the WGC wrote in their newly released Gold Demand Trends Q1 2024 report. “290t (net) was added to official holdings, only part of which is currently reflected in IMF data.”
China’s consumer market has also shown robust gold demand even as prices set new highs. According to the China Gold Association (CGA), the country’s gold consumption was 5.94% higher in the first quarter of 2024 than during the same period in 2023, which they attributed to surging demand among the citizenry for safe haven assets.
Chinese buyers purchased 308.91 metric tons of the precious metal in the first three months of the year. The CGA said gold bars and coins represented 34% of the total, as demand for these products increased by 26.77% percent to 106.32 tons in Q1.
But while sky-high gold prices made the yellow metal more attractive to Chinese investors, they also made it too expensive for many regular shoppers. Purchases of gold jewelry fell 3% during the quarter to 183.92 tons, or 59.5% of total consumption. The CGA said rising gold prices increased operational risks for precious metal processing and sales companies.
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Source: PBoC buys gold for 18th straight month, but April also marked second month of sharply
